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Q4 2023 Vir Biotechnology Inc Earnings Call

Participants

Sasha Damouni Ellis; Executive Vice President and Chief Corporate Affairs Officer; Vir Biotechnology Inc

Marianne De Backer; Chief Executive Officer, Director; Vir Biotechnology Inc

Phil Pang; Executive Vice President, Chief Medical Officer, Interim Head of Research; Vir Biotechnology Inc

Sung Lee; Chief Financial Officer, Executive Vice President; Vir Biotechnology Inc

Khalil Fenina; Analyst; Goldman Sachs

Emily Zhou; Analyst; Barclays

Nikola Gasic; Analyst; Leerink Partners

Eva Privitera; Analyst; TD Cowen

Patrick Trucchio; Analyst; H.C. Wainwright

Eric Joseph; Analyst; JPMorgan

Alec Stranahan; Analyst; Bank of America

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Joseph Stringer; Senior Analyst; Needham & Company LLC

Michael Ulz; Analyst; Morgan Stanley

Presentation

Operator

Hello. Welcome to Vir Biotechnology's fourth-quarter and full-year 2023 financial results and business update call. As a reminder, this conference call is being recorded. (Operator Instructions) After the speakers' presentation, there will be a question-and-answer session.
I will now turn the call over to Sasha Damouni Ellis, Executive Vice President, Chief Corporate Affairs Officer. You may begin, Ms. Damouni Ellis.

Sasha Damouni Ellis

Thank you, and good afternoon. With me today are Dr. Marianne De Backer, Chief Executive Officer; Dr. Phil Pang, Chief Medical Officer; and Sung Lee, Chief Financial Officer.
Before we begin, I would like to remind everyone that some of the statements we are making today are forward-looking statements under the securities laws. These forward-looking statements involve substantial risks and uncertainties that could cause our clinical development programs, future results, performance, or achievements to differ significantly from those expressed or implied by such forward-looking statements. These risks and uncertainties and risks associated with our business are described in the company's reports filed with the Securities and Exchange Commission, including Forms 10-K, 10-Q, and 8-K.
I will now turn the call over to our CEO, Marianne De Backer.

Marianne De Backer

Thank you, Sasha. Good afternoon to everyone on the webcast and thank you all for joining us today. Before we discuss the tremendous progress we made in 2023 and what's ahead in 2024, I want to touch on the announcement we made earlier this week that Phil Pang, our Chief Medical Officer, has decided to step down at the end of March to spend more time with his family. We have initiated a search for his successor. I want to sincerely thank Phil for his leadership. He leaves a strong clinical development team in place, positioning us well for continued success, and I wish him the very best.
Stepping in as Interim Chief Medical Officer is Dr. Carey Hwang, currently Vir's Senior Vice President, Clinical Research.
As I reflect on 2023, I'm proud of the clinical progress we have made towards developing a potential treatment for patients with chronic hepatitis delta, a potential functional cure for the millions living with chronic hepatitis B as well as a differentiated approach to preventing HIV. Our priority is to deliver on our mid-stage clinical pipeline while also refocusing our research and early pipeline to programs beyond infectious disease. We anticipate significant data readouts this year, which build off last year's progress across all our clinical programs.
Specifically, already in the first quarter, we anticipate completing the enrollment of approximately 60 participants across 2 cohorts in SOLSTICE, our Phase II hepatitis delta trial. We attribute this rapid rate of enrollment to the positive clinician and patient interest following the initial data we reported at AASLD last year. In the second quarter, we plan to share early virologic and safety data on a subset of these participants. It is important to appreciate that there is a significant underserved patient population in need of a safe, highly efficacious, and convenience therapy for treating hepatitis delta.
We estimate that there are at least 12 million people diagnosed with this disease and an estimated 60 million or more undiagnosed globally. We aim to develop a best-in-cost treatment, which we believe will drive increased diagnosis rates and position Vir to become the leader in hepatitis delta. To position us for success, we are collaborating with patient advocacy groups and policymakers to improve surveillance and screening.
In addition, crucial work is ongoing to understand who and where delta patients are. These efforts will support a targeted, rapid, and successful commercial launch in the future.
Switching gears, I will now discuss our functional cure program for chronic hepatitis B, another area of high unmet medical need. Based on the data reported in our ongoing Phase II trial thus far, we believe our 2 therapeutic candidates, tobevibart and elebsiran has the potential to play a critical role in delivering high functional cure rates for chronic hepatitis B patients. We look forward to reporting end-of-treatment data from the MARCH Part B trial at a major medical congress in the fourth quarter.
Finally, in the second half of the year, we are looking forward to sharing initial immunologic proof-of-concept data for VIR-1388, an HIV T cell vaccine candidate currently being evaluated in a Phase I trial. If the data supports the validity of the platform, it could be a springboard for other indications, including our preclinical therapeutic vaccine for control of pre-cancerous lesions and HPV cancers.
Switching to research. We continue to advance antibody therapeutics optimized for increased likelihood of development success, thanks to our proprietary platform powered by AI and machine learning. Our focus is on prophylactic antibodies or influenza A and B, RSV/MPV, and COVID-19. In addition, we are developing a cocktail of broadly neutralizing antibodies for an HIV cure. We look forward to sharing more about these programs and the timing of potential IND submission during the year.
On February 21, Vir and GSK terminated our collaboration to research, develop, and commercialize our monoclonal antibodies targeting the influenza of virus under our Definitive Collaboration Agreement that we established in May of 2021. Vir retains sole rights to continue advancing our investigational therapies for influenza. With that in mind, we are actively pursuing external partnership opportunities for our next-generation influenza A and B antibodies and ADCs. Meanwhile, our respiratory collaboration with GSK continues.
Turning to our cash and investments. Our financial strength allows us to fund our clinical programs through major inflection points while enabling the flexibility to invest in external innovation opportunities. In evaluating external innovation, we are thoughtful, selective, and strategic with a focus on opportunities capable of augmenting our pipeline and platforms. To recap, we are preparing for a transformational year at Vir, anticipating critical value inflection points in our programs focused on chronic hepatitis delta, hepatitis B and HIV.
With that, I'll now turn the call over to Phil.

