Vir Biotechnology, Inc. (VIR) Earnings Call Transcript & Summary

Great. Thanks for joining us, everybody, for the next session. I'm Matthew Harrison, one of biopharma analysts here at Morgan Stanley. Very pleased to have Vir joining us for the session. Before we get started, I need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at morganstanley.com/research disclosures. And pleased to have the full team here with us from Vir. I'm going to turn it over to George Scangos, who is the CEO, to give us some opening comments, and then we can jump right into it.

Okay. Thank you, Matt. Just a few comments. As many of you know, Vir was founded about 5 years ago with the purpose of taking on some of the world's most serious infectious diseases. We've kind of entered into a little different world from one we'd envisioned, but we're proud, I think, of what we've accomplished so far in terms of the evolution of the company in terms of what we've been able to bring to patients. We're excited about the programs we have ongoing and the potential of what we're going to be able to do in the future. In most of the approaches we're taking are immunology based as well as we can talk about can of interest. We have a deep, broad pipeline. Obviously, COVID is at the front of everybody's attention right now, but hepatitis B, flu, HIV and other diseases in research as well. So I think we'll stop there and leave plenty of time for the Q&A. Thanks.

Great. Thanks, George, and thanks for that opening. So I guess, obviously, we should probably start with COVID because that's just how it is. So maybe we could just -- I guess the best place, I think, is you obviously have EUAs out there for treatment. So maybe we could talk about the commercial outlook for treatment and just how you're thinking about the market and especially given that there are multiple antibodies now available in the market.

Yes. I mean the ones available right now are those from Regeneron and Lilly had here. So look, we think sotrovimab is an especially interested antibody that's differentiated. It has a very strong efficacy, 79% in all cost hospitalization, not COVID related hospitalization. So -- and some of the hospitalizations were not COVID-related, so very good activity. Activity against all currently circulating variants of concern, including Delta, Delta Plus and Mu. So continues to be impervious so far to the variants. It was, as you know, selected from a patient who recovered from SARS. So it is the only antibody currently authorized that is not specific to COVID. And we think that breadth that allows it to be effect against other coronaviruses correlates with this ability to tackle a few variants that may arise in the future. So we feel good about that. It is a low dose, 500 milligrams. We are testing it in. We're doing 2 studies, our COMET-PEAK study, which has completed enrollment, and we'll have data from that study in the fall of 2021. And then COMET-TAIL with efficacy study where we said we'll have data in the second half of 2021. And since we're sitting here in September of 2021, which is both in the fall and the second half, those data are obviously coming reasonably soon. And so we're hopeful that we'll be able to demonstrate good data. So a lot of advantages to this antibody. We have E-way in the U.S. As you know, we have on Article 5, a positive opinion in the EU. We have the equivalence, so emergency use authorizations in many countries around the world, so, Brazil, Canada, Egypt, Italy, Kuwait, Saudi Arabia, Singapore, United Arab Emirates among others. Three of those governments have publicly announced purchases agreements Australia, Singapore and the UAE. Others have not yet announced them, but we do have other agreements in place. So we are enthusiastic about the sotrovimab about its ability to continue to provide a benefit to patients around the world.

Great. Great. Thanks, George. So I guess a couple of items. So first, can we touch on manufacturing and supply, where that stands and especially whether in the U.S. or globally?

Yes. So the material is being made at Wuxi, China and at Samsung in South Korea, and we're transitioning to Samsung's large-scale capacity. So we're in that transition process as we speak. The bulk material is made there and then the material is filled and finished at the GSK's facility in Italy. We think we're going to be able to make about 2 million doses in the first year after authorization. And so we have a good supply, obviously, not an infinite supply. But we think we'll be able to make substantial amounts making meaningful difference in patient health.

Okay, great. And then I guess second question that comes up a lot is you've seen, I guess, Regeneron, obviously -- both Regeneron and [indiscernible] have been able to get BARDA contracts or large-scale purchase agreements from the U.S. So maybe just give us the outlook and the dynamics on if you think that's a possibility for you? And what sort of needs to happen for that to occur?

Yes. So I don't want to go into all the details. I will say that the lack of a government purchase agreement in the U.S. does not have to do with a lack of confidence in the antibody itself. I think everybody that we speak to is very enthusiastic as do with other factors. And there is increased use of antibodies now in the U.S. They've increased dramatically, not just in the U.S., other parts of the world as well. And it surprises me that it's taken this long, actually for the antibodies to be used, but they are now. And so I think the U.S. and other governments around the world are using more than they had anticipated. We continue to be in discussions with the U.S. government as well as other governments around the world. And we're doing all we can to make this antibody available in the U.S. as well as the rest of the old. It is available. We have been using commercial channels. It's available now in about 27 states. I believe we have some -- we have an agreement with the Indian health services and some military basis. So it is available in the U.S., and we'll continue in discussions with the government about possible purchase.

