Arbutus Biopharma Corporation (NASDAQ:ABUS) Q2 2024 Earnings Call Transcript

Arbutus Biopharma Corporation (NASDAQ:ABUS) Q2 2024 Earnings Call Transcript August 1, 2024

Operator: Good day, and thank you for standing by. Welcome to the Arbutus Biopharma 2024 Second Quarter Financial Results and Corporate Update. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Lisa Caperelli, Vice President of Investor Relations. Please go ahead.

Lisa Caperelli: Thank you, Jill. Good morning, everyone, and thank you for joining Arbutus second quarter 2024 financial results and corporate update call. Joining me today from the Arbutus Executive Team are Michael McElhaugh, Interim President and Chief Executive Officer; Dr. Karen Sims, Chief Medical Officer; David Hastings, Chief Financial Officer; and Dr. Mike Sofia, Chief Scientific Officer. Mike McElhaugh will begin with a corporate update, followed by Karen, who will review our ongoing clinical programs. Dave will then provide a review of the company’s second quarter 2024 financial results. After our prepared remarks, we will open the call for Q&A. Before we begin, I’d like to remind you that some of the statements made during the call today are forward-looking statements, which are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our annual report on Form 10-K, our quarterly report on Form 10-Q, which we filed today, and from time to time and other documents filed with the SEC.

With that, I’ll turn the call over to Mike McElhaugh. Mike?

Michael McElhaugh: Good morning, everyone, and thank you for joining us today. In the second quarter of 2024, we made significant advancements in our pursuit of developing a functional cure for patients with hepatitis B and driving value for our company and shareholders. Most importantly, we presented positive data from two Phase 2a clinical trials, combining our RNAi therapeutic imdusiran with different immunomodulators. Both of these data sets support the continued development of imdusiran as a cornerstone in an HBV functional cure treatment regiment. Of note, the improved one clinical trial demonstrated undetectable hepatitis B surface antigen in 33% of patients from Cohort A1, who were treated with 48 weeks of imdusiran and 24 weeks of interferon.

More importantly, 67% of those patients with baseline surface antigen less than 1,000 international units per mil had undetectable hepatitis B surface antigen. In addition, six patients four from Cohort A1 and two from Cohort A2, who achieved undetectable surface antigen after receiving imdusiran plus 24 weeks of interferon, stopped all therapy and maintained undetectable surface antigen and HBV DNA in early follow-up, a precursor to a functional cure. To put this in context, if these six patients continue to maintain undetectable levels of HBV DNA and surface antigen for 24 weeks, while off all therapy, they would be considered functionally cured. We look forward to following the trajectory of these patients and potentially achieving our goal of reaching a functional cure rate that is equal to or greater than 20%, a goal of it aligns with a number of in the HBV field.

Q&A Session

We are now prioritizing advancing imdusiran and into Phase 2b clinical development and preparations are ongoing. In addition, to the follow-up data from the patients from improved one that are trending towards a functional cure. We expect to report preliminary data from the nivolumab arm of the improved two trial evaluating imdusiran plus VTP-300, in the second half of this year. As a reminder, improved to — includes an additional cohort of patients who received imdusiran plus nucleoside analogue therapy for 24 weeks, followed by VTP-300 plus up to two low doses of nivolumab, an approved anti-PD-1 monoclonal antibody. Because we are now focused on advancing imdusiran into Phase 2b clinical development and ensuring we have the resources to do so.

We have made the difficult decision to further streamline the company by eliminating our HBV discovery efforts. These actions will result in a reduction in workforce of 40% affecting our discovery, research and G&A functions. We know changes that impact our people are not easy, and we are committed to providing — departing employees with support as they transition to their new next roles. At the same time, we are confident that Arbutus remains well positioned for the future. I want to emphasize how grateful we are to all our employees, especially those departing for their dedication and passion in developing novel therapeutics that may lead to a functional cure in hepatitis B. In addition to eliminating our research discovery efforts, we have also decided prior to dosing any patients to discontinue our recently initiated improved three trial also known as AB-729-203, which was a Phase 2a trial evaluating the addition of their nivolumab to imdusiran.

Our decision to discontinue the improved three clinical trial is not related to any concerns regarding imdusiran or our belief that the addition of controlled checkpoint inhibition may be a key component of a functional cure regimen. The decision was based solely on prioritization of resources for the advancement of imdusiran into a Phase b — Phase 2b clinical trial and the projected availability of improved three clinical data given the advancement of AB-101 through Phase 1 clinical development. I want to emphasize that our decision to discontinue this clinical trial, has no impact on our small — small molecule, PD-L1 checkpoint inhibitor. AB-101, that is differentiated from checkpoint antibodies and is currently in a Phase 1a/ 1b clinical trial.

