Vir Biotechnology, Inc. (NASDAQ:VIR) Q3 2023 Earnings Call Transcript November 2, 2023
Vir Biotechnology, Inc. misses on earnings expectations. Reported EPS is $-1.22 EPS, expectations were $-1.21.
Operator: Hello, and welcome to Vir Biotechnology's Third Quarter 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 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 Form 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, and welcome. I'm Marianne De Backer, CEO of Vir, and I am pleased to welcome you all here today. Since the last time we spoke, Vir has made some impressive progress on driving our scientific platforms, our pipeline and our clinical trials forward. All this positive momsentum is encouraging as we seek to serve all the patients who are waiting, especially those with unmet medical needs in multiple infectious disease areas and beyond. Let me first call your attention to the updates we are most looking forward to at AASLD The Liver Meeting in Boston later this month. Our Phase 2 data readouts from two of our most advanced programs chronic hepatitis B and chronic hepatitis delta.
As a reminder, this includes initial data from Part B of the MARCH trial where we are looking at combinations of our monoclonal antibody, VIR-3434 and our siRNA VIR-2218 for 24 and 48 weeks with and without peg interferon alfa. We also look forward to sharing initial data from our ongoing SOLSTICE trial, which is evaluating whether our antibody VIR-3434 alone, our siRNA VIR-2218 alone, or the combination of these can be a viable chronic therapy for patients who are co-infected with hepatitis delta virus. Thanks to the approximately $50 million in new BARDA funding, we have had positive momentum on the development of VIR-7229, our investigational next generation COVID-19 monoclonal antibody with a distinct combination of potency, breadth, and viral ines capability.
This funding includes $40 million in Project NextGen non-diluted funding, which will support the development of VIR-7229 through Phase 1. We expect the Phase 1 trial to initiate in 2024, and we'll be exploring a partnership for the development of this antibody post Phase 1. The BARDA funding also supports alternative monoclonal antibody delivery technologies, such as RNA delivered monoclonal antibodies, which have the potential to revolutionize the field of antibody therapeutics with the ultimate benefit of enabling greater patient access and ease. This funding is another testament to Vir’s world class antibody platform and our ability to discover rare, broad and highly potent monoclonal antibodies with the hope of generating powerful new medicines.
Switching gears to one of our newest clinical programs. In September, the first participant was dosed in a Phase 1 trial evaluating VIR-1388, an investigational novel T-cell vaccine for the prevention of HIV. This trial is especially meaningful, because it brings us and our supporters, which includes the Bill & Melinda Gates Foundation, the National Institute of Allergy and Infectious Diseases and the HIV Vaccine Trials Network one step closer in our shared pursuit of developing an HIV vaccine. We are hopeful that our unique approach will help close the longstanding public health gap in HIV prevention and we will look forward to sharing initial data from this trial in the second half of 2024. Finally, I want to give you a glimpse into some of the transformative strategic decisions Vir has made to drive future growth and increase patient impact.
As you know, our founding mission was a world without infectious disease and we are now embarking on a broader vision, powering the immune system to transform lives. We have always seen ourselves as an immunology company first and are now ready to expand into new areas of growth by applying our deep immunology expertise beyond infectious disease with the first applications in autoimmune diseases and immuno-oncology. This is made possible by our platform that has already created monoclonal antibodies with enhanced selectivity and potency using AI-based protein engineering. We have existing in-house immuno-oncology experience, and we are already advancing enhanced antibodies for tumor immunotherapy with augmented selectivity and potency under the leadership of Dr. Alan Korman, Senior Vice President of Immune Targeting here at Vir.
Prior to joining Vir, Alan led discovery of three approved drugs for oncology. We are also embarking on a novel agnostic way to identify T-cell receptors specific for tumor antigens, an effort led by our National Academy of Sciences Immunologist, Dr. Antonio Lanzavecchia. We look forward to keeping you updated on this in 2024. We believe all of this is within reach thanks to our strong balance sheet, which allows us to take our chronic hepatitis B and chronic hepatitis delta programs through development inflection points, as well as invest in our core antibody platform and evaluate complementary external opportunities. Meanwhile, we will continue to be judicious in our spend and investment to ensure that we maximize the deployment of the 1.7 billion in cash and investments.
Finally, I want to highlight that next week we will be welcoming our new Chief Scientific Officer, Dr. Jennifer Towne. Jennifer brings more than two decades of R&D experience and a proven track record of successfully developing breakthrough medicines and bringing multiple investigational new drug applications for innovative therapeutics forward. This includes bringing 16 drug candidates from preclinical research to IND and early clinical development. Her scientific and external innovation leadership experience combined with her deep immunology expertise will be critical to delivering on our strategy to go beyond infectious disease. I want to thank Phil Pang for expanding his responsibilities as Interim Head of Research. Phil will continue to lead clinical research, development and medical affairs as Chief Medical Officer to bring our late stage portfolio to fruition, which is our top priority at Vir.