Phil Pang

Thank you, Marianne. I want to begin by thanking you, the Board, and all of my dear colleagues for what has been an honor and privilege to serve as Vir's Chief Medical Officer. Vir has been a family to me as well as an all-consuming passion for the last seven-plus years. I have full confidence in Vir's future and the ability of our promising clinical programs to impact the lives of millions of patients.
Moving on to that pipeline. I'll begin by summarizing the initial results from our Phase II SOLSTICE trial, which is on hepatitis delta that was shared in a late-breaker presentation at AASLD last year and discussed earlier this year. The SOLSTICE trial is evaluating tobevibart alone and in combination with elebsiran as a potential chronic treatment for patients living with chronic hepatitis delta. Tobevibart is our investigational neutralizing monoclonal antibody, which has been engineered for enhanced immune engagement. Elebsiran is an investigational HBV-targeted siRNA that reduces hepatitis B surface antigen, which is the protein that the delta virus needs for its life cycle.
In our initial data, we observed extraordinarily rapid declines in HDV RNA. 5 out of 6 participants had undetectable HDV RNA and 6 out of 6 or below the lower limit of quantification within 12 weeks of starting combination therapy. Of note, 2 out of 6 also achieved ALT normalization. While participant numbers are small, these data were recognized by several hepatologists as one of the most exciting advancements shared at the AASLD conference in 2023. That excitement has meaningfully translated into our ability to rapidly enroll patients both with and without cirrhosis ahead of schedule in our SOLSTICE study.
As a reminder, our stated goal is to enroll approximately 60 participants in SOLSTICE by the end of the first quarter. These participants are being enrolled into two groups. The first group is receiving tobevibart monotherapy every two weeks and a second group is receiving tobevibart plus elebsiran combination therapy every four weeks. As of early February, greater than 90% of participants have been dosed. Notably, of the 55 participants who have already been dosed, 24 of them or 44% have compensated cirrhosis. We plan to share initial data on a subset of these participants in the second quarter, specifically, 15 participants per regimen at 12 weeks and 10 participants per regimen at 24 weeks. Should these data be supported, we intend to discuss with regulators on a potential path to registration in the third quarter.
Switching to our Phase II program for chronic hepatitis B. Our preliminary data suggests that when elebsiran was given with pegylated interferon alfa for up to 48 weeks, approximately 26% of participants achieved hepatitis B surface antigen loss at the end of treatment and 16% maintained hepatitis B surface antigen loss 24 weeks after the end of therapy. Again, although the number of participants treated was small, this was the first sign that our siRNA may have a potential impact on functional cure rates beyond what is possible with peginterferon alone. In a subsequent trial, when adding tobevibart to a regimen of elebsiran alone or elebsiran plus peginterferon, we observed an almost threefold increase in end of treatment response rates after only 24 weeks of treatment.
These data were the first indication of the potentially important role of an HBV directed antibody in hepatitis B functional cure. These data are encouraging, and we look forward to sharing end-of-treatment data from the MARCH Part B trial, which is evaluating 48 weeks of the doublet and triplet regimens in the fourth quarter. This will be followed by post-treatment data in the first half of 2025, which will allow us to assess functional cure rates.
Turning to what we anticipate will enter the clinic next. VIR-7229 is a next-generation COVID antibody with increased potency, breadth and resistance to viral escape thanks to AI engineering and optimization. We expect to file a health authority application to support a Phase I trial later this year. The development of VIR-7229 through the end of Phase I is supported by BARDA. We look forward to continuing to share our progress over the coming quarters and during an R&D Day planned for the end of this year.
I will now turn the call over to Sung.