Okay, great. Good. And then maybe, I guess, we could turn to a couple of the other things. You talked about presentation. You're working on an IM formulation. Just next steps there, what needs to be done and how confident you are in a positive result there?

Well, there are a couple of steps there. First question is PK, there's a delivery in the drug IM you the same blood levels as IV and what's the timing. We need to know that. And then, of course, there's efficacy. And does the IM reduce hospitalization death to the same extent as the IV administration does. And so we'll have -- those are the data we're gathering that will have this fall and in the second half, so relatively soon. So -- if they don't have the data yet, but we're hopeful. Those data are positive and this drug can be administered IM, intra muscular, then I think it opens up the opportunities dramatically for patients who don't get the drug because of the inconvenience of IV remonstrations. So we're pretty excited about the possibilities there.

Okay. And just for everybody's benefit, maybe compare and contrast your presentation versus, I believe, Regeneron has an injected formulation, though I think they're sort of quite different compared to yours.

They are -- as far as I know, Regeneron's dose currently is 1,200 milligrams. I think they are giving four 4 mL subcu injections. So those are big injections, 4 mL, and you get 4 them. So it may be better than IV, and you don't need an IV suite, but it's cumbersome. Our dose is 500 milligrams, so less than half. And we are working on a higher concentration formulation. So we think we can get this to be quite a convenient dosing regimen that will -- I think, be more convenient than Regeneron's, subcu administration. And that's just enabled by the lower dose, lower volume that has to be injected.

And just to be clear, in trials right now, how is it -- how is it being? Is it more than one injection or is it only one injection right now in the trials?

It's 2 injections right now.

Great. Perfect. Thank you. And then obviously, the other thing, which I guess I want to weave into the commercial outlook is also PrEP indications, which you're expecting data on. So maybe you could just talk about how you think about the commercial outlook for PrEP and how important that is in terms of getting prep?

Yes. Let me back up a second because I mean the antibodies now are approved for treatment of newly diagnosed patients, not moderate patients. That leaves a number of let's say, unmet needs so one is PrEP, as you're talking about pre exposure prophylaxis. Postexposure prophylaxis is also important. And -- I mean in hospitalized patients, I think are important. So we think the most important use of the antibodies for PrEP is in immuno-compromised patients for whom the vaccine really isn't a choice that if they are vaccinated, their immune systems are impaired, and they don't respond very well. They're very vulnerable. So that's the population we'd like to go after for PrEP studies. As you know, we have had sotrovimab in a trial in hospitalized patients. Our view is that there were signs of efficacy there. We have a second antibody 7832, which is an enhanced version of sotrovimab that we think could be even more efficacious. And so we also want to tackle that hospitalized population. I think the [ mantra ] now is they will say the common U.S. antibodies don't work there. And let's say antibodies don't work until one dose. And there's good reason to believe that the right antibody can also have an impact on that hospitalized population. So we want to go after that as well.

Okay. Okay. Good. Maybe one last question before we talk about the rest of the pipeline because I know there's a lot more going on here. Can you just talk about, I guess, the -- sort of the business outlook for COVID and what I mean by that is, I think it's obvious right now with Delta and cases and continued global spread about why you need to invest in this program and what the revenue outlook might be. But I think for a lot of people, say, maybe after a year or 2, it's not clear to people what the outlook might be and whether or not this is going to be a long -- potential long-term revenue stream. So just give us your thoughts around that and how you think about this is a potentially longer term business?

Yes. This is an unfortunate situation where I think it is a long-term revenue stream for Vir, and I'm sad to say that. Look, this is not a new virus, but it's a virus that's new to the human population. When [indiscernible] viruses enter the human population, they're not optimized, right? They are optimized for whatever their previous animal host was. Now they're in humans, and they'll evolve over a period of time. And so what we're seeing with the variants now is completely predictable, which is why we went after anymore like sotrovimab in the first place. So the virus is not done mutating for sure. Delta is here now. There's now Delta Plus. There's Mu. There will be other variants coming forward. Virus is only now coming under pressure now that a lot of people are vaccinated. And a lot of people have been infected. There's a different kind of selection pressure on the virus now to be able to avoid the immune response as a result of the vaccines or prior infection. And you see some of that Delta is a little more evasive, maybe Mu is a little more. And so we're not out of the woods. We think these fires will eventually become endemic, not a pandemic trend, but vaccines will provide some level of protection. We'll have drugs like the antibodies that can prevent -- certainly reduce the worst outcomes. And so it will be more like flu, right, that will need both vaccines and therapies and see that continuing well into the future. Given that nobody has a crystal ball, I think that's our view of how this thing is likely to be with us for quite some time.

