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

All right. Good afternoon, everyone, and thanks for joining us at the Morgan Stanley Global Healthcare Conference. I'm Mike Ulz, one of the biotech analysts here, and it's my pleasure to introduce Marianne De Backer, CEO from Vir Biotechnology. Just a reminder, the format for today is a fireside chat. So if anyone would like to ask a question, please raise your hand. But before we get started, I just need to read a quick disclaimer 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. With that, Marianne, thanks for joining us. And I'll just hand it over to you to make some introductory comments, and then we can get into the Q&A.

Okay. Great. Thank you, Mike. Pleasure to be here, again, at Morgan Stanley. Yes, maybe just to introduce Vir a little bit. So at Vir Biotechnology, our vision is really to transform patients live through powering the immune system. And the way that we have been doing that, and we have a lot of experience in, for example, COVID and hepatitis is by engaging the immune system one way through our platform, our antibody platform where we do a lot of Fc engineering to again, inducing immune engagement to fight against infection. And we recently announced a deal where we are acquiring a second platform that is focused on masking T-cell engagers. And again, the whole idea is there that you unmask the T-cell engager, so that's at only the tumor environment, you actually bring together a T-cell and a cancer cell and you induce the killing of the cancer cells who, again, T-cell directed. So both on the antibody side and the T-cell side, we have technologies that we can bring to bear to help patients either fight infection or fight cancer really through powering up their immune system. What I'm really excited about is how we are building a very compelling clinical pipeline. So we have a Phase II program in hepatitis B that is aiming to get to a functional cure. We have a Phase II program in hepatitis delta where we're aiming to get to chronic treatment. And then through a transaction, again, that we announced a couple of weeks ago, we will soon have access to 3 clinical stage T-cell engagers, addressing metastatic some of solid tumors. So taking that all together, we have, as I said, a very compelling pipeline that we're building, a number of data catalysts coming up, we will have Phase II end of treatment data for hepatitis B program already in the fourth quarter. We will have a full data set on hepatitis delta in the fourth quarter. And then in the course of next year, we will have start of a Phase I program in EGFR and data on our HER2 and our PSMA programs in the second half of the year. So a lots coming up.

Yes. A lot coming up, and you've been busy also recently with the deal and some other announcements. So maybe thanks for that introduction, but maybe we could just start with. We also announced the recent strategic restructuring and pipeline prioritization. So maybe just walk us through some of those changes and some of the reasons behind that?

Sure. It might be beneficial in that context to talk a little bit about where Vir is coming from. So Vir Biotechnology was one of only a handful of companies that was able to bring COVID therapeutic to market. And of course, since the pandemic has ended we were part of that subset of companies that had a rise and fall associated with it. So 1 year, we had over $1 billion in revenue and the next year, basically, that revenue had dissipated. So obviously, when you find yourself in such a situation, you have to revisit your strategic imperatives. And what we have done is looked at how do we reprioritize our pipeline what are the programs that we want to take out, phase out? And what other restructuring measures do we need to take? And so on the prioritization front, what we did is we said, okay, our most advanced programs in the clinic, hepatitis B and delta really very promising, and we really wanted to make sure that those were going to get the most attention and the resources. And we also reprioritized our preclinical pipeline to only focus on RSV prophylaxis, which is a 50-50 deal with GSK and HIV cure because there, we have a very unique cocktail of antibodies that we could deploy. So we really trimmed down our infectious diseases pipeline. As I mentioned, we also decided to phase out a number of programs, so we stopped our efforts in influenza prophylaxis, and we are in discussions with partners around that. We phased out our COVID program, and then we also phased out our viral factor-based platform and the associated programs again in HIV prophylaxis in TB, tuberculosis and HPV. And as a result of all that, we looked at our workforce and how we would really fit our resources to what it is we need for the future. So taken together, everything we have done since last year, we have reduced our workforce about 1/3. And as we will probably talk about a bit more, we are bringing some additional resources in through the transaction with Sanofi, but those are very focused on, again, bringing clinical stage assets forward in the pipeline.

Maybe just we continue with sort of the Sanofi deal and maybe talk a little bit about just the rationale behind it and maybe some of the structure of that deal.