Sung Lee

Thank you, Phil. We're pleased to share our financial results for the fourth quarter of 2023 and the full year. Total revenues in the fourth quarter of 2023 were $16.8 million compared to $49.4 million for the same period in 2022. Total revenues for the full year of 2023 were $86.2 million compared to $1.62 billion in 2022. The primary driver for the year-over-year decline is lower collaboration revenues from sotrovimab. We do not anticipate any meaningful collaboration revenue from sotrovimab in the future. And this line item could make a negative contribution to our top-line due to the ongoing required investments to support the marketing authorization of sotrovimab, which our partner GSK leads the efforts in.
Turning to operating expenses. Cost of revenue for the full year of 2023 was $2.8 million compared to $146.3 million in 2022. The year-over-year decline was driven by lower third-party royalties owed on sotrovimab sales. R&D expenses in the fourth quarter of 2023 were $111.9 million compared to $155.2 million in the same period in 2022. The decrease was primarily driven by the wind down of the Phase II Flu study of VIR-2482 in the fourth quarter of 2023. Included in the R&D expense for the fourth quarter of 2023 is a severance charge of $2.6 million related to the workforce reduction announced in December 2023.
R&D expenses for the full year of 2023 were $589.7 million compared to $474.6 million in 2022. The year-over-year increase was primarily driven by the Phase II Flu trial evaluating VIR-2482 and related manufacturing costs, and to a lesser extent, the advancement of our hepatitis delta and hepatitis B programs. SG&A expenses in the fourth quarter of 2023 were $43.1 million compared to $38.7 million for the same period in 2022. The increase was primarily driven by higher personnel costs and a severance charge of $1.9 million related to the workforce reduction announced in December of 2023. SG&A expenses for the full year of 2023 were $178 million compared to $161.8 million in 2022. The year-over-year increase was primarily driven by higher personnel costs.
For the fourth quarter of 2023, we reported a consolidated net loss of $116 million compared to a net loss of $101.6 million for the same period in 2022. For the full year of 2023, we reported a consolidated net loss of $615.1 million compared to a net income of $515.8 million in 2022.
Moving to the balance sheet. Cash, cash equivalents and investments declined by $108 million quarter over quarter, and we finished the fourth quarter of 2023 with $1.63 billion.
Turning to the financial guidance for 2024. We anticipate that the GAAP combined R&D and SG&A expense will be in the range of $650 million to $680 million. Included in this range are non-cash stock-based compensation expense in the range of $105 million to $115 million and restructuring charges for the closing of two R&D sites previously announced in December 2023 in the range of $25 million to $35 million. The restructuring expenses are primarily non-cash. When excluding the non-cash stock-based compensation and restructuring expenses from the GAAP combined R&D and SG&A expense range, the resulting range is $500 million to $550 million, which represents an 18% year-over-year decline at the midpoint.
The expected year-over-year decline is driven primarily by, first, the absence of expenses from the Phase II flu trial evaluating VIR-2482 and related manufacturing cost in 2024, partially offset by the ramp-up of our hepatitis delta and hepatitis B programs in 2024; and second, the cost optimization measures taken in 2023. Approximately 3% to 4% of the GAAP combined R&D and SG&A expense will be funded by grants. It's important to remember that these grants are recognized as revenue in our income statement. The combined GAAP R&D and SG&A expense guidance does not include the effect of GAAP adjustments caused by events that may occur subsequent to the publication of this guidance, including but not limited to, business development activities, litigations, in-process R&D impairments and changes in the fair value of contingent considerations.
Our financial strength allows us to advance the Phase II hepatitis delta and hepatitis B program through multiple milestones, invest in our core antibody platform and provide flexibility to evaluate external innovation. We will continue to have a disciplined approach to capital allocation and expense management.
I will now turn the call back to Sasha.

Sasha Damouni Ellis

Thank you, Sung. We will now start the Q&A section. Please limit questions to two per person so that we are able to get to all of our covering analysts.

Question and Answer Session

Operator

(Operator Instructions) Paul Choi, Goldman Sachs.

Khalil Fenina

Everyone can hear me?

Marianne De Backer

Yes, hi.

Khalil Fenina

This is Khalil calling in for Paul. I guess we'd like to ask about the tobevirbart/elebsiran combination cohort without peginterferon alfa in MARCH Part B at 24 weeks. Is that slightly higher efficacy observed in the cohort without interferon, something you expect to see repeated in the 48-week data? And what would that mean for interferon's place in a future pivotal study?