With that, I'll now turn the call over to Phil to provide an update on the progress we are making in our preclinical and clinical programs.
Phil Pang: Thank you, Marianne. As Marianne mentioned, we are looking forward to sharing at ASLD data from our Phase 2 MARCH chronic hepatitis B trial and our Phase 2 SOLSTICE chronic hepatitis delta trial. First, I want to talk about chronic hepatitis B and our goal, which is to achieve a functional cure defined as lifelong control of the virus after a finite duration of treatment, a goal that would be welcomed by the 300 million people living with chronic hepatitis B. The only treatment available to achieve a functional cure is arduous and results in a functional cure only 3% to 7% of the [time]. We are aiming to set the bond much higher with a goal of achieving a 30% or better functional cure rate. Our hypothesis is that you cannot achieve a functional cure with only an antiviral or only with an immunomodulator, but you really need both mechanisms fraction, which is exactly what we are evaluating in our multiple ongoing clinical trials.
Our vaccine antibody VIR-3434, and our siRNA VIR-2218 can potentially act as both immunomodulators and antivirals. VIR-3434 has three mechanisms of action. First, it is a neutralizing antibody preventing viral entry of HBV and HDV virions. Second, via enhanced optimization, it removes viral particles and subviral particles from the bloodstream. Third, it has a modified Fc domain, which allows it to act as a potential direct immune activator, capable in-vitro of stimulating dendritic cells to mature and create T-cells against HBV or HDV. This is otherwise known as a vaccinal effect. VIR-2218 can act as an antiviral by knocking down HBV RNA transcripts. VIR-2218 can also act as a potential immunomodulator because we believe the HBV protein hepatitis B surface antigen is an immune to allergen and by knocking it down we can unleash the break on the immune system.
So VIR-2218 is designed to act by analogy like a checkpoint inhibitor. We have demonstrated that when VIR-2218 plus peg interferon alfa is given for 48 weeks, about 30% of participants achieved hepatitis B surface antigen loss at the end of treatment and about 16% had sustained hepatitis B surface antigen loss 24 weeks after the end of treatment. Although the number of participants treated to date is relatively small, this is the first demonstration that siRNAs can have a potential impact on functional cure rates. In that same study, Vir identified that we may be able to predict who will have an off treatment response based on their endogenous anti-HBS antibody levels at the end of treatment. Vir was also the first to demonstrate the additive impact of combining an siRNA and a monoclonal antibody, specifically VIR-2218 with VIR-3434.
This combination resulted in the largest declines in hepatitis B surface antigen ever observed after just 12 weeks of combination therapy. In Part B of the MARCH study, we are evaluating VIR-2218 plus VIR-3434 with and without peg interferon alfa for 24 and 48 weeks. To remind you, after 24 weeks of VIR-2218 plus peg interferon alfa without VIR-3434, we saw that 6% of patients achieved hepatitis B service antigen loss at the end of treatment. Thus, for AASLD, the fundamental question are around the role of our vaccine antibody VIR-3434. First, if we add VIR-3434 to VIR-2218 plus peg interferon alfa, will we see an end of treatment response greater than 6%? Second, if we replace peg interferon alfa with VIR-3434, will we see an end of treatment response better than 6%?
Third, if we give VIR-3434 for 24 weeks or more, will we see any signs of immunomodulatory activity suggestive of a vaccinal effect? If so, that would strongly support the potential role of VIR-3434 in a functional curative regimen. Now let's shift gears to chronic hepatitis delta. About 100,000 people in the United States and potentially over 200,000 in the EU5 are currently estimated to have HBV/HDV co-infection. This is likely to be an underestimate, given the under diagnosis rates for chronic hepatitis delta. We believe having a highly efficacious, easy-to-use treatment for chronic hepatitis delta will drive the desire to be diagnosed. Delta is one of the most severe forms of viral hepatitis with 4 times greater risk of liver cancer and 2 times greater risk of death compared to hepatitis B.
Notably, we don't yet have potent chronic viral suppressive therapy for delta. In recognition of this urgent unmet medical need, there are potentially accelerated paths to approval. Our antibody, VIR-3434 and our siRNA VIR-2218, can also inhibit the hepatitis delta lifecycle because hepatitis delta virus requires the hepatitis B service antigen to be infectious. Notably, with the only currently available chronic treatment, 12% of patients achieve undetectable HDV RNA after a full 48 weeks of therapy with 45% of patients receiving some benefit. This regimen also requires lifelong daily subcutaneous injections. We have challenged ourselves to develop a chronic suppressive therapy that is better, not just in terms of efficacy but also in terms of convenience, safety and tolerability.
I'm excited to see if we can get there. Data from the SOLSTICE trial will be shared as a late breaker oral presentation at AASLD. Specifically, we'll be evaluating the safety and antiviral efficacy of VIR-3434 alone, VIR-2218 alone and the combination of the two together in a small cohort of participants. Looking ahead to what we believe will enter the clinic next is VIR-7229, our next generation investigational COVID-19 monoclonal antibody, which is being funded in part by BARDA. This funding includes the parallel research and development of next generation RNAs, such as circular RNA or self-amplifying RNA that would actually encode this antibody, potentially allowing your own cells to make VIR-7229. This would be the ultimate combination of RNA and antibody technology.
Instead of using RNA to encode a protein that your body then must develop an immune response against, this is about RNA encoding antibody that directly defends you. Finally, a quick look back. As I know there remain questions about VIR-2482, our investigational prophylactic influenza A antibody. Our ongoing post hoc analyses have yielded the following two important insights. First, VIR-2482's ability to reduce cases of symptomatic flu improves to 57% for the 1200 milligram dose when the case definition includes fever, that is how symptomatic illness is defined. Second, this relative risk reduction increases further to 65% when excluding the cases of flu that occurred within a few days of dosing. Notably, our next generation antibody, VIR-2981, is not only more potent in-vivo but covers both flu A and flu B.
Furthermore, because it inhibits the neuraminidase enzyme, like all current flu antivirals, its mechanism of action has been clinically validated and is de-risked. The IND submission for VIR-2981 is anticipated in the second half of 2024. In addition to VIR-2981 and VIR-7229, we have two other preclinical candidates that we expect an IND filing for in the next 12 to 24 months. VIR-8190 is an investigational monoclonal antibody against respiratory syncytial virus and human metapneumovirus. You may have heard the news of the incredible demand surrounding the currently available mAb for RSV. Imagine if you could have a single monoclonal antibody that not only covers RSV but also a second virus human metapneumovirus that also causes significant morbidity and mortality in infants.
We also have an investigational novel therapeutic vaccine candidate for control of high grade squamous epithelial precancerous lesions and HPV cancers that is called VIR-1949. Our talented researchers here at Vir have been very busy executing, and I'm excited to hand over the reign to Jennifer Towne as Chief Scientific Officer. She will no doubt further bolster our innovation mindset. I will now turn the call over to Chief Financial Officer, Sung Lee.
Sung Lee: Thank you, Phil. We're pleased to share our financial results for the third quarter of 2023. Total revenues were $2.6 million compared to $374.6 million for the same period a year ago. The primary reason for the decline is lower collaboration revenues from Sotrovimab compared to a year ago. We continue to expect collaboration revenues to be at minimal levels and potentially making negative contribution to our top line due to the ongoing required investments to support the marketing authorization of Sotrovimab, which our partner GSK lease the efforts in. Turning to operating expenses. R&D expenses in the third quarter of 2023 were $148.3 million compared to $114.2 million in the same period in 2022. In the third quarter of 2023, we have recorded an expense of $21.9 million for the cancellation of Phase 3 manufacturing activities for VIR-2482, our investigational flu monoclonal antibody.
With this expense recorded, cost related to VIR-2482 are now largely behind us. Other drivers of year-over-year growth were the investments in our ongoing Phase 2 studies in hepatitis B and hepatitis delta. SG&A expenses in the third quarter of 2023 were $41.1 million compared to $43.2 million for the same period in 2022. The decline was primarily driven by lower consulting expenses and stock based compensation. For the third quarter of 2023, we reported a consolidated net loss of $163.4 million compared to a net income of $175.3 million for the same period in 2022. Turning to the balance sheet. We ended the third quarter of 2023 with cash and investments of $1.74 billion compared to $1.9 billion at the end of the second quarter of 2023. During the third quarter, we made a payment of $67 million to our collaborator GSK for excess Sotrovimab supply and manufacturing capacity, which were originally recorded as a liability in 2022.
With this recent payment, the liabilities of GSK is effectively paid off. Excluding the payment to GSK, our cash utilization during the third quarter was approximately $94 million. In closing, I would like to add that we are taking measures to optimize our cost structure and capital allocation. You can expect us to continue to be strong stewards of capital and 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 lines.
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