Arbutus Biopharma Corporation (NASDAQ:ABUS) Q4 2023 Earnings Call Transcript

Arbutus Biopharma Corporation (NASDAQ:ABUS) Q4 2023 Earnings Call Transcript February 29, 2024

Arbutus Biopharma Corporation reports earnings inline with expectations. Reported EPS is $-0.12 EPS, expectations were $-0.12. ABUS isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the Arbutus Biopharma Fourth Quarter and Year End 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [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, VP of Investor Relations. Please go ahead.

Lisa Caperelli: Thank you, Stephen. Good morning everyone and thank you for joining Arbutus’ fourth quarter and year end 2023 financial results and corporate update call. Joining me today from the Arbutus executive team are Mike 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 fourth quarter and year end 2023 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 and from time-to-time in our other documents filed with the SEC.

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

Michael McElhaugh: Thank you, Lisa. Good morning everyone and thank you for joining us today. In 2023, we made several important strategic choices to best position Arbutus for long-term success. In addition to streamlining our focus and resources on HBV, which extended our cash runway into the first quarter of January 2026, we also announced my appointment as Interim President and CEO. As a Co-Founder of Arbutus, I am honored to have this opportunity to lead my colleagues in our mission to develop a functional cure for the millions of people chronically infected with hepatitis B virus. I’m excited for my new role and plan to leverage my extensive scientific, strategic, transactional, and commercial experience with antiviral and infectious disease companies to continue to move Arbutus forward.

In 2024, our focus is to position Arbutus for continued success and create value for all our stakeholders. We remain committed to advancing the development of our proprietary clinical assets in HBV, including imdusiran, our RNAi therapeutic and AB-101, our oral PD-L1 checkpoint inhibitor. There remains a need for finite and more efficacious HBV treatments that further improve long-term outcomes and increase functional cure rates as fewer than 5% of patients currently achieve functional cure with currently approved nukes or interferon. Our goal is to develop a treatment for chronic hepatitis B virus patients that results in at least a 20% functional cure rate to address this large unmet medical need. HBV is a complex virus that will most likely require a combination of compounds that inhibit viral replication, lower the viral antigen burden, and boost the immune response.

We are executing on our three-pronged approach to functionally cure HBV with a combination therapy that includes imdusiran as a cornerstone. A combination that includes imdusiran, AB-101, and a nuke is our ultimate goal. That said, our current strategy is evaluating imdusiran in combination with other agents in multiple Phase 2a clinical trials with the goal of gaining valuable insights on efficacy, safety, and optimal dosing to help inform the design of a Phase 2b clinical trial with imdusiran as the cornerstone therapy. Throughout 2024, we anticipate reporting data from our two ongoing Phase 2a clinical trials with imdusiran, including the potential to see patients with undetectable surface antigen. Achieving undetectable surface antigen levels in either of our current Phase 2a clinical trials would certainly be an important validation of imdusiran’s role in potentially achieving the functional cure for hepatitis B patients.

This year, we also anticipate data from our healthy subject portion of our Phase 1a/1b clinical trial with AB-101, our immunomodulator. We expect to report preliminary safety and importantly, preliminary receptor occupancy and target engagement data in this population. With the potential of AB-101 to boost the host immune response, our goal is to move AB-101 through the clinic as quickly as possible to prepare it for a possible combination with imdusiran. I’d like to say a few brief words about our ongoing intellectual property litigation efforts before closing out this section of the call. All of our scientists take great pride in the intellectual property they develop which takes great effort, time, resources, and expense. It is for these reasons that we continue to protect and defend our intellectual property, including our LNP delivery technology which is the subject of ongoing lawsuits against Moderna and Pfizer-BioNTech.

An important step in the litigation for Moderna took place on February 8th of this year. This was the date of the Markman hearing, also known as a Claim Construction hearing, where the court heard each party’s interpretation of the construction of claims in the disputed patents. We anticipate the judge to issue his order from the hearing within 60 days of February 8th. The next steps will include expert testimony and depositions. In addition, the court has set April 21st, 2025 as the trial date for this case. That date is subject to the court’s availability. With respect to the Pfizer-BioNTech lawsuit, the only update I can provide is that the lawsuit is ongoing but is behind the Moderna lawsuit as it was filed later. A date for the Claim Construction hearing for that case has not yet been set.

When able, we will provide updates on both the Pfizer and Moderna lawsuits, but please keep in mind that giving the legal sensitivities, we’re limited in what we can say. I’ll now turn the call over to Karen Sims to provide an update on the continued progress we are making across our pipeline. Karen?

