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Vir Biotechnology, Inc. (NASDAQ:VIR) Q4 2023 Earnings Call Transcript

Vir Biotechnology, Inc. (NASDAQ:VIR) Q4 2023 Earnings Call Transcript February 22, 2024

Vir Biotechnology, Inc. beats earnings expectations. Reported EPS is $-0.86, expectations were $-1.14. Vir Biotechnology, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

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. At this time, all participants are in a listen only mode. 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.

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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 a successor. I want to sincerely thank Phil for his leadership. He leads 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. Carrie Wang, 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 programs across all our clinical programs. Specifically, already in the first quarter, we anticipate completing the enrollment of approximately 60 participants across two cohorts in SOLSTICE, our Phase 2 hepatitis delta trial. We attributed 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 biologic and safety data on 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 convenient 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-class 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 policy makers 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 2 trials thus far, we believe our two therapeutic candidates, tobevibart and elebsiran, have 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 1 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 precancerous 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 for 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 submissions during the year. On February 21st, Vir and GSK terminated our collaboration to research, develop and commercialize our monoclonal antibodies targeting the influenza 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 infection 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 program 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 Vir 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 2 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 HPV targeted siRNA that reduces hepatitis B surface antigen, which is the protein that the delta virus needs for its lifecycle. In our initial data, we observed extraordinarily rapid declines in HDV RNA. Five out of six participants had undetectable HDV RNA and six out of six were below the lower limit of quantification within 12 weeks of starting combination therapy. Of note, two out of six 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.

A geneticist in a lab coat using high tech microscopes to research hepatitis B and influenza A viruses.
A geneticist in a lab coat using high tech microscopes to research hepatitis B and influenza A viruses.

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 2 program for chronic hepatitis B. our preliminary data suggests that when elebsiran was given with pegylated interferon alpha 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 peg interferon alone.

In a subsequent trial when adding tobevibart to a regimen of elebsiran alone or elebsiran plus peg interferon, 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 1 trial later this year. The development of VIR-7229 through the end of Phase1 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 the 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 2 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 2 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 equivalent 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 noncash 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 noncash. When excluding the noncash 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 2 flu trial, evaluating VIR-2482 and related manufacturing costs 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 impairment and changes in the fair value of contingent considerations.

Our financial strength allows us to advance the Phase 2 hepatitis delta and hepatitis B programs 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. Operator, please open up the line for questions.

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