Recall, AB-101 is liver centric and in preclinical studies had typical small molecule pharmacokinetics and therefore, likely a much shorter duration of effect than long acting antibodies. These features were designed with the goal of minimizing systemic exposures and reducing the chance of immune-related adverse events that are often seen with checkpoint antibodies. It is for these reasons that we continue to remain excited about the potential of AB-101 in hepatitis B and are continuing to evaluate multiple ascending doses of AB-101 in healthy subjects in our Phase 1a/1b clinical trial. Importantly, the actions today have allowed us to extend our projected cash runway into the fourth quarter of 2026. Before I turn the call over to Karen, I would like to provide a brief update on the litigation with moderna and Pfizer/BioNTech around our LNP intellectual property.

In the moderna case, next steps include expert reports and expert depositions. The court has set April 21, 2025 is a trial date for this case, which is of course, subject to change. The Pfizer/BioNTech lawsuit is ongoing with no updates at this time. With that, I’ll now turn the call over to Karen to review the data we presented at EASL. Karen?

Karen Sims: Thanks, Mike, and good morning, everyone. The end of treatment data we reported at the EASL congress in June, with from our ongoing Phase 2a combination clinical trials, evaluating and imdusiran with two immunomodulatory approaches and supports advancing the development of imdusiran as the cornerstone therapeutics of an HBV functional cure regimen that reduces surface antigen suppresses HBV DNA and boost the immune system. The first trial improved one, evaluated the safety, tolerability and antiviral activity of a 24 week lead-in of imdusiran 60 milligrams given every eight weeks, followed by 12 or 24 weeks of weekly interferon with or without additional doses of imdusiran and nuke suppressed chronic hepatitis B patients.

At the end of interferon treatments, patients remained on their Nuc therapy for an additional 24 weeks. And at that point, if protocol criteria were met, they could stop their Nuc therapy and remain off all therapy for 48 weeks of follow-up. While we presented the full undertreatment preliminary dataset for all four patient cohorts at EASL, I will focus on the two cohorts of patients in the trial that received 24 weeks of interferon as more patients in these cohorts reached and maintained undetectable surface antigen levels than in the 12-week interferon cohorts. 12 patients received 24 weeks of imdusiran dosing, followed by 24 weeks of weekly interferon with continued imdusiran dosing every eight weeks. And for those 12 patients or 33% had undetectable surface antigen at the end of treatment, all four patients maintained undetectable surface antigen after stopping interferon treatment and continuing just their Nuc therapy for 24 weeks.

These same four patients discontinued their Nuc therapy and are in follow-up. And if they continue to maintain undetectable surface antigen and HBV DNA levels for another 24 weeks, they will be considered functionally cured. Of note, there are also two patients that received 24 weeks of imdusiran followed by 24 weeks of interferon with no additional doses of imdusiran, that also reached and maintained undetectable surface antigen and have discontinued Nuc therapy. So in total, there are six patients from the 24-week interferon cohort that achieved sustained surface antigen loss of zero converted with high surface antibody levels and are now being followed off all therapy to assess for a functional cure. The 33% response rate seen with 24 weeks of interferon, is one of the highest response rate seen in the field, including some studies testing interferon treatment durations of 48 weeks.

In addition, unlike other RNAi candidates in development that have been evaluated in combination with interferon, imdusiran was administered less frequently and at a lower dose. The key opinion leaders in the HBV field have found these data to be impressive. There’s been prior skepticism around the use of interferon and HBV functional cure regimen, especially since 48 weeks of interferon treatment is not always well tolerated. This clinical trial evaluated 24 weeks of interferon treatment, which is one of the shortest courses leading to sustained surface antigen loss in patients with HBV to date. Additionally, in this clinical trial, interferon was generally safe and well-tolerated, giving us and others in the field. The belief that this may be a viable treatment regimen to advance into a Phase 2b clinical trial.

Our second trial improved to, is evaluating the safety and immunogenicity of a 24 week lead-in with imdusiran, followed by biotherapeutics, immunotherapeutic VTP-300, while continuing Nuc therapy. At the end of treatment week 48, if patients met protocol criteria that could stop their Nuc therapy and continue to be followed for 48 weeks of all treatment. During the 24 week imdusiran lead-in period, we saw a 1.8 logs decline in surface antigen from baseline on average. This decline in surface antigen with imdusiran treatment alone is in-line with data we’ve seen to date from our other clinical trials. In addition 95% of patients had surface antigen levels less than 100 IUs per ml at the time of dosing with VTP-300 or placebo. And after VTP-300 administration, more patients maintained surface antigen threshold of less than 100 or less than 10 IUs per ml versus placebo through 24 weeks post end of treatment.