Yes. So maybe first on the structure. So it's an exclusive license agreement. So we get access post closing of the deal to 3 clinical stage T-cell engagers, targeting, respectively HER2, PSMA and EGFR. And we are also getting the exclusive rights to the PRO-XTEN platform, which is a masking platform for the fields of oncology and infectious diseases. And as I just mentioned, I think what is quite unique is that we're also bringing a group of about 50 scientists into Vir that have been associated with the program -- the clinical programs since the start that have been working with the platform for over a decade and that have deep expertise in how to manufacture those T-cell engagers. So the deal structure is almost like an acquisition, in the sense, again, that it's unique to get access to assets platform and the associated talent that you need to bring it forward. The way that we thought about this deal strategically is a couple of things. I mean, what made us really excited about it is, first of all, each of these assets address a really high unmet medical need. If you look at just the PSMA program, for example, it is still the case that the 5-year survival rate for patients with metastatic prostate cancer is only 1 -- 1 in 3, 34%. If you think about EGFR-associated cancers, 5-year survival rate varies somewhere between 3% and 38%. So again, very dismal numbers there of survival. And in addition, if you look at the modalities and the treatments that are available, a lot of them come with significant toxicity associated. Now also for the T-cell engagers, while the T-cell engagers hold great promise and there's 10 T-cell engagers already on the market, they typically come with significant toxicity, which sometimes cardiac dysfunction, interstitial lung disease, pneumonitis and so on. So what is really unique about these T-cell engagers that we are going to license in is that they are marked. So they are only going to be activated in the tumor microenvironment. And that is giving a potential to be able to reach a very different level of therapeutic index and hopefully associated with a much safer profile.

Maybe you can talk a little bit more about the PRO-XTEN platform in terms of how validated is it? How much experience is there that kind of thing?

Sure. Yes. So PRO-XTEN, the name sort of gives away some things. First of all, XTEN refers to the fact that this platform was initially developed to extend half-life of drugs. And there is one drug on the market by Sanofi's called ALTUVIIIO that is using the XTEN mask. So it's a hydrophilic mask that, again, has been able to be developed and is proven to be safe. The PRO refers to the fact that the mask is linked to a protease-cleavable linker. And that is really the ingenuity of the technology the T-cell engager that is containing the mask can travel in the circulation of patients, nothing much happens until the mask T-cell engager reaches the tumor microenvironment. And at that point in time, the linker can be cleaved by a number of proteases that have high activity only in the tumor microenvironment. And by only revealing the T-cell engager at that moment in time, you can induce the cancer -- cancer-killing activity very, very specifically. What is also really unique about the platform is that every single T-cell engager, you don't need to start from scratch in coming up with a linker and a mask. So it's a universal mask in our 3 clinical stage assets for HER2 PSMA and EGFR. It's exactly the same mask. And so because you use it the first time around and you learn about it, it allows you to move faster in subsequent stages of development and going to next target. And then finally, I would say that given that we have a very deep expertise in antibody engineering, there's a high synergy with the masking platform. So our ability to come up with a really unique bispecifics combined with that PRO-XTEN masking platform will allow us to explore other potential targets for therapeutics going forward.

You mentioned sort of the 3 programs, HER2, PSMA and EGFR, -- maybe if you could just touch on each in terms of where you are in development and kind of next steps for those programs?

Sure. Yes. So the first one, as I mentioned, it's a dual CD3 HER2 bispecific TCE. It is currently in Phase I dose escalation as a monotherapy, and also in combination with pembrolizumab. So data is expected in the second half of next year. As I mentioned, if you think about HER2-associated cancers, there's still a very high unmet medical need. What we are targeting for this specific regimen is second and third line metastatic breast cancer and third-line metastatic colorectal cancer. Again, and in those -- for example, in third-line metastatic colorectal cancer, again, the 5-year survival rate is around 1 in 10. So there's a high unmet need, and we hope that with this T-cell engager program, we will be able to come up with an efficacious regimen that is also much safer given the demasking only in the tumor. So that's one program. It's the most advanced. It was the first program. And as I mentioned, what is very unique about the platform is that the same mask is being applied across the 3 programs. So for the HER2 program, the Sanofi -- I mean, Sanofi team started from very low doses of drug, and they went into very small increments increasing the dose just to make sure that it was going to be safe. The second program, which is a dual CD3P SMA T-cell engager, there, the team was able to already start at a higher dose and move into larger -- larger dose intervals because, again, you were using the same kind of mask. So that second program is also in Phase I dose escalation. And again, data is expected in the second half of next year. And as I mentioned, again, in metastatic castration-resistant prostate cancer, the 5-year survival rate is around 1 in 3, so still a high unmet medical need, and this is an opportunity to potentially address that. And then finally, the EGFR program. Again, it's a dual CD3 EGFR. That is expected to go first in human in the first quarter of next year. So that has IND clearance and is moving towards the clinic.