Karen Sims: Thanks Mike and good morning everyone. We are currently conducting three clinical trials with our hepatitis B assets, two Phase 2a clinical trials with imdusiran and 1 Phase 1a/1b clinical trial with AB-101, and we expect to report data from all three of these trials throughout this year. We also plan to initiate a third Phase 2a clinical trial with imdusiran and durvalumab and approved anti-PD-L1 monoclonal antibodies in the first half of this year. We will share more details on that trial upon initiation. As Mike stated, the purpose of these multiple Phase 2a combination clinical trials are to gain information on the safety and efficacy of imdusiran as a cornerstone therapy and to identify a combination treatment regimen that reduces viral burden and boost the host immune response to advance into a later-stage clinical trial.

AB-792-201 is our Phase 2a clinical trial evaluating imdusiran in combination with ongoing nuke therapy and interferon in patients with chronic hepatitis B. Last June at EASL, we reported preliminary data that continues to reinforce our confidence in imdusiran’s ability to effectively lower surface antigen. At that time, we reported data on a small number of patients that had received imdusiran plus at least 12 weeks of interferon and show that interferon may contribute to additional declines in surface antigen. In the first half of this year, we plan to announce end of interferon treatment data for all 43 study patients, which will include safety and changes in surface antigens from baseline. When we report these data, we could potentially have some subjects that achieved undetectable surface antigen.

As a reminder, undetectable surface antigen is a key component of functional cure. AB-729-202 is a Phase 2a clinical trial that we are conducting in collaboration with Barinthus Bio Therapeutics, formerly known as Vaccitech. Through this clinical trial, we are testing whether the combination of imdusiran, nuke therapy, and Barinthus’ HBV antigen-specific immunotherapeutic VTP-300 can lower surface antigen and stimulate the host immune system to fully suppress the virus. Late last year at AASLD, we reported preliminary data that included all patients that received imdusiran treatment and several patients who had received VTP-300 or placebo. In these early data, we reported that surface antigen levels were reduced and sustained with the combination treatment of imdusiran and VTP-300.

In the first half of this year, we expect to report end of treatment data, which would include safety and change in surface antigen from baseline for all 40 patients that received imdusiran, VTP-300 or placebo and nuke therapy. We are continuing to dose patients in the amendment to the AB-729-202 trial that explores the addition of a low dose of the anti-PD-1 monoclonal antibody nivolumab to the combination treatment regimen. We believe nivolumab may further boost the host immune response. Preliminary data from this portion of the trial is expected in the second half of this year. As noted for the AB-729-201 trial, we may also have the potential to see undetectable surface antigen in some patients, which is a prerequisite to achieving functional cure.

While our Phase 2a clinical trials are evaluating imdusiran in combination with immune modulators, we intend to develop a proprietary combination therapy with imdusiran and AB-101, our oral PD-L1 checkpoint inhibitor. We believe that the immune checkpoint pathway plays an important role in HBV-specific immune tolerance and in T cell activation. Our third ongoing clinical trial is our Phase 1a/1b clinical trial, AB-101-001. This double-blind, randomized, placebo-controlled trial is designed to investigate the safety, tolerability, pharmacokinetics, and pharmacodynamics of AB-101. This trial consists of three parts; starting with single and multiple ascending doses in healthy subjects, and culminating with multiple doses in patients with chronic hepatitis B.

We are now moving AB-101 into the second part of this trial, which includes evaluating multiple ascending doses of AB-101 in healthy subjects. In the first half of this year, we anticipate reporting preliminary data from the healthy subject portion of this trial which will include safety data in addition to preliminary target engagement and receptor occupancy data. As we continue to advance the clinical development of imdusiran and AB-101, we believe both compounds are well positioned to deliver on our goal of developing a functional cure for hepatitis B and driving value for our company. 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 2023 with approximately $132 million of cash, cash equivalents, and investments compared to approximately $184 million as of December 31st, 2022. During the year ended December 31st, 2023, we received $29.9 million of net proceeds from the issuance of common shares under our at-the-market offering program. These cash inflows were offset by $85.9 million of cash used in operations. We anticipate a significant reduction to our cash burn in 2024 from 2023 as we focus our pipeline and research efforts on HBV. Therefore, we expect our 2024 net cash burn to range between $63 million to $67 million, excluding any proceeds received from our at-the-market offering program.

Importantly, we believe our cash runway is sufficient to fund our operations into the first quarter of 2026. In closing, we have a strong financial position to advance our mission, and we remain committed to developing our HBV assets to provide a functional cure for chronic HBV. With that, I’ll turn the call back to Mike. Mike?

Michael McElhaugh: Thanks Dave. As I mentioned earlier, we have a data-rich year with end of treatment data expected from our two Phase 2a clinical trials with imdusiran and preliminary data from our Phase 1a/1b clinical trial with AB-101. We also anticipate initiating a third Phase 2a clinical trial with imdusiran and durvalumab. Operator, we’re now ready to open the call for Q&A.

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Q&A Session

Operator: All right. Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] First question comes from the line of Dennis Ding, Jefferies. Your line is now open.

