Vir Biotechnology, Inc. (NASDAQ:VIR) Q1 2024 Earnings Call Transcript

Vir Biotechnology, Inc. (NASDAQ:VIR) Q1 2024 Earnings Call Transcript May 3, 2024

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 First Quarter 2024 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. Carrie Huang, Senior Vice President, Clinical Research and Interim Chief Medical Officer; and Sung Lee, Executive Vice President and 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. During this afternoon’s call, I will provide initial remarks before returning to Carrie to share an update on our clinical development programs and pipelines, and then to Sung to summarize our first quarter financial results. We will then open the line for questions. Before we proceed, I would like to highlight two recent updates. First, our Board of Directors has nominated two new independent directors, Doctor Norbert Bischofberger Bischofberger and Doctor Farid, for election at our upcoming annual stockholders meeting. Doctor Bischofberger’s track record of overseeing more than 25 clinical development programs and drug approvals, including in Hepatitis, during his tenure at Dilead, is directly relevant as our own programs progress through mid and late stage trials.

Doctor Farid ‘s pioneering work applying advanced computational methods to drug discovery at Schrodinger aligns perfectly with our focus on leveraging AI in drug discovery. Two of our long serving directors, Doctor Philip Sharp and Robert Perez, won’t be standing for reelection as founding board members. They made tremendous strong contributions and I want to thank them for their dedicated service. Second, Sang Lee, our Chief Financial Officer, will be stepping down at the end of this week to pursue another career opportunity. Sung’s leadership during his time at Vir has been instrumental in building a talented financial team and implementing rigorous financial practices and controls. Our finance organization is well positioned for continued success while we search for a successor.

I would like to express my and the company’s gratitude for Sung’s contributions and wish him all the best in his new opportunities. Looking ahead we expect 2024 to be a transformational year for Vir. Our teams are mission driven and we aim to play an important role in serving patients in areas of high unmet medical need while creating significant value in large potential markets. We continue to make progress on the goals we laid out in January. A key priority is to deliver on our mid stage clinical pipeline and I’ll begin by discussing our ongoing phase two SOLSTICE trial in people living with chronic hepatitis delta. Our goal is to provide a lifelong therapy that is impactful and convenient for patients in this area of substantial unmet medical need.

At least 12 million people globally are estimated to be living with hepatitis delta, with most cases remaining undiagnosed. While there are significant challenges with the under diagnosis and lack of robust epidemiological data for chronic hepatitis delta, we do see positive momentum towards greater awareness and patient screening. For example, in March, the World Health Organization published updated guidelines for the prevention, diagnosis, care and treatment of people with chronic hepatitis B and this update included recommending hepatitis delta reflex testing for everyone who tests positive for hepatitis B. This is a major step forward for both patients and researchers within the hepatitis delta community. Chronic hepatitis delta infection increases the risk of poor outcomes for patients, compared to hepatitis B alone, there is approximately a four times greater risk of liver cancer, a two times greater risk of death, and more than half of these patients will die from liver disease within ten years.

The need for a safe, efficacious and convenient treatment for these patients is critical. In the first quarter, we completed enrollment of the current cohorts in the SOLSTICE trial one month ahead of schedule, and our late breaker SOLSTICE data abstract was accepted for poster presentation at the European association for the Study of the Liver or Evil Congress 2024. We plan to host an investor conference call to discuss the SOLSTICE data on June 5. In the third quarter, we intend to engage with regulatory authorities to discuss the next steps for the development program, shifting our focus to another area of high unmet medical need, chronic hepatitis B, where we are making progress in our efforts to achieve a functional cure. According to the World Health Organization Global Hepatitis Report 2024, there are an estimated 253 million people chronically infected and living with hepatitis B.

Among this total population, only 13% of HPV positive patients had been diagnosed and with only 3% receiving treatment at the end of 2022. The WHO further estimated that 1.1million people died from viral hepatitis B in 2022, compared to an estimated 820,000 deaths in 2019. At Vir, we are committed to addressing this global health crisis and its concerning increase in deaths and we believe our two therapeutic candidates, Tubevibard and Elapseron, have the potential to make a meaningful impact. Tubebibard and elapseron are being studied in our ongoing phase 2, March trial in combination with and without back interferon alpha. Our aim is that our two therapeutic candidates can help us achieve our goal of a 30% or higher functional cure rate. While this is our stated goal, Kols we hosted at an advisory board last year at AASlD expressed the desire for 25% or better for a regimen that includes interferon and less than that for an interferon free regimen.

We expect to report 48 week end of treatment data for the March Part B trial at a major medical congress in the fourth quarter. Subsequently, we expect to share functional peer data in the second quarter of 2025. Now I will briefly discuss peer 1388, our HIV T cell vaccine candidate currently being evaluated in a phase one trial. We are looking forward to sharing initial immunologic proof of concept data in the second half of this year. If the data supports the validity of the platform, it could be a springboard to other indications, including peer 1949, a preclinical therapeutic vaccine for control of precancerous lesions and cancers caused by HPV. This trial is supported by the National Institute of Allergy and Infectious Diseases, part of the NIH and the Billemanenda Gates foundation in research.

We continue to advance multiple investigational antibody therapeutics optimized for increased likelihood of development success, thanks to our proprietary platform powered by AI and machine learning called Daisy. Daisy enables fast and cost efficient optimization of multiple properties such as binding affinity, neutralization, potency, and developability, and we have applied it to over ten investigational monoclonal antibodies across multiple projects. Our most advanced preclinical programs are prophylactic antibodies for influenza A and B, RSV and or 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 during the course of the year and at our RD day in late November.

Now turning to our cash and investments, our balance sheet enables us to fund our clinical programs through major inflection points while providing the flexibility to invest in external innovation. We are closely managing our expenses and prudently investing in programs with the greatest opportunity to drive return for our shareholders. To conclude, I would like to acknowledge and thank our employees, partners, clinical trial participants and shareholders who help make this all possible. With that, I’ll turn the call over to Carrie.

Carrie Huang: Thank you Maryam. I’ll begin by reminding you about the initial results from our phase two SOLSTICE trial on hepatitis Delta, which were shared in a late breaker presentation at AASLD last year and discussed earlier this year. The SOLSTICE trial is evaluating Tobivart in combination with Lebsiran and tobevibart alone as a potential chronic treatment for people living with chronic hepatitis delta. Based on the initial data reported, we observed 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 qualification. Within twelve weeks of starting combination therapy, two out of six participants also achieved alt normalization. As Marianne mentioned, we completed enrollment for greater than 60 participants across two cohorts one month earlier than anticipated.

Physician enthusiasm at ASLD was significant and this contributed to the rapid rate of enrollment. One group is receiving tobisobar plus elebsiran combination therapy every four weeks and a second group is receiving tobibobar monotherapy every two weeks. Approximately 50% of participants have compensated cirrhosis or CPTA. Overall, around 40% of patients with hepatitis delta develop cirrhosis, with an average of approximately five years to progression. Therefore, it’s important to include patients with cirrhosis and trials to understand how our treatment impacts those with more progressive disease. This type of information can help optimize treatment strategies in the future and inform our future trial designs. We plan to share updated data on additional SOLSTICE participants in a late breaker data abstract that was accepted for poster presentation at the ESO Congress.

Specifically, we will share data on approximately 15 participants per regimen at twelve weeks and approximately ten participants per regimen at 24 weeks. Additional follow up for the initial six SOLSTICE trial participants will also be shared at that time. Complete 24 we treatment data for SOLSTICE participants in these two courts is expected in the fourth quarter of 2024. We foresee that the SOLSTICE data update at easel will be highly informative that will shed light on several key areas. First, we anticipate gaining greater clarity on the safety profile subistle, heart and mister together with ellipserate. Second, we expect to obtain additional insight into virologic response rates and alt normalization. Third, we aim to evaluate whether there are initial efficacy or safety differences between cirrhotic and non cirrhotic participants.

And finally, we are looking forward to seeing longer follow up data on durability of viral suppression and safety from the initial participants previously reported at ASLD. If the data are supportive, we will dialogue with health authorities about the development program later this year. We expect Vir’s next trial will be designed with deliver tide as a comparator and we will have greater clarity on potential trial designs following discussions with health authorities. Switching gears for our phase two program for chronic hepatitis B our preliminary data suggests that when ellipsoran was administered with Peg interferon alpha for up to 48 weeks, about 26% of participants achieved hepatitis B surface antigen loss at the end of treatment and 16% achieve functional cure, meaning they maintain hepatitis b surface antigen loss 24 weeks after the end of treatment.