Marianne De Backer

Thank you for that question, Paul. I will ask our CMO, Phil Pang to give you deeper insights into that.

Phil Pang

Com, remember the numbers from the 24 week end of treatment data that we showed with the doublet and the triplet are still small numbers. So I would not look much into the fact that the median of the doublet was slightly different from the triplet at 24 weeks. I think that really what we're looking forward to seeing what happens as you know, after 48 weeks of the doublet and triplet. So I would say the jury's still out as to what those results are going to be, which we will share with you in the fourth quarter.
And I think that that leaves open whether or not interferon will be required. And if it is, I think it will require a slightly higher functional cure rate given the known side effects of interferon. But I think again, for patients and for providers, it always comes down to risk benefit. And I think that if we can show a transformational increase in functional cure rates such as 30% or more. This is something that will be very important, a tool for clinicians.

Khalil Fenina

Got it. Thank you so much. And I guess quick follow-up kind of relating to the pipeline in general, could you just give like a potential time line as to when the Company will select a front runner antibody candidates to enter the clinic? And any color on any color on what would drive that decision choosing one?

Phil Pang

Yes. So just to provide a little clarity, we have a number of candidates entering the clinic in the near term. And that's sort of regardless of platform, whether it's an antibody or a T cell vaccine. And really what we're always looking for is obviously something that is differentiated and something that we believe can make an impact on patients' lives. So those three candidates are Gear seven to nine.
The next-generation COVID antibody I spoke about earlier with its increased breadth and potency, and thanks to our AI engineering platform. That also includes veer 29 81 on nerve. And it is targeting monoclonal antibody, which is differentiated on three levels, one, it targets both flu A. And B, it's more potent than 24 82 and has a de-risked mechanism of action by targeting the neuraminidase enzyme. And third, we're very excited about VR 1949, which is a potential therapeutic T cell vaccine that builds on our human cytomegalovirus vaccine vector platform and targets precancerous HPVV., but I do want to say and stress that, of course, the first two candidates, seven to nine in 2019 81, we are planning to execute with a partner given the scale of development necessary Brent, Brent, I think you so much and some of

Operator

Gena Wang, Barclays.

Emily Zhou

Hello. This is Emily on for Gena. Thank you so much for taking our questions. So first of all, fulfill and best wishes for your next journey and for Marianne with Phil's departure and now you have focus on infectious disease, oncology and immunology. What do you think will be the ideal candidate for your next on the MO. and for your HDV. on could you share your expectation that you're going to share in the second quarter? And also, did you hear some initial regulatory feedback on the approval path? And lastly, and for your earlier stage pipeline, how do you select the lead antibody candidate and what will drive those decisions? Thank you.

Marianne De Backer

Okay. Thank you very much, Gena. I will start with your first question related to a successor to fill and what you're looking for in the next GMO?
First of all, what is going to be really critical is for someone to have a proven track record in advancing therapies, really through Phase three and having experience bringing therapeutics all the way to market. And needless to say, we have already initiated a search for a successor and I must say also, you know, since the news have gone out this week, we have received a flood of inquiries, but obviously we will be very selective in what the profile of the candidates. We will be also looking for someone who has a really in-depth understanding of the evolving regulatory landscape, deep insights in how to use data and big data for insights into clinical development. So there's a number of things here that need to come together. And as Phil pointed out, we have a very talented leadership team here in our clinical group. So we are also looking for someone who can it's such a team of very talented developers for success, especially focused on our hepatitis B and hepatitis delta programs.
Now switching to your second question, Gena, understood. That was related to hepatitis Bellessa and what data we are expecting in the second quarter. So I will ask Phil to give you more color on that?

Phil Pang

Yes. Thank you, Marianne. So So with regard to the data in Q2 around hepatitis delta to step back first, as I as we shared both at the conference earlier this year as well as the AFLD. What we showed was data on six patients and the data we think is quite transformative, but it is only six patients. So what we're looking for in Q2 is really to answer three questions. The first is what happens when we dose more patients with our combination therapy, will we be able to repeat that type of data. Number two, what will happen when we dose patients who have compensated cirrhosis? And three, what will happen with the long-term durability of those initial six patients. So I think we're excited and looking forward to that data.
I think you also asked a question about regulatory feedback. And I just wanted to reiterate what we had said earlier this year, which is that the next step will be to take that data if positive and put it in front of regulators in the third quarter in an intent to discuss a path to registration. So that's sort of the path as we see it coming from hereon from here on out.
Yes.

Marianne De Backer

And one it relates to your third question, Richard, which was related to our early-stage pipeline. I think that fill in in answering the question of Paul already laid out, we really have three candidates that can enter the clinic or in the next 12 to 24 months, it's just up to nine 29, 81, 1949. And so each of those are really progressing very well. And we will be providing more data and information on timing during the course of this year.