Statistical significance was achieved in mean surface antigen levels between the treatment arm of five patients, and placebo with six patients, reaching the 24-week post end of treatment timepoint. The data from this trial supports our thesis that by first lowering surface antigen with imdusiran, we increase the patient’s ability to respond to additional treatments. Recall, that we’ve expanded the improved use clinical trial to evaluate the addition of a low dose of anti-PD-1 monoclonal antibody nivolumab to the imdusiran and VTP-300 combination treatment regimen. We believe nivolumab may further boost the host immune response. We are on track to report preliminary data from this portion of the trial later this year. Now, let’s briefly review the Phase 1a/1b clinical trial with AB-101.

As Mike mentioned, AB-101, our liver centric oral small molecule, PDL1 checkpoint inhibitor, is differentiated from checkpoint inhibitor antibodies that is developed for potential use in combination with imdusiran as a potential treatment regimen to functionally cure chronic hepatitis B. The Phase 1a/ 1b clinical trial consists of three parts, starting with single and then multiple ascending doses in healthy subjects and culminating with multiple doses in patients with chronic hepatitis B. Last quarter, we reported data from Part one showing that AB-101 is generally well tolerated with evidence of dose-dependent receptor occupancy. In the 25 milligram cohort, all five evaluable subjects showed evidence of PDL1 receptor occupancy between 50% and 100%.

Indicating that AB-101 is interacting with the intended target. We are now in part two of this trial, where cohorts of healthy subjects are receiving multiple ascending doses of AB-101. We anticipate announcing preliminary data from Part two later this year. Our goal is to move as quickly as possible into Part three, which will enroll patients with chronic hepatitis B. We believe that the immune checkpoint pathway plays an important role in HBV specific immune tolerance and in T-cell activation. And the addition of a checkpoint inhibitor in combination with imdusiran could potentially further enhance HBV specific immune responses. With that, I’ll turn the call over to Dave Hastings, for a brief financial update. Dave?

David Hastings: Thanks, Karen, and good morning, everybody. We ended the second quarter of 2024 with approximately $148.5 million of cash, cash equivalents and investments in marketable securities, compared to approximately $132 million as of December 31, 2023. During the first half of 2024, we received $44.1 million of net proceeds from the issuance of common shares under Arbutu’s at-the-market offering program. These cash inflows were offset by $33.8 million of cash used in operations. As we announced today, we are reducing our workforce by 40%. Importantly, we continue to believe we have the financial and human resources necessary to advance our clinical stage HBV pipeline. Now with this reduction in workforce, we will incur a onetime restructuring charge of approximately $3 million to $4 million that will be recorded in the third quarter of 2024.

We still expect our 2024 cash burn, to range from $63 million to $67 million. Importantly, with the actions we announced today, we extended our cash runway into the fourth quarter of 2026. And significantly strengthened our ability to fund an anticipated imdusiran Phase 2b clinical trial. In closing, we have a strong financial position to advance our mission of developing our HBV assets to provide a functional cure for chronic HBV. With that, I’ll turn the call back to Mike.

Michael McElhaugh: Thanks Dave. With the reporting of end-of-treatment data for improved one and improved two. We have now achieved all of our first half of 2024 key milestones. Our second half milestones are on track, including reporting preliminary end-of-treatment data from the nivolumab arm, the improved two trial and reporting preliminary multiple ascending dose data from healthy subjects in the AB-101-001 trial. In closing, I wish the best to our departing employees. And again, thank them for their dedication and contributions to the company, as we continue to pursue our goal of developing a functional cure for patients with chronic hepatitis B. Operator, we we’re now ready to open the call for Q&A.

Operator: [Operator Instructions]. The first call comes from Dennis Ding with Jefferies.

Dennis Ding: Good morning. Thanks for taking the questions. I just had one on the Phase 2b that you guys were mentioning. Can you just talk a little bit about what this trial would look like in terms of size and design and approximately how much it would cost to run? And as a follow-up, I’m just curious, with this include AB-101, that’s quite the regiment? Or I guess maybe it was just include interferon and VTP-300. In some more data in the second half this year> Maybe just a comment on that as well, please. Thank you.

Michael McElhaugh: Sure. Good morning, Dennis. Karen, would you like to handle that question.

Karen Sims: Of course, sure, that’s fine. Hi, Dennis. So there’s really not much I can share. At this point in terms of the Phase 2b study design. Obviously, we’re in the planning stages of that study. It would be premature to describe any specific study design feature or the timing of the study. So that will allow me to be the subject of a future discussion . In terms of including compounds in that trial. I think we’re evaluating all the options, we have at our disposal right now. As you know, we shared very exciting data at EASL with our interferon combination and improve one, with VTP-300. We’re waiting that additional the nivolumab data from the improved two additional cohort coming later this year. So at this point, I think all options are open and on the table, and we’re evaluating all those as we speak.

Dennis Ding: Okay. Thank you.

Operator: Your next question comes from Ed Arce with H.C. Wainwright.

