Arbutus Biopharma - Q2 2024

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Arbutus Biopharma 2024 second quarter financial results and corporate update. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lisa Caperelli, Vice President of Investor Relations. Please go ahead.

Lisa Caperelli (Head of Investor Relations)

Thank you, Jill. Good morning, everyone, and thank you for joining Arbutus' second quarter 2024 financial results and corporate update call. Joining me today from the Arbutus executive team are Mike McElhaugh, Interim President and Chief Executive Officer, Dr. Karen Sims, Chief Medical Officer, Dave Hastings, Chief Financial Officer, and Dr. Mike Sofia, Chief Scientific Officer. Mike McElhaugh will begin with a corporate update, followed by Karen, who will review our ongoing clinical programs. Dave will then provide a review of the company's second quarter 2024 financial results. After our prepared remarks, we will open the call for Q&A.

Before we begin, I'd like to remind you that some of the statements made during the call today are forward-looking statements, which are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our annual report on Form 10-K, our quarterly report on Form 10-Q, which we filed today, and from time to time in other documents filed with the SEC. With that, I'll turn the call over to Mike McElhaugh. Mike?

Michael McElhaugh (Interim President and CEO)

Good morning, everyone, and thank you for joining us today. In the second quarter of 2024, we made significant advancements in our pursuit of developing a functional cure for patients with hepatitis B and driving value for our company and shareholders. Most importantly, we presented positive data from two Phase IIa clinical trials combining our RNAi therapeutic, imdusiran, with different immunomodulators. Both of these data sets support the continued development of imdusiran as a cornerstone in an HBV functional cure treatment regimen. Of note, the IMPROVE-1 clinical trial demonstrated undetectable hepatitis B surface antigen in 33% of patients from cohort A-1 who were treated with 48 weeks of imdusiran and 24 weeks of interferon. More importantly, 67% of those patients with baseline surface antigen less than 1,000 international units per mL had undetectable hepatitis B surface antigen.

In addition, six patients, four from cohort A-1 and two from cohort A-2, who achieved undetectable surface antigen after receiving imdusiran plus 24 weeks of interferon, stopped all therapy and maintained undetectable surface antigen and HBV DNA in early follow-up, a precursor to a functional cure. To put this in context, if these six patients continue to maintain undetectable levels of HBV DNA and surface antigen for 24 weeks while off all therapy, they would be considered functionally cured. We look forward to following the trajectory of these patients and potentially achieving our goal of reaching a functional cure rate that is equal to or greater than 20%, a goal that aligns with a number of KOLs in the HBV field. We are now prioritizing advancing imdusiran into Phase IIb clinical development, and preparations are ongoing.

In addