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

All right. Good morning, everyone and thanks for joining us at the Morgan Stanley Global Healthcare Conference. I'm Michael Ulz, one of the biotech analysts here and it's my pleasure to introduce the team from Vir Biotechnology, including Marianne De Backer, CEO; and Sung Lee, CFO. Just as a reminder, the format for today is a fireside chat. So if anyone in the audience has a question, please feel free to raise your hand and we'll address your question, although with these lights, I'm not sure I can see if people raise their hands but give it a go. Before we get started, I just need to read a quick disclosure. For important disclosures, please see the Morgan Stanley Research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, Marianne and Sung, thanks for joining us today.

And I thought maybe we could start with Marianne, if you could give us some introductory comments on Vir for people who might not be too familiar with the company.

Sure. Yes. Thank you, Mike and thank you, Morgan Stanley, for hosting us here and welcome, everyone in the audience and listening in on the webcast. Thanks for your interest in Vir Biotechnology. Yes, so the company was founded 7 years ago and really founded on the premise that there was so much happening, so many advances in the field of immunology and understanding of the immune system. And a lot of that knowledge was being deployed to immuno-oncology but not really in the field of infectious diseases. And so the founding team felt that all those new learnings about the human immune system could also really be deployed to the fight against debilitating infectious diseases. And so that's how Vir Biotechnology came to be. And in the meantime, the company has actually been really successful in delivering on that goal of sort of jump-starting immunovirology, if you want. And the company has shown that you can actually really power on the immune system to fight infectious diseases. And more specifically, Vir has shown that we can take human-derived antibodies and transform them into very powerful drugs. And the company has now twice the molecules that were discovered in the labs of Vir Biotechnology have been commercialized. Ebanga is one of them for Ebola. And Xevudy is the other one for COVID. And so I joined as new CEO of Vir earlier this year. I spent my entire career in pharma, 28 years in Johnson & Johnson and a number of years at Bayer. And together with my executive team that are also really all veterans in the industry, we have the hope and the ambition to really transform Vir into a sustainable and a commercial company. And we really aim to do that in 2 different ways. One is to really focus our investments on those assets that address a significant commercial opportunity, address a significant commercial market. And secondly, to really double down on the antibody platform that has delivered before and where we are now adding more and more artificial intelligence technology to it and use that as the growth engine for next high-growth value opportunities. And that has already yielded a set of preclinical candidates that hopefully will enter into the clinic in the next 12 to 24 months.

Great. Well, thanks for that introduction. You've had success in the past and you've got a couple of opportunities near term, the most recent or the most recent upcoming one is hepatitis B. So maybe we could start there and talk a little bit about current treatment options in hepatitis B, where the unmet need is and how you can address that?

Sure. Yes. As I mentioned, we really want to focus in on assets and opportunity that address a significant commercial opportunity. And we feel our hepatitis portfolio is sort of our first opportunity to do that. Hepatitis B, chronic hepatitis B is a disease caused by small virus hepatitis B that is very infectious. It's actually 10 to 50x more infectious than HIV. And when I learned about chronic hepatitis B for the first time many years ago, I was already really surprised by how many lives this disease takes every single year. So there's an estimation of about 900,000 people dying every single year of the results of hepatitis B infection. So typically, we have about 300 million people in the world that are estimated to be infected with the virus today. About 40% of those tend to move on to liver cirrhosis, liver cancer. So the unmet need is actually really big but because there aren't any really good treatments, diagnosis rates are really low. So globally about only 10% of the disease gets diagnosed. And from the people that get diagnosed only a minor portion, 5% actually get treated. And it's a bit of a chicken and egg problem because there aren't good treatments, people are not really doing a good effort in diagnosing the disease. So the way that the disease is treated today is with lifelong oral, which can help a bit but are not really providing for a functional cure. And the only asset that has shown to be able to deliver a functional cure is interferon alpha. And, of course, that has a lot of tolerability issues and only yields after 48 weeks of treatment and many side effects, cure rate is somewhere between 3% and 7%. So really, really not good. So in summary, it's a really debilitating disease, unmet need is very high. The treatment is -- treatment options that are available, really suboptimal. And what we are trying to do at Vir is come with a new approach. We call it a stop and clear approach where we try to kill the virus, obviously but also try to reawaken the immune system to clear the cells that are infected, clear the infected hepatocytes from the human body. And so our data thus far have already shown evidence that this is a project [ worth ].