Operator

Roberto Ruiz, Leerink Partners.

Nikola Gasic

Hi, good afternoon. This is Nick Ashik on for Ana. Thanks for taking our questions. Just first on HDV, could you provide a little more color around how large the market opportunity is in HDV. currently? And also, could you discuss what a possible accelerated approval pathway could look like for better Barton help help Sorona in HDV.? And then I have a quick follow-up.
Okay.

Marianne De Backer

Thank you, Josh. Let me maybe begin with remarks by reminding everyone that delta is the most severe form of hepatitis. And as you know, I mean people that are co-infected with Delta and progress to liver cancer, four times faster and to them faster to death. So there's a tremendous unmet need here, I think is the first point that I would like to make. And then looking at the prevalence, we estimate that there are about 100,000 patients in United States and over 200,000 patients in the EU5 alone. And we do believe that this is likely a growth underestimate, given that diagnosis is really not optimal at this moment in time. So you can assume that even you if you want to access only a modest portion of this population. And if you think about pricing, that would reflect really the clinical benefit of a potentially transformative therapy. Taking that together, we are confident that you would already be looking at a very large and significant market opportunity. And obviously, we believe that combination regimen that we have of the BD Bard and the lapse run represents the potential of such a transformative therapy based on the data that we have shown thus far. And of course, in a limited set of patients, but still very impressive, very impressive data.

Phil Pang

And with regard to an accelerated approval, if I'll take that one, Marianne, please go ahead.
So I think that, you know, as you as we often like to say in the development space, data changes, everything and more data is always better. So I think that when we think about accelerated approval, which for a rapid path to approval. What's in our favor is the fact that the unmet need, as Marianne has described, is undoubtedly, right. There are hundreds of thousands of patients worldwide who would benefit from a chronic suppressive therapy for Delta. And the fact that there is a lack of good options for many of them is also clear. So I think that that all favors a rapid path in the setting of the right data. On the other hand, of course, our program is still early, and we're really waiting for our chance to get in front of regulators. And our anticipated goal is goalpost is Q. three. And by then we'll have a subset of data which we've talked about previously, which we will show in Q2, which is 30 participants through week 12 and 20 participants through week 24 in our two regimens that we are exploring. And to remind you of that, that is the combination of Toba Bard and a lesser on every four weeks versus just to lever our every two weeks.

Marianne De Backer

Thank you, Phil. Joe, did you have an additional question?

Phil Pang

What so this is Nick. I just wanted to follow up on HDV. Curious what signals you're hoping to see the upcoming additional data from Solstice? And maybe what are some of the gating factors for moving this program into Phase three, I guess like what would regulators really want to see in this data to support moving into Phase two?

Marianne De Backer

Our jobs are you referring to hepatitis B or Delta?

Phil Pang

I can take that one. So setting a big big.
Thank you, Nick. So as I said earlier, I think it's really a question of getting in front of them with the answers.
So to answer your first question, there are three things we're looking for in the data. The first thing we're looking for in the data is doesn't repeat what we've seen with the original six patients. Second, what will happen when we dose patients who have compensated cirrhosis? And third, how durable that it will be, I think that all of that data in terms of numbers will matter to the regulators and be able to reassure them that six patients we have data on six patients is not sort of a one-off, but actually something that really is as transformative as we as we believe it to be.
So in terms of gating factors, I can only speak more generally but once we have the opportunity to sit down with regulators in the third quarter, which is our anticipated goal, we'll be able to discuss with them one, what the comparator arm would be to what the size of the safety database needs to be and three, what kind of particular endpoints they would be most interested in that they believe would be demonstrated of transformative efficacy. So that's what we're going to be talking about. And then, of course, it's a matter of execution. I will say that, of course, we are planning for success in terms of both trial planning and regulatory interactions. And so we'll continue to do so because this is our most important clinical program and it's first out of the gate.

Marianne De Backer

Yes, and just to maybe add and repeat that already in the second quarter, we will be seeing 12 week data on 30 participants across the two regimens and then 20 participants for the 24 weeks. So that will give already a lot of insights into the data.

Nikola Gasic

Helpful. Thank you.

Operator

Eva Privitera, TD Cowen.

Eva Privitera

Hey, good afternoon and thank you for taking our questions. Just a couple from us on on the HDV. Solstice trial from there was some ALT elevations seen with two two one eight monotherapy, which came down with the combo and what's the mechanism for that? And what are the kinetics for achieving ALT normalization with suppressing viral RNA?