Okay. Okay. Good. Why don't we switch to HBV? Probably prior to COVID, that was what most of your questions were about. So spend some time talking about that. I think, look, the first question is just what's the vision in HBV? I think people have been going after HBV for a while. But we haven't -- other than the NUC, right, we haven't seen a lot of successful therapies. And still for people with NUCs, right, no one really develops a functional cure. So maybe you could talk about what your vision is in HBV and how you're investing to try and achieve that?

Yes. So look, the function of cure really is to find a long-term, potentially lifelong control of the virus after a finite duration of treatment. And regulatory, what that means is 6 months of undetectable virus after cessation of treatment. So our goal is achieve a function of cure. That's the first goal. Look, our view of this was different from some -- most of the other companies. I think they've now come around. So our view is that this is certainly a viral disease caused by hepatitis B, but it causes immune dysfunction. And it is the dysfunctional immune system that then allows the virus to replicate out of control and cause the imbalance. So the way to bring this back under control is to get the immune system again in control of the virus. And that takes, on our view of 2 things to do. One is the viral proteins that circulate in the blood are immunosuppressive. They eventually result in what's called T cell exhaustion. So the T cells that we're controlling the disease are no longer detectable. And whether they are there still present in the body but not quiescent or whether they have all been killed off, unclear or maybe different in different patients. And so the first thing to do is reduce the level of viral antigens that are circulating to relieve the body of those immunosuppressive agents. And we are doing that with our siRNA together with Alnylam, and we presented the data on that. They look very good. We think it's actually invest in best-in-class siRNA including the reasons why we think that. But then you've had that second arm, which is to re stimulate the immune system. And so we're trying to do that in a number of different ways. We're pretty confident that, that's what you need to do, exactly how to achieve that goal. We have some good ideas, but there are many different ways. So in that sense, I think we have one of the broadest programs in the industry in our items to re stimulate the immune system. We're doing a clinical trial with the sRNA and interferon. We recorded some day on that trial. We have an antibody, there VIR-3434, which recognizes s antigen is a potent entry inhibitor and is designed to stimulate T cell responses. As you know, antibodies can interact with other cells in the immune system and stimulated response. We've enhanced that property. That molecule is currently in Phase II testing. We have a collaboration with Gilead, which will test the siRNA in combination with their TRA agonist and with PD261127157. And then we have a collaboration with BRE, who is testing the sRNA combination with the T cell vaccine. So we have multiple ways going forward in our portfolio, in which we are attempting to restimulate the immune system after suppression of the viral antigens. So that is an approach. I think now being also taken by some of the other companies who initially had different approaches. We feel good about our competitive position. We feel good about the breadth of our program, and we feel good about the particular molecules that they are testing in combination with VIR-2218. So pretty excited. One of the we'll have data for many of these trials next year. And so not that far away in drug development term lines. But obviously, we're excited and moving as far as quickly as we can.

Okay. Okay. Good. So why don't we tick through some of the strategies. So I guess the first one is maybe just your outlook on your siRNA versus the few others that are in development and why you think you have a best-in-class siRNA?

Look, in terms of efficacy, they all look pretty much the same. There's a lot of noise in there early days about someone being better than others and everything we thought that was noise at the time. And if you look at our data and you look at the data from J&J and others, it's hard to distinguish, and they look pretty much the same. The issue is that sRNA are not benign molecules. They can have safety issues and the safety issues largely resolved from the fact that they're not completely specific. They inhibit their target for sure, but some of them more than others can inhibit other targets as well, and then you start to interfere with cellular processes that were unintended, and you can see some side effects from that. Certainly, Alnylam has seen that as have others. And so the challenge is in a necessary sRNA, that's going to be administered to millions of people, maybe tens of millions of people and so rare safety events become an issue. What can you do to mitigate those potential side effects? And so Alnylam has this technology, which they call ESC+ technology. I don't know how technical we want to get here. We can go into the mechanism how what does that. But it reduces off-target activity really substantially dramatically actually. And we have the same sRNA with and without that technology, we've looked and the difference in off-target activity is really dramatic. So as we dose more patients and as others dose more patients and with the possibility of safety events start to become more frequent and rarer. None of them have major safety issues or would have seen that already. Rare safety issues that can arise when you start to treat large populations. I think you never can predict exactly what's going to happen in the future, but I'd certainly much rather have an sRNA with the CSC plus technology. And when we have it. And we think that could be a major differentiator as we move forward.