And you mentioned the masking technology is kind of a universal mask, but in each program is the efficiency of the unmasking in the tumor? Is that similar? Or is it different based on different tumor types or just -- how that works?

Yes. So the linker has been designed such that there are 8 different proteases that can leave it. So it has really been optimized to be used in tumor microenvironment. So it's the same type of linker, but it might be cleaved by different proteases depending on the application.

Makes sense. Maybe you can talk about just -- you recently announced the deal. I think there's a period where there's going to be like a sort of a transition like how is that going? When will you have everything in-house? Or is this is this pretty seamless?

Yes. So we are still currently in the HSR period. So but closing is expected in the coming days. Post closing, what will happen, of course, is I think a very swift transition because, as I mentioned, the people that have been associated with the program you're joining us, the people that have been associated with developing the platform are joining us and the people that know how to manufacture it as well. So we hope to not really miss a beat in progressing these programs forward. And we have been, of course, preparing very well for that transition.

You mentioned the potential also with the PRO-XTEN platform is to sort of develop some of your own programs and use that technology as well. How much of a priority is that? Is it more T-cell engagers? Is it more maybe monoclonals or different types of molecules? Or how are you thinking about that?

Yes. So first of all, I want to reiterate that absolute priority is going to be on accelerating our hepatitis delta program, hepatitis B program and our other clinical stage assets. the T-cell engagers. However, the platform holds tremendous potential. And so there's certainly thinking around how we could the right value out of the platform and come up with new therapeutics going forward. So post deal closure, that, of course, will be a discussion with the team that we are bringing in. As I mentioned in infectious disease, we have very strongly prioritized our preclinical programs, and we're really focused now on prophylaxis, RSV and HIV cure. And for the T-cell engager platform, that will be a discussion both [indiscernible].

Makes sense. How are you thinking about just business development going forward? Obviously, you still have a lot of cash, but you just had this deal? Are you kind of where you want to be? Or are you thinking more sort of activity in the future?

No. I think we have, again, post close of this deal, built a very compelling clinical pipeline. The focus is really now on, as I mentioned, because we have phased out a number of programs that actually hold a lot of promise. For example, our preclinical influenza prophylaxis program, 2981 as well as an ADC are very promising molecules. It's not an area where we want to take molecules forward, but the focus in business development is going to be on potentially finding partners for the phase-out program.

Okay. Maybe we can shift gears just to hepatitis delta and diesel. You shared some very promising sort of preliminary Phase II data from your SOLSTICE study. Maybe just walk us through the key findings there.

Sure. So yes, first of all, just to remind everyone, hepatitis delta is the most severe form of viral hepatitis. And people who are co-infected with both hepatitis B and Delta progress much faster to liver cancer, need for transplantation and unfortunately, also progress much faster to death. So what we have been showing at EASL are preliminary data from our SOLSTICE trial, 24-week treatment. And we saw some really compelling efficacy from our both monotherapy antibody to tobevibart as well as our dual regimen to tobevibart plus an SRNA elebsiran. And for the combination therapy, for example, after only 24-week treatment, we saw 55% of patients that had target not detected, which means that you can no longer detect the delta RNA virus in the blood of patients. So this was very compelling data. We also showed that more than 50% of the patients achieved ALT normalization, which is important because it is a regulatory requirement to have a dual endpoint, and we will have coming up at AASLD in November, the full data set, 24-week data on 30 participants with the combo regimen and 30 participants with the monotherapy. In the meantime, again, the data, even though preliminary on the combination have been so compelling. We have achieved IND clearance, Fastrack designation on that combination and clearly achieving such a high level of target not detected and significant levels of S antigen reduction has made us to choose for this combination regimen as a potential regimen, which we would proceed with into registrational studies.

Can you maybe talk about what you saw in terms of cirrhotic patients in non-cirrhotic patients? And if there are any differences there?

Yes. So one of the questions that we received prior to EASL was will you be able to see the same level of efficacy in patients that have progressed to cirrhosis? And so even though it was still a small data set participants in the combination regimen, we saw absolutely no difference between cirrhotic and CPTA cirrhotic patients. So that was actually a very promising outcome again because again, patients that have a dual infection of B and delta progress to cirrhosis very quickly. So it really opens up the perspective of the patients that you will be able to treat going forward.

And earlier in our conversation, you mentioned given sort of an update on that study, I think, by year-end. Maybe just talk about what we should expect there? Is it just more patients, longer follow-up or...

Yes. So we expect to share data in the fourth quarter. likely at AASLD in November, major hepatitis Liver Congress. So we will be sharing, as I mentioned, the full data at 24 weeks, 30 participants on the monotherapy and 30 participants on the deal. We will have more data on to your point, cirrhotic and non-cirrhotic patients. We will have safety data, tolerability data. So it will be a really informative data set on our SOLSTICE trial. And again, that will guide us in what our registrational trial is going to look like. We also have shared that we are planning interactions with regulators in the third quarter. So at that moment in time, we should also be in a position to share more information about our plans going forward.

And can you talk just about the sort of market opportunity in hepatitis delta I think and also how are patients identified right now? And what percentage are sort of diagnosed?

Yes. So certainly, hepatitis delta is not -- it's a very severe disease. It's a very high unmet medical need. Yet, unfortunately, diagnosis rates, especially in the United States, are really low. And we are looking into ways to change that going forward. The estimates based on a lot of studies that have been done is that there are approximately 100,000 delta patients in the U.S. and about 200,000 in Europe. So it resembles pretty much an orphan-like disease. The impetus for diagnosis, I think, will really come here in the United States when a regimen is available or there's an outlook of a regimen coming. Thus far, there's really no treatment available for patients in the U.S. So there's little incentive for physicians to even diagnose hepatitis delta. The situation is very different in Europe. So in Europe, there is bulevirtide available on the market. There is reflex testing, meaning that if patients get tested for hepatitis B, and they are positive, they get automatically tested for hepatitis delta. And we have seen some data that, for example, in Germany and in Spain, when that happens, the diagnosis rates for delta patients went up significantly, 5- to 6-fold compared to just basing diagnosis based on risk factors. So that's very promising. And as these data, I think, evolve and come out, we are expecting that the guidelines in the United States will also change. Again, I think our initial data with our combination regimen is very compelling. And as that data gets reinforced hopefully in November, I think that there will be -- again, if there's nothing out there to treat patients with, and there's no outlook of anything coming there isn't really an incentive to diagnose. But I think if sort of there's potential treatments on the horizon, I think that might really change. And hepatitis delta in that sense is very similar to -- to hepatitis C. It's also an RNA virus. It's very different from hepatitis B, where it's a DNA virus, you have the cccDNA. It's more complicated. But hepatitis delta is an RNA virus. And again, what was seen in hepatitis C is that as soon as good treatments became available, more diagnosis happened and over time, that really acted as a flywheel. So we are working with patient advocacy groups, policymakers. We are looking at ways to diagnose patients also for selection in our clinical trial. So we're doing a lot of effort. And I think the other players in the field are doing the same. So with -- again, the shift in Europe to reflex testing, the WHO putting guidelines out there for reflex testing as that develops here in United States, I think that will drive a lot of change.

You mentioned next step is sort of the Phase III study and maybe just share your early thinking on what the trial design could look like in terms of duration end points, et cetera.