Phil Pang

I'll take that one about.
So thank you for the question. I think that it's important to remember that the number of patients dosed with 2 to one eight or a lesser on monotherapy is small, but we did see a couple of patients who did show an ALT signal. This replicates what we've seen with other SII. therapy in hepatitis delta patients in a larger study known as REFT. Almost 70% of patients did see an ALT signal in patients receiving SIRNA. who had delta. But it's important to remember that when they gave an SI RNA and when we've given our SIRNA. hepatitis B patients, we have not seen this. So it does not appear to be something intrinsic to the drug, but some interaction between the drug and the hepatitis delta virus itself.
So with that in mind, when you look at the data closely, it seems to suggest that on treatment within FIRNA., there is a paradoxical increase in HDV RNA after some duration of therapy. If that is the driving force behind the ALT signal that it would make sense that driving that HDV RNA down further and preventing the infection of new Ocado sites would be key and that's exactly what we're intending to do with our monoclonal antibody toolbar or VR. 34, 34. So the idea there is that any kind of fluctuation you would see in HDV RNA that might be driving an ALT signal would be prevented by having a neutralizing antibody like to toolbox. And so far, of course, the numbers are very small of the six patients. We did not see any ALT elevations, unlike the 70% of our ALT elevations seen with any monotherapy by another company. And so that's the that's something we'll be looking forward to seeing as to what will happen when we dose these next 30 patients in the combination arm.
So to summarize, the mechanism is still not clear, but there are really signaling that it is due to the changes in HDV RNA and there are really signals that 34, 34 or five of our console for that.

Marianne De Backer

Perfect. Thank you. And I had another question on the HBV March trial. You've previously shown that high antibody titers were predictive of sustained surface antigen loss. Do you expect to present antibody titer data at the 48 weeks end of treatment data in Q4.

Phil Pang

So we have not yet guided to whether or not we will be showing anti HBS. data along with the actual surface antigen loss. But we will be doing everything we can to provide as much clarity on our results at that time. So stay tuned.

Marianne De Backer

Perfect. Thank you.

Operator

Patrick Trucchio, H.C. Wainwright.

Patrick Trucchio

Your line is open and congrats on all the progress. I have a couple of follow-up questions on Solstice program. So just first a clarification around the next data readouts. I'm wondering, first, should we expect the next update or when should we expect the next update on the patient cohort data reported at AASLD 2023, specifically, the proportion who achieve ALT normalization, which I understand can take longer and achieving HDVR. and A. below the lower limit of quantification as well as assessment of the durability of the viral virologic response. I'm wondering if that update may be part of this data that's coming in the second quarter or if maybe we would see the next cut there later this year in the fourth quarter? And then secondly, I'm wondering how we should think about the 44% of patients having compensated cirrhosis? Is this a proportion of patients with compensated cirrhosis consistent with what would be expected in real-world setting for patients with chronic HDV? Or how would you decide on that proportion? And then how should we think about these key endpoints like HBV RNA and normalization of ALT and as well the safety profile of the combination regimen in these patients with or without compensated cirrhosis.
All right. Well, Patrick, you're going to challenge my memory to make sure I remember all those questions, but let me start with the compensated cirrhotic question move on to the endpoint question. And then finally, a final I finish with the durability question. So with regard to the compensated cirrhosis, it is the epidemiology of hepatitis delta patients and how many of them have compensated cirrhosis is not entirely clear, but it is certainly a large proportion, probably somewhere between 30% to 50%, Al, that was not the reason why we ended up at 44%. As you can imagine, when you're enrolling this trial, we actually targeted around 50%. But you want to move also the trial enrollment as fast as possible. So right now, as I said in my prepared remarks, there's about 90% of the trial has been enrolled. That's why it's at 44% I expect that number to go up because the only patients left in screening are all cirrhotic are all patients with cirrhosis. So we'll probably get 44 or maybe even 48% or somewhere around there. But what we really wanted to do was to get at at least 10 to 15 patients with cirrhosis per cohort to be able to understand what the kinetics of viral decline is and ensure that there's no obvious safety signal. So that's how the 44% is just sort of the the result of where we are in enrollment.
With regard to the endpoints, I think it is important to remember that how we think about the endpoints is both historical as well as forward-looking. So there are a few possibilities for the for the primary endpoint that I want to share with you. The first, of course, is the endpoint that was used by vosoritide, which was a combined ViroLogic and biochemical endpoint specifically, that virologic endpoint allowed either a two log decline or getting to the limit of detection biologically and then also requiring ALT normalization. But I think when you speak to physicians providers and virology is what they'll say is they're not sure what a two log decline actually means. For example, if you go from seven lakhs to five lakhs, you still have 100,000 copies of the virus in your blood milliliter, and that obviously does not sound good. So we think as well as clinicians that getting to undetectable or below the limit of quantification would be strongly prefer. So then you can imagine of forward looking endpoint. And I think that's the likely possibility of requiring patients to get to the low limited detection or the lower limit of quantification and ALT normalization without allowing patients to achieve just a two log decline in viral load that would set a gold standard that I think we could definitely show a meaningful benefit on because it would require everyone to at the first instance, get to the lower limit of quantification where we would have a possible advantage over the standard of care. So I think those are some of the some of the color I can provide for you around the primary endpoint.
And then as far as your third question around durability, I would say that we have actually not guided to the follow-up on those six patients. But as we're going to have nearly 20 participants at 24 weeks, we'll be able to share their their kinetics of both viral load decline and ALT. changes, which I think will be informative and we will look into showing the six patient follow-up data as well in a in a in a future guidance call.
Great.
That's very helpful. Thanks so much.