Okay. So I guess maybe to build on that, 2 things. So let's talk about combination safety. And if you think having a cleaner sRNA allows you to do combination safety and then I guess, second follow-up is you've outlined sort of a handful of combination strategies. Do you have a view on which one you think could be better or do you think you're sort of looking at each of these individual combinations and the ultimate goal that you may be more than 2 in terms of combination?

Well, look, I think in terms of combination, safety, the first part of that? More safety is better than lessee. And so if you have an sRNA with less off-target activity that is preferable. It's too early, I mean, to say how much of the difference or if that will make a difference clinically. But sitting here today, placing your bet, as we place our bets, certainly place it on the sRNA with that technology rather than what it. That's number one. If you ask me which of the approaches I'm most excited about, I don't have to say it's a combination with our antibody, VIR-3434. That is an amazing molecule, which by itself shows dramatic reductions in antigen, we have data now from that antibody. And then it is designed to interact differently with the Fc gamma receptors on myeloid cells, including dendritic cells. And specifically to enhanced finding to the stimulatory receptors and almost eliminate binding to inhibitory receptors. In preclinical models, animal models, there are results of that are that the antibodies with this mutation do actually induce T cell responses that are protective even after the antibody's gone. And this work comes out of the lab of Jeff Ravetch at Rockefeller, and we've been working closely with Jeff. And so we have data now in oncology models and environ models, all the other characteristic of that mutation is that it increases short-term policy like pipeline probably also because of the interaction of bio-excels. So if that immunology in humans is the same as it is in animals, and there is some suggested data already that it is, then that combination should reduce the circulating s antigen, not just by a couple of orders of magnitude that you see with the sRNA, but more than that with the combination of the sRNA and the antibody and then re-stimulate T cells, right? And so the biology, right, as we sit here today, suggest that that is -- could be a very efficacious way to get to a [ functional cure ]. We don't have the data yet. We have the preclinical data that's very exciting. But that, I think we're very excited to get the data from that combination trial, which will be next year.

Okay, great. Good. Maybe in the last 2 or 3 minutes that we have, maybe just talk about some of the other work that you're doing. I think, obviously, respiratory diseases that have become more prominent in people's focus now. So maybe talk about the work you're doing in flu and some of the other things in the pipeline?

Yes. Look, before COVID was a major program for us. And we -- just like in COVID, we have an unusual antibody with unusual breadth and that the first antibody, 2042 covers all strains of flu. As you know we had that one in clinical testing. And it was ready for a large Phase II study to see if we could prevent flu as a prophylactic. And then COVID came along and there's no flu. So right now, the last flu season, there was hardly any flu either in the Northern Hemisphere or the Southern Hemisphere. Don't know about this flu season coming up now as we come into the next. And since we had a little bit of a delay we've had isolated other flu antibodies now that are cover alternative flu A and flu B. And so we're going to move those forward. Flu will come back for sure. It's not -- we're not going to wait forever. And so we think we have a really interesting program there. Both sotrovimab and our flu antibodies have potential not only to treat the current situation than annual outbreaks in the case of flu. But as pandemic preparedness reagents since their breadth is so broad. And for flu since it covers every pandemic strain since 1918, reasonable that the chance we would cover the next one. And COVID, I mean sotrovimab since it covers a large number of coronaviruses if not all, by the large number, it may provide production against not only COVID and SARS, but the next coronavirus outbreak as well. And then, of course, we haven't talked very much about our HIV vaccine program. I think we're running out. That's moving forward. That's a very exciting new technology. We'll have data from that, not too far from now. And then we are working with GSK on a pan-coronavirus vaccine, which I think is the ultimate answer to this, one that covers not only all variants of COVID but other coronaviruses as well. We're making reasonable progress on that as well. I can go on, but I don't know how much time we have left.

I think that's perfect. I think that's great. Yes. No, thank you for the overview, George. And thanks for being here, and we appreciate all the comments.

Okay. Matt, thanks for having us. Appreciate it. And hope that was useful for you and [indiscernible]. Great. Thanks