Yes. So we are working through now the design of our registrational study, which is will be called Eclipse. And what we can say is that, we will use bulevirtide as a comparator in that study because bulevirtide is the standard of care in Europe. It will be important for again, reimbursement in Europe. It's going to be a study that we expect somewhere in patient size range between 300 and 500 participants in the study. So reasonable size. And again, we're going to have interactions with the regulators to agree and align on all the things that we have assumed to be true, and we will be sharing more about that in November.

Great. Maybe we just shift the hepatitis B. And maybe you can just talk a little bit about the Phase II March study. You shared some data already, I think, in treatment data at 24 weeks and maybe just -- can you tell us the key takeaways there?

Sure. Yes. So for hepatitis B, the aim is really to try and achieve a function of cure so that's very different from what we have been discussing in hepatitis delta where we're looking at chronic treatment. And what we have shown in prior data, to your point, Mike, is that after 24 weeks of treatment with the combination of tobevibart and elabsiran alone or with the addition of peginterferon alpha, we achieved about 15% as antigen loss. And that was about threefold increase compared to a combination of elabsiran, the siRNA and peginterferon alpha alone. So that was on itself already really promising. What we had seen before in hepatitis B in our 1001 trial was that moving from 24-week treatment elabsiran peginterferon interferon. We had about 5% as antigen loss to 48 weeks, we got to about 26% S antigen loss at the end of treatment. And then the functional curate is taking treatment away and look at what that looks like 6 months later, and we achieved about a 16% functional cure rate. So the data that we're going to show in November in our March Part B, trial are the 48-week end of treatment data and then the functional cure data will come in the second quarter of next year.

Just as we think about the 48-week data -- in your view, what's kind of a good result on S antigen loss? And I guess how high does it have to be? Where is there a threshold you have in mind? I know you're going to run the study out and kind of see where it ends up, but just...

Sure. Yes. So we have had a lot of conversations with key opinion leaders and treating physicians around we have an opportunity for an interferon spearing and an interferon-containing regimen. And obviously, we will have to see what the data tells us. However, what we have consistently heard is that physicians would like to see at least 30% functional cure rate for an interferon containing regimen and they would be happy with lower antigen or lower functional cure rate for an interferon sparing regimen. So if you take that into account and you sort of understand that between the 48-week end of treatment and the function of cure, you typically see a drop off. Obviously, we would like to see, and it would be very promising if we could see as the antigen loss rates above 40% at least. So that it tells you that you have a shot at achieving those kind of functional cure rates. So again, we will have the data on 50 participants in the doublet and 30 participants in the triplet coming up in November.

Is that at a medical meeting? Or is that...

Yes, that will also be at AASLD.

Okay. Got it. I think also you're planning a sort of an R&D day, I think, in November, if I recall. Maybe just talk a little bit about what you plan to share there.

Yes. So R&D Day will follow AASLD very closely. So we will use our R&D Day to really talk through our hepatitis delta results or hepatitis B results, talk about the landscape, the opportunity, the parts going forward for hepatitis delta, especially potential future registrational trial design, et cetera. We will also use our R&D day to talk about, of course, our clinical stage T-cell engagers and our thinking around that. And finally, we will talk a little bit more about the platforms that we have, the antibody engineering platform and the masking platform and the synergies and some of our future thinking around potential applications around that.

Okay. Maybe just last question. Your current cash position which, if I recall, is still pretty good. But maybe just remind us what that is? And just with all these changes and it looks like you have a very robust pipeline and you're advancing it quickly like what does the runway look like?

Yes. So we shared that at the end of the second quarter, we had $1.43 billion in cash. As I mentioned in the beginning, we have very substantially reprioritized our pipeline phased out programs. We structured the company. So that has freed up $90 million in cash savings, and it has also yielded about $50 million in cash avoidance for the course of next year. So -- and we continue to really look at how to get operationally more efficient. So we are just kicking off our budget cycle for next year. We have also shared that we are reducing our guidance for this year with $70 million. So we are taking a lot of measures to make sure that the cash that we have available is really going to be able to be deployed to accelerating our hepatitis programs and progressing the T-cell engager programs, which is, of course, the core priority for the company.

Okay. Great. Just like we're out of time. So we're looking forward to all these updates coming up. And Marianne, thanks so much. Appreciate your time today.

Thank you, Mike. Appreciate it.