Unidentified Analyst: Well, good morning, everyone. This is [indiscernible] asking a couple of questions for Ed. Thank you for taking our questions. So first question for the improved two expansion cohort data spend expected in second half this year. As the data announced and expected to be in conjunction with any major medical conference in the second half this year?

Michael McElhaugh: Good morning, Thomas, and thanks for the question. I will tell you, what we tell you every time, we talk about the release of data. We hope that’s the case. But of course, we can’t commit to that because we don’t know — we won’t know that the disposition of abstracts yet. So we hope that’s the case. We anticipate that that will be the case. But of course, we can confirm that till we get closer to up, to the end of the year.

Unidentified Analyst: Understood. And then perhaps as an add-on question to that. Are there any plans to report a new interim data from -1 and input-2 studies, before year end?

Michael McElhaugh: Yeah, I think the answer to that question, Thomas, is yes. Timing TVD.

Unidentified Analyst: Got it. And then perhaps one question from us on the operation streamline plans are they — any other impacts on your clinical programs other than the planned input-3 study. And then also if you can discuss any preclinical programs that are effective, by just reminding?

Michael McElhaugh: Yeah, No — No. Look, we don’t anticipate any other impact on the clinical programs. In fact, the focus really is to — focus on the later stage different studies. And that’s the intent and using the existing resources we have to fund the Phase 2b study, which we believe we can substantially fund with the current cash on hand. Obviously, we can’t give exact guidance after that until the study design is complete. But with the streamlining to date, it positions the company well, to advance and disarm it quickly.

Unidentified Analyst: Got it. Thank you again for taking my questions.

Michael McElhaugh: Of course, thanks Thomas.

Operator: Your next question comes from Roy Buchanan with Citizens.

Roy Buchanan: Hey, thanks for taking the questions. Just a couple of quick ones. I guess just to make sure I’m clear. Just I know I’m sure you’re going to need to talk to the FDA, but it sounds like the next and possibly the only trial that you’re going to start is going to be this Phase 2b. Is that correct?

Michael McElhaugh: Yeah, I don’t know how to answer that. I mean what we said today was, we’re planning to move imdusiran into later-stage clinical development, which is likely a Phase 2b study. We have lots of thinking to do. We are in the process of doing that. And we’ll come back when we have some more details.

Roy Buchanan: Okay. And still some data to see if I got.

Michael McElhaugh: Though some data to see.

Roy Buchanan: Correct. Yeah. Okay. And then just one — Just I guess you’re thinking and I think you mentioned it in the prepared remarks about focusing on patients with baseline HBs less than 1,000. Other companies are looking there. Just how are you potentially thinking about that today?

Michael McElhaugh: Yeah, that’s a good question, Roy. I mean, yes, you’re right. You did hear that comment in the prepared remarks. One of the things that we found very intriguing about the data that we generated and improved one is that if you looked at the response rate in patients with surface antigen less than 1,000 at baseline, the number increased dramatically from 33% to 67%. Now, of course, we’re going to have to see how that continues to hold as we move forward here. But remember, we’re talking about 350 million patients globally with hepatitis B. So even if you start to cut that down into some patient populations and you think about how you could potentially segment that market? We’re still talking about substantial numbers of patients. We’re working on specifically what that looks like, but there are — there is a very large base number of patients to work from. So yeah, we’re excited about that.

Roy Buchanan: Okay. Thank you.

Operator: Your next question comes from Keay Nakae with Chardan.

Keay Nakae: Yeah, thanks. Just again, not to beat a dead horse here, but just trying to understand the path forward for the next clinical trial. It sounds like you’re trying to position your resources to be able to at least start this on your own, if needed. But can you just firm up when you think you might start, and I know, you can’t give us any details on design, but you’re going to have more data in the second half of this year. So is this a first half 25 study or later?

Michael McElhaugh: Yeah, Keay, good question, good to have you on the line. Thanks for the question. I can’t give you any more specifics about design or timing at this point. All I can say is that we’ll get it started just as quickly as we possibly can. There are still some discussions to be had we are, as you mentioned, we’re still waiting for some data, which is obviously going to help drive that decision. But the goal here is to start this as quickly as we can. And yes, we do have the legs to kick this off on our own. And as Dave said, the fund substantially all of it at this point with the cash we have on hand. So we’re diligently working to get this kicked off quickly and stay tuned for more information.

Keay Nakae: Okay, thanks.

Michael McElhaugh: Thank you.

Operator: I’m showing no further questions at this time. I would now like to turn it back for the company for closing remarks.

Michael McElhaugh: Thank you, everyone, for joining us this morning. We appreciate your continued interest in and support of Arbutus. And of course, we look forward to providing updates as we progress development of our HBV assets. Operator, that concludes our call.

Operator: Thank you. And thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.