Current therapies such as NRTIS require lifelong therapy but rarely achieve functional cure. The only other therapy approved for hepatitis B is pecanopheron alpha, which has a low functional cure rate of three to 7% with poor tolerability. In the March trial, when adding Tobivobart to a regimen of Elebsiran alone or Elebsiran plus Peginterferon alpha, we observed an almost threefold increase in end of treatment response rates at 24 weeks of treatment. These data were the first indication of the potentially important role of an hpv directed antibody in hepatitis B functional cure. 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 readout will be followed by post treatment data in the second quarter of 2025, which will allow us to assess functional cure rates. Finally, we recently published the full year 24 82 peninsula trial data manuscript in Med Archives we are applying key learnings from the Peninsula trial to our next generation prophylactic flu antibody VIR 29 81. Now turning to our early stage pipeline. VIR, 1949 is an investigational therapeutic T cell vaccine based on our HCMV vector platform and is designed to treat precancerous lesions caused by the human papillomavirus. Despite advances in vaccination and screening, Hpv associated cancers and conditions such as high grade squamous intraepithelial lesions remain significant global health concerns. We look forward to sharing more later this year about this program and the timing of a potential IND submission versus 7229 is a next generation COVID-19 monofilo antibody candidate with increased potency, breadth and resistance to viral escape.

Thanks to AI engineering and optimization, the development of VIR 7229 through the end of phase one is supported by BaRDA. We look forward to continuing to share our progress over the coming quarters and during a virtual R&D day planned for late November. I will now turn the call over to Sung.

Sung Lee: Thank you Carrie. Before I get to the financial results, I would like to take this moment to thank Maryann and the board for the opportunity to make an impact at Vir. I have truly enjoyed my time as CFO and I’m proud of what we have accomplished. I’m confident that the company and the finance organization are well positioned for continued success. With that, I’ll now share the financial results for the first quarter of 2024. Total revenues in the first quarter of 2024 were $56.4 million, compared to $63 million for the same period in 2023. As anticipated, we saw year over year declines in collaboration and grant revenues. These declines were partially offset by higher contract revenue in the first quarter of 2024, driven primarily by the recognition of deferred revenue related to our 2021 agreement with GSK.

Turning to operating expenses, cost of revenue for the first quarter of 2024 was nominal compared to $1.9 million for the same period in 2023. R&D expenses in the first quarter of 2024 were $100.1 million compared to $157.6 million in the same period in 2023. The decrease was primarily driven by lower clinical development and manufacturing costs related to VIR 24 82. SG&A expenses in the first quarter of 2024 were $36.3 million compared to $46.8 million in the same period in 2023. The decrease was primarily driven by disciplined expense management, which resulted in a significant reduction in external expenses. Moving to the balance sheet, we ended the first quarter of 2024 with cash, cash equivalents and investments of $1.51 billion compared to $1.63billion at the end of 2023, representing a $118 million decline, quarter-over-quarter.

Turning to our financial guidance for 2024, the year is progressing as expected and we are reiterating all aspects of our guidance which can be found on slide 28 of our corporate presentation. We will continue to be disciplined in managing our expenses and focus our investments on programs with the greatest opportunity to drive return for shareholders. 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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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator instructions]. Again, your first question comes from the line of Gena Wang of Barclays. Your line is now open.

Gena Wang: Thank you for taking my questions. So, my best wishes to your next journey. I have two questions regarding Hdv. First question is regarding patient with baseline cirrhosis, any restriction or exclusion criteria for cirrhotic condition. And my second question is which measurement would be more meaningful, in your view, regarding the lower limit of quantification and the limit of detection? And is the phase two efficacy data setting a bar for easel update?

Sasha Damouni Ellis: Thank you very much for that question. For those questions, Gina, which are very, very relevant, I will ask Karin to address them.

Carrie Huang: Great. Thank you, Gena. So, for your first question around baseline cirrhosis and restrictions in our trial, so, as I mentioned, in the two new cohorts that we enrolled in SOLSTICE, we included CPTA patients, so they have compensated sclerosis, and so we have about 50% of those participants in those two new cohorts and so this will help us inform, going forward, the safety and efficacy of our regimen in those populations. So we look forward to looking at if there are any differences between cirrhotics and non cirrhotics in that population. In regards to your second question, around which measurement, lower limit of quantification or limited detection, different assays have different cutoffs for those parameters, and so these will be discussed with regulatory authorities in terms of which of these parameters would be acceptable from an endpoint perspective.