Operator

Your next question comes from the line of Eric Joseph with JPMorgan. Your line is open.

Eric Joseph

Yes, yes, Mr. Krishnan, what you expect to be the ultimate treatment duration or kind of paradigm here with the Tobey Elli combination, do you expect it to be finite therapy or chronic treatment? And if it is the former finite interval, I guess, how much sort of off treatment observation do you think you would would. But I hope to have going into a discussion with regulators.

Phil Pang

So ERIK sorry, the beginning of your question was a little bit difficult to understand in the in hepatitis delta is 1,000 is the expected treatment algorithm going to be finite therapy for chronic therapy if it's finite therapy, cabo from frequent?

Sung Lee

Paul, do you think you would have going into initial discussions with regulators.

Marianne De Backer

Thank you, Eric.

Phil Pang

Yes.

Marianne De Backer

So what we are aiming to achieve here is a chronic treatment regimen for hepatitis delta patients. You want to comment further So yes.

Phil Pang

So with that, in that framework of chronic viral suppressive therapy, as we currently know it, for example, for other viruses like HIV and or hepatitis B, this there is no need for a follow-on therapy as if there is not a finite duration of therapy.
I think one of the questions that can come up is are we going to be following these patients for 24 or 48 weeks. And of course, we'll follow for both. But the question will be with regulators. How is there any precedent for earlier data and there is we've got very tight and that's another discussion we'll be having with regulators.

Sung Lee

Anything you can share the tolerability profile in that among patients receiving the upfronts on a combo regimen in the US you see forward?

Phil Pang

Yes. So I think that certainly we're looking forward to the Q2 data from our Solstice trial and the patients who have started what we call de novo or immediately on combination therapy without a lead-in. And what we've said is that we'll have about 30 participants between the two arms actually between mono and combo at week 12 and 20 participants at week 24. So you divide that into 15 and the patients will be through week 12 and 10 participants through week 24 in the combination arm, and we're looking forward to being able to share that data to.

Sung Lee

Okay, great.

Phil Pang

Thanks for taking the question.

Operator

And third, your next question comes from the line of Alex Fuhrman with Bank of America. Your line is open for.

Alec Stranahan

Hey, guys. Thanks for taking our questions. Just a couple from us. You've mentioned in the past about expanding beyond infectious disease into to, say, immunology, et cetera. Are there any areas of immunology or targets you've been 20 that you see is particularly interesting? And would you stay within your core competencies regarding antibodies and SI RNA? Or would you be more maybe technology agnostic? And one question on how you plan to allocate your 1.6 billion roughly in cash and maybe if you could breakdown percent spend on pipeline development, discovery, clinical trials and investments in your AI and machine learning capabilities, I'm versus say, dry powder for investing in external innovation that great.
Yes.
Okay.

Marianne De Backer

Thank you, Alice. Yes, I mean, since its inception, here has really been a leader in immunology and of course, initially focused only on really targeting infectious diseases and but what we're really doing now is broadening that vision to we call it powering the immune system, which is really giving patients the ability to to SunPower the immune system to fight infection fight cancer. And we do it in two fundamental ways through our powerful antibody therapeutics, which we generate through our engineering. And then secondly, sewing generating unique T cell responses in vivo with our T cell-based viral vector platform. So the type of expansion that we're looking at are it is really, you know, rooted in our strengths of the Company where we have deep expertise and that is in immunology, virology and oncology. So we are looking at expanding into viral associated diseases and then indeed, immune targeting such as such as in cancer. And we will be sharing more information on our early programs in that area towards the end of the year when we will be holding an R&D day.
So with that, I'll maybe ask Sam to comment on our cash position and breakdown.

Sung Lee

So thanks for that question. So with regard to our 1.6 billion in cash and cash equivalents, the majority of this will be dedicated to the ongoing clinical stage programs of hepatitis delta and hepatitis B, of course. So we have to sort of take this one year at a time as we have important data readouts in both of those programs this year. So obviously, we're rooting for success and that would dictate the capital allocation for subsequent years. But when you look at the immediate year 2024, we've provided guidance, R&D and SG&A expense combined. It's fair to think that more than half of that is dedicated to the development programs, primarily hepatitis delta and hepatitis B hub. There's amounts that will be invested to build our antibody platform. And as Marianne said in her prepared comments, will be very opportunistic about tapping into external innovation where it makes sense, but we'll be very prudent about that.
Great.