Maybe you can touch on some of the data with your different assets, the combo with interferon but also the dual combination of your own pipeline assets and kind of what you've learned so far in the clinic?

Sure. So the first combination that we tested was a combination of what is called VIR-2218, which is an investigational siRNA and we combined it with an immunomodulator interferon alpha. And this was really aimed to see, can actually the combination of a direct antiviral and immunomodulator yield the effect that we are looking for. And so we treated patients for 48 weeks with that combination. We have already shown data that we can, at the end of that treatment, achieve 30% S-antigen loss, really 30% functional cure. And what the regulators really are looking for is in the functional cure is that you treat patients for a finite amount of time and then your disease is really under control. So it's not just end of treatment that counts. It's looking at 6 months after end of treatment, what is the result then. And so what we have shown is that 6 months after that 48-week treatment with an siRNA and interferon alpha, we have about 60% of the patients that are functionally cured. So this is the best result that has been shown to date. But of course, it's not enough. And we are now investigating other combinations. We have a proprietary investigational antibody called VIR-3434, which we also combined with 2218, the siRNA. And what we have shown in an initial trial, which was called MARCH Part A and again, it was short treatments, only 4 and 12 weeks, so was rather short treatments. But still, what we could show in that trial already is that the combination of that direct antiviral, that siRNA and the antibody, which is the immunomodulator, together had an additive effect with 3 log drop -- decline in S-antigen and was also really safe. And that is really important because a lot of combinations have been tested in this field. And obviously, it's not always shown that effects are additive and certainly not always shown that the treatments are safe. So we feel very emboldened by those initial results that we have seen in our MARCH PART A trial. Yes.

Got you. I guess, the Part B of the study is ongoing. You're going to share some data there. Maybe you can just talk about some of the differences in the design for Part B versus Part A and maybe how that translates into a different -- potentially different effect?

Sure. Yes. So what we -- as mentioned, what we did in the MARCH Part A trial is really look to get an answer to the question, is the combination of our siRNA and our antibody, is it additive and is it safe? And I think that conclusion was clear from the PART A trial. In Part B -- and we will be releasing data in the fourth quarter this year, what we were looking to do is, look, if you combine our siRNA 2218 and our antibody 3434 with and without interferon, what kind of effect can you achieve after 24 weeks of treatment and after 48 weeks of treatment. And then, of course, we will need to look 6 months beyond end of treatment to really know about functional cure. So to your question, the data that we will be showing in the fourth quarter of this year is, what are the results after 24 weeks of treatment of this combination. So again, the siRNA, the antibody plus/minus the addition of interferon.

I guess a couple of questions there. #1, based on the data you've seen so far, do you think you need interferon or not as part of the combination? I know it's a bit difficult to answer until you see the data, you've had sort of some data sets that maybe give some insights.

Yes, we will really need to wait and see. Also, depending on the time point at which you look at the data, there's very big variations. To give you one example, when we looked at the combination of our siRNA with interferon at the 24-week level, we saw only 5% functional cure. And when we looked at the 48-week time point, we saw 30% functional cure. So depending on the time point that you're looking at and of course, the combinations, we will really need to see what works. I think, again, what has given us a lot of hope and confidence is that we have seen additivity. We have seen that the combinations are safe. And again, I mean, the data that we have shown are the best data thus far shown in the industry.

When you look at the 24-week end of treatment data, I guess, in your view, is there a particular bar you're looking for? And is it different with and without interferon?

Yes. I mean, in the end, what we are aiming to achieve is a 30% functional cure. That's really what we're aiming to achieve. And that means that you have a sustained S-antigen loss and a sustained removal of HBV DNA 6 months after treatment. That's our goal. That's the endpoint we're going for. We don't know yet, of course, will we be able to achieve it at 24 weeks, at 48 weeks, what combination will yield it. Again, we have seen that it tends to take a little bit of time based on what we know from 2218 and interferon. But yes, we are looking forward to seeing the data end of this year.

You mentioned functional cure is important, which is 6 months after you complete the treatment. So if we're going to get data at end of treatment, to get to a 30-month or 30% functional cure, do you need to be above 30% at end of treatment? Or you think you can -- if you're around 30%, you can sustain that for the other 6 months?

Well, the only thing that we know right now and again, you don't know how translatable it is, is that when we achieve 30% functional cure with the combination of siRNA and interferon, 13 months -- or 6 months after end of treatment, we still yielded 16% functional cure. So it is in that clinical trial, we did not see it stay at the same level. It actually dropped. The same was seen in some other trials with an antisense in HBV. So I think our assumption is that probably at the end of treatment, you need to get to a higher bar to be able to sustain it. But again, data will have to, will have to show.

Yes, makes sense. And then when you think about duration of treatment, so we see the 24-month data in 4Q. Sorry. Thanks.

Don't make it worse.

Yes. All right. So 24 weeks versus 48 weeks, do you think -- I guess, if we're thinking about that is longer, better, in general, do you think you have a better shot with longer treatment. And then do you think 48 weeks is enough?

Yes. So based on everything we have seen, not just from our own trials but everything that has been done, typically, the longer the treatment the better the results tend to get. So again, we will have to wait and see what the data tell us that, that has been the trends that it does seem to take a bit of time. Again, with 2218 and interferon at 24 weeks, we were at the 5% cure level and then 24 weeks later, we were at 30% cure level. So again, we'll have to see but it seems to be the case that the human body tends to take some time for the virus to be really cleared out.

Yes. Makes sense. If we just fast-forward and think about success for Part B, what's the next steps from there? And do you need to wait till end of -- or functional cure data for both cohorts, the 24 and 48 weeks? Or could there be a -- if you see something really positive at 24 weeks, could you sort of rapidly move ahead there?

Yes. Of course, in our industry, everything is guided by data. So if data shows us that we can really achieve our goal of a 30% functional cure, then obviously we are going to move forward to Phase III trials. We are currently already really thinking if it's true, what could this look like, what is it that we need to do? Where are the patients? So both on the clinical trial level and what it needs to look like registrationally, as well as potentially commercially, we are going through different scenarios, thinking already and doing some groundwork to be prepared.

Got it. Maybe just last question on hep B, if you could talk about the competitive landscape and what others are doing and your thoughts there?

Now if you look at truly functional cure, there is not a lot of competition, right? I mean, really sustained finite treatment and then sustained control of the virus. There is the antisense oligo that I talked about that has shown some effect. But I think it was 9%. And in a patient population that started off with low S-antigen level, so again, this is not an easy goal to get to. But again, we really feel that we are seeing results that point us in the right direction.

Yes. Makes sense. Maybe we can shift to hepatitis D and maybe talk about how that's different from hepatitis B and how patients are currently managed?

Yes. Yes, sure. So hepatitis delta. It's a very funny -- so it's a totally different virus from hepatitis B and from hepatitis C. I mean, these are all viruses that, in fact, hepatocytes, liver cells but all totally different and they have different mechanisms about which they enter the cell. They have different mechanisms by which they replicate within the cell. And hepatitis delta is extra unusual in the sense that it can only exist if hepatitis B is there. So it actually uses the S-antigen of hepatitis B virus to be able to enter a hepatocyte. So it's a very curious virus. Unfortunately, when you are unlucky to have the hepatitis delta virus on top of your hepatitis B infection, you're 4x more likely to proceed to get liver cancer. And there's also a 2x more risk of that. So it really is the most debilitating form of hepatitis. There's about -- there's an estimation that about 12 million people carry hepatitis delta virus. There's one treatment available only in Europe for this -- at this moment in time and it's a daily subcutaneous injection, so really not very patient friendly that patients have to take for the rest of their lives. And with that, they can potentially achieve 45% chance of getting cured, so -- of controlling their virus. So again, there's a high unmet medical need. It's again the same thing because there isn't a really good solution out there. Diagnosis is certainly not optimal. And what we are trying to do, is really use, again, our combination of a direct antiviral and an immunomodulator, either separately or in combination and see if that could lead to a chronic treatment option for these patients. And I mean, it would already be a big difference that patients only have to have 1 injection a month or 2 injections a month versus daily. And we are aiming to achieve about 50% control there. Because there's so limited amount of treatment options also, the bar that has been set by the regulators is not that high. So what you need to show is a 2 log reduction of hepatitis delta RNA. And you need to show that the ALT levels, the Alanine transaminase levels, which is basically a measure for liver damage, that those levels really get normalized again. And if you can show that combination with your treatment option, then you basically have a shot on goal.

Got you. And I think you're going to share some data in the fourth quarter this year. Can you give us a sense of what we should expect and will we have a sense of whether it met the regulatory hurdle at that point?

Yes. So what we will be sharing in the fourth quarter is results from our SOLSTICE trial. What we're trying to do there is, we are looking at whether the siRNA on its own as a monotherapy, the antibody 3434 on its own as a monotherapy or the combination can actually yield the outcomes that I just mentioned. So 2x reduction of delta RNA and normalization of ALT. We have a clinical trial that we started that will run for 96 weeks. We will have initial data this fourth quarter, where patients have been on it a number of weeks. I guess, again, the good news is that we already know that these agents shown in other patients have shown that they're really safe. We have also shown in animal models for hepatitis delta results that are really promising. But again, now we need to see whether the results we see in animal models are going to be reproduced in humans now.

Can you remind us what durations of treatment you're testing in the SOLSTICE study?

Yes. So it's an ongoing trial. Again, the total duration is 96 weeks. We will be looking at results in different time intervals and then be able to determine what -- at what point in time we achieve the endpoint that we need to get to have a real chronic treatment for delta.

You think there's any read-through to the hep B data to the hep D data or is it just more -- is hep D more challenging? So for example, if you only need to treat 24 weeks with hep B, maybe you need to go longer than hep D? Or does that not make sense?

Yes. As I mentioned, I mean, delta is a totally different virus, uses very different mechanisms. Of course, delta uses the S-antigen of the B virus. That is exactly the reason why we believe that we can use the same kind of modalities to attack it, right? But yes, data will really have to guide us, yes.

Makes sense. Maybe we can just touch quickly on flu. Maybe just recap some of the recent data and maybe highlight your next-gen program and differences there?

Yes. So we had a large Phase II trial, 3,000 participants with our investigational antibody 2482, that was looking to see whether we could prevent influenza-like illness. And we missed our primary endpoint. And to be honest, based on everything we knew, that was a little bit of a surprise. And we have since then really taken a lot of time to analyze the data. So it is still early because we don't have all the PK data yet and we will share all that data with the public as soon as we have the full package together. What I can already say is that, just 2 observations. So first of all, it seems that if you look at the activity of the antibody for the prevention of influenza-like illness and you introduce fever as one of the measures, then your results are markedly better. So then you are looking at an effect size at the highest dose of around 57%, which is, of course, significant. The second observation that we have made is that for some reason since the COVID pandemic, the influenza peak is getting earlier. And so when we have dosed our antibody, we had quite a number of participants that either were already infected with influenza or were very shortly thereafter, infected with influenza. And so the duration of time that you need for the antibody, which is delivered intramuscularly to, of course, make its journey through the human body to the lungs and where it needs to [indiscernible], it's a fact that time might not have been there. And so if we -- for example, if we exclude cases where the first 7 days, patients already had influenza, then your effect rate goes up to 65%. So there's really a lot there that we need to further investigate and look at. Clearly, we have an antibody that works. We need to understand under what circumstances. And again, we don't have all the PK data. We really need to fully understand this. And we are, of course, going to use all the learnings we can get to educate what we need to do on our next-generation flu antibody. So and just very briefly, we have a next-generation flu antibody 2981, which we [indiscernible] mature using artificial intelligence. It's active against Flu A and Flu B. It has a different mechanism of action. It's neuraminidase targeted. And it shows in animal models, in some animal models greater potency than 2482. It's at the preclinical stage. So we hope that this can get to the clinic in the course of next year. And again, we will be guiding whatever we are going to be doing with our next-generation flu antibody based on what we learn from PENINSULA data analysis.

Got you. Maybe in the last 2 minutes, you have a lot of cash. Maybe you can talk about your view on partnering or adding additional assets to the pipeline at this point?

Yes. So Mike, we do have a very strong balance sheet. We had $1.9 billion as of June of this year. So that gives us the wherewithal to fund our hepatitis B and hepatitis delta programs, not only through Phase II but also Phase III. It also gives us the ability to further invest in our antibody platform. And we'll think about partnerships and external innovation. You would expect the company with our balance sheet to do those things. But we also have a lot to invest internally, especially with our antibody platform. Now having said that, with this amount of cash, we're going to be very judicious about where that capital is deployed and also be very vigilant about expense management. So that's a mindset that will continue as we move forward.

Okay. Great. Why don't we -- we're just about out of time, so we'll leave it there. Thanks, Marianne and thanks Sung. Appreciate your time.

My pleasure. Thank you, Mike.