So I can’t answer that right now, but that was something that will be something that we will have to, we will clarify with regulators.

Gena Wang: And a bar for easel update?

Carrie Huang: Right. And then the last question is whether the [indiscernible] SOLSTICE data would be setting a new efficacy bar. As you’re familiar with from our ASLD presentation, from our six first six participants, we were able to achieve six out of six that achieved HDV RNA less than limit of classification, and five out of six that were undetectable or less than limited detection. I think if we are able to demonstrate these results in a larger population, then I think that it could set a new efficacy bar, because, as with any chronic viral disease, the goal is always to suppress viral replication to undetectable levels, such as an HIV. And so if we’re able to do that, I think that would set the benchmark.

Operator: Your next question comes from the line of Paul Choi of Goldman Sachs. Your line is now open.

Paul Choi: Hi. Thank you. Good afternoon, and thank you for taking our questions, I want to follow up on Gena’s question regarding the compensated cirrhosis population in SOLSTICE, and could you maybe just clarify for us, particularly among the patients for which you’ll have the twelve week, additional twelve week update versus those who have had the 24 week treatment update, just how you’re thinking that baseline of half the patients having cirrhosis might affect those particular updates? Then my second question is, in terms of the earlier stage pipeline, just given the success that we’ve seen with the various RSV drugs from both GSK and Pfizer, in terms of recent market success, can you maybe elaborate on sort of what the criteria that you and your partner, GSK, are looking at for sort of a go or no go decision in terms of advancing 8190? Thank you.

Carrie Huang: So thank you, Paul, for the question. So, in terms of how we think cirrhosis might affect safety or efficacy, we have done initial hepatic impairment study in CPTA participants and have not seen any safety signals or any clinically significant changes in PK that would cause us any concern. Our expectation is that this compensated cirrhotic population, we should not see any significant differences in terms of the safety or efficacy profile between those two populations, and we will have that data coming out relatively soon in terms of RSV. And given the success of those vaccines from Pfizer and GSK, I think these are ongoing discussions that we have with our partner. In terms of looking at the profile of your 8190 or other potential monoclonal antibodies, we certainly only want to present or kind of progress antibodies that fill an unmet need in the space. And so those are ongoing discussions that we will have with our partners to make those decisions.

Operator: Your next question comes from the line of Alec Stranahan of Bank of America.

Alec Stranahan: Your line is open. Hey, guys, thanks for taking our questions and just a couple from us as well, I guess. First, how should we be thinking about the easel update in the context of the more advanced update expected in four Q? I guess, in terms of which questions you think we’ll have answered at easel versus what will be still outstanding for the four Q data and as a follow up, what would inform a go no go on a phase three in this setting, sounds like you’ll likely wait until the additional 24 week data becomes available, even though you may have already aligned with regulators on next steps in three Q. Thanks

Carrie Huang: Great. Yeah. Thank you, Alec. So in terms of how we would think about the data that we will have at easel, so we will have about 15 participants in each of the cohorts at week twelve and about ten participants in each cohort at week 24. So four things that we would be looking at at this time point number one, the safety profile to Livabar and absurd combination. Number two, what the virologic response rates and alt normalization rates are. Third, the potential efficacy and safety differences between cirrhotic and non cirrhotic participants. And then finally, the longer term follow up data on the initial six participants that we reported ASLD to see if we have durability of response over time. So I think the ESOL data will hopefully further expand the data set that we have from the initial six and confirm the directionality of what we’re seeing in terms of efficacy and safety.

And then obviously the 24 week data would be the complete data set across those two populations. So in terms of your second question around, what would inform a go no go on a phase three for delta? So I think it depends on the strength of the data. I think if our data with the easel data cut, if we believe that is strong enough, I think that would be a possibility of taking that forward for conversations. But it all depends on the strength of that data going forward. Obviously, 24 weeks would be the complete data set, but if we have a very strong indication of efficacy, then I think we can go earlier.

Operator: Your next question comes from the line of Phil Nadeau of TD Cowen. Your line is now open.