Phil Pang

Appreciate the color.

Sung Lee

Thank you, Shannon.

Operator

Your next question comes from the line of Joseph Stringer with Needham & Co., your line is open.

Joseph Stringer

Hi. Thanks for taking our questions. And just a follow up question on the Delta readout in the second quarter. I wanted to focus on the cirrhotic patients. Clearly, safety will be key will be key, but do you anticipate that it would be more challenging to show a treatment effect in these patients relative to the non-cirrhotic patients? And how important from a commercial perspective would it be to show a clinical effect and and these patients?
Thank you, Julie. I'll take that one. If that's all right. And so in terms of cirrhosis, first off, I want to just provide a little clarity. We need to distinguish between patients who we have what we have, what we call compensated cirrhosis and patients who have decompensated cirrhosis. Decompensated patients are obviously much more fragile and have a high one-year mortality. So I think really we need to we are focused on getting our drugs to patients as fast as possible or drug candidates to patients as fast as possible. And that will include both compensated cirrhosis patients with compensated cirrhosis as well as those who are non-cirrhotic. We think that the as I said earlier, I think the compensated cirrhosis patients are approximately 30% to 50% of patients currently living with hepatitis delta that number is obviously a little bit biased simply because those with compensated cirrhosis are more likely to present to a clinician in terms of whether or not we expect the efficacy to be any different. I don't see any biological reason why we would expect a different result in cirrhotic patients compared to non-cirrhotic patients from a viral efficacy perspective.
From a safety perspective, it would there's there's also not any reason to believe that they would be a significant safety signal. I do want to point out that we did do a hepatic impairment study in decompensated chart to try to be patient for CBTB. patients. And there was no evidence to date of a clinically significant change in PK or safety in that small study. So I think that there's again, no reason to believe there's a concern, but that's why we did the clinical trials. And that's why we're looking forward to seeing what that data looks like in Q2.
Great. Very helpful. Thanks for taking my questions.
Thank you, Johannes.

Marianne De Backer

Sorry.

Operator

Your next question comes from the line of Mike Olson with Morgan Stanley. Your line is open again, thanks for taking the question.

Michael Ulz

Maybe just a follow-up for Sung.

Sung Lee

Thanks for giving clarity on how to think about OpEx spend this year. Maybe if I could push you a little bit as we think about moving beyond 2024 million?

Phil Pang

Maybe give us a sense of how to think about it trend-wise, should we be thinking more flattish spend?

Sung Lee

Or should we be thinking sort of an upward trend? I know a lot will depend on kind of what happens with some of these readouts here, but any any comments there would be helpful.
Thanks.
Yes, thanks for the question, Mike. So kind of going back to what I said for the bulk of the capital allocation, if we continue to demonstrate successful data with hepatitis delta and hepatitis B programs as we have of the last 18 months, that would garner the lion's share of capital allocation.
So moving beyond 2024, we would expect hepatitis delta and hepatitis E studies to continue to ramp up. They're still in Phase two as we get into Phase three a deep both of these studies with Pete, but that peak would not be reached in 2025. Boutique would most likely be reached somewhere in the second half of 2026 to 2027 timeframe as things progress. But and again, we have to really take this one year at a time because it's dependent on data.
I might just add, though, when you look at the guidance for 2024, we put a lot of information out there to help you think about not only GAAP operating expenses, excluding cost of sales, but also how to think about cash utilization from our guidance range because we provided you with important noncash items. So both on an OpEx basis and cash utilization basis, we would be significantly lower than 2023, which we would consider a peak year driven by the flu study and related manufacturing. And I'll just round out my statement by saying on a operating expense basis when you exclude the non-cash significant items, we would expect to be down 18% year over year, so which is significant. And again, from all the cost optimization efforts undertaken last year and coming off the peak of the flu investment last year as well.

Phil Pang

Got it. That's helpful. Thank you.

Sasha Damouni Ellis

There are no further questions at this time. I will now turn the call over to Marianne Bakker for closing remarks.

Marianne De Backer

Okay. Thank you, operator. So to close up, we are eagerly anticipating our multiple data catalysts. That's really in our mind holds a great promise for patient impact and for value creation. And we are well on our way, as we said, powering the immune system to transform lives.
Thank you all for joining us.
Today. And operator, you may end the call.
Thank you.

Sasha Damouni Ellis

This concludes today's call. You may now disconnect.

Phil Pang

I mean, I mean, no, yes.