Dennis Ding: Hi, good morning. If I can ask this question around the patent litigation. Can you just help frame for us what to expect at the upcoming claim construction order and what is perhaps a good outcome? And do you need the judge to roll in favor of you for all three or to just one disputed claim, either than that? Thank you.

Michael McElhaugh: Good morning Dennis. Dave, do you want to handle that question?

David Hastings: Yes, sure. I mean, look at us, as you know, we’re a little bit — we have to be very careful about what we say publicly about this case. We look forward to the judge’s ruling. I really don’t think we want to comment sort of on the play-by-play of that until it actually happens. We appreciate everyone’s interest. We take this, obviously, very seriously, we were pleased with the actual hearing itself, and we look forward to Justice Goldberg’s ruling which we expect, as you know, within 60 days of February 8th.

Dennis Ding: And maybe as a follow-up to that, like, as you look forward six to 12 months, is there an opportunity for a summary judgment or anything that could happen potentially in your favor before actually going to trial? Thank you.

David Hastings: Yes. I believe that the schedule is that there will be that opportunity at some point. I believe we’re expecting that in the late summer. All these timelines are subject to change, obviously. I think that’s the best estimate of the company at this point in time.

Dennis Ding: Thank you.

Michael McElhaugh: Thanks Dennis.

Operator: All right. Thank you. Next question comes from the line of Brian Skorney of Baird. Your line is now open.

Brian Skorney: Hey, Good morning. Thank you for taking my question. I just wanted to get a little bit more of a handle on the PD-L1 antibody study designs and rationale. I guess, first, how do you think about PD-1 versus PD-L1 targeting? It’s been a while, but I think some of the initial Medarex literature showed that maybe preclinically, PD-L1 was the more desirable of a target for infectious disease. Any thoughts on that design trial? And then how do you kind of go about thinking about selecting nivo for 202 and durva for study 203? Thanks.

Michael McElhaugh: Good morning Brian. Thanks for the questions. So, a couple of questions there. So, maybe what I’ll do is I’ll turn it over to Mike Sofia to answer the PD-1 versus PD-L1 question and then we can go to Karen for some considerations on design, if that works. So, Mike, do you want to handle the PD-1, PD-L1 question?

Michael Sofia: Sure. Sure. Hi Brian. So, we do know that PD-L1 is certainly upregulated on hepatocytes in chronic hepatitis B patients, right? The decision for PD-1 versus PD-L1 really come from a strategy standpoint in the sense that we were able to identify small molecule agents that target — that block PD-L1 essentially. And obviously, as we reported in the literature that this is a novel mechanism of action by which it internalizes the PD-L1, causes degradation, et cetera, and you can then reconstitute PD-L1 on the surface of hepatocytes completely by just washing out drug. So, that all fit within our strategy for small molecule liver-centric agents that circumvents the concerns with, let’s say, general systemic activation of the immune system.

So it was, a, partly the decision around the fact that PD-L1 is highly upregulated in hepatocytes. Therefore, we can target the hepatocytes with a PD-L1 agent and the ability to design and develop a small molecule that fits within our overall concept of how to address this from a liver disease standpoint.

Karen Sims: Yes. Thanks Mike. And I can jump in about the questions regarding the nivo versus durvalumab in our clinical trials. So, for the 202 trial, that’s the trial we’re doing in collaboration with Barinthus Biotherapeutics and their VTP-300 asset. So, as you probably know, they have performed some studies already using VTP-300 in combination with low-dose nivolumab and their HBV002 and ongoing HBV003 studies. And in those studies, they have suggested that there is potentiation of response in subjects that receive VTP-300 plus a dose of low-dose nivolumab given at the time of the MVA boost. So, for that reason, we incorporated that strategy into the 202 study as an amendment based on their prior and ongoing experience with using nivolumab in this context.

For the 203 study, we did decide to utilize the anti-PD-L1 antibody, durvalumab, basically for the reasons Mike just suggested, and to be able to inform our upcoming combination study with AB-101 and imdusiran in terms of starting to explore the optimal timing and administration of a PD-L1 inhibitor in the context of imdusiran therapy. So, that’s kind of the rationale for the difference between the two studies. And certainly, as the 203 study moves forward, we’ll be able to share more details about the study design.

Brian Skorney: Great. Thanks. That’s really helpful.

Michael McElhaugh: Great. Thanks Brian.

Operator: All right. Next question comes from the line of Roy Buchanan of Citizens JMP. Your line is now open.

Roy Buchanan: Hey, thanks for taking the questions. A couple, I guess, for 101, just when do you think you might be in a position to re-engage with the FDA on 101? And I guess, more broadly, what are your plans following the Phase 1a/1b, too? Can you just elaborate on those a little bit?

Michael McElhaugh: Sure. Karen, do you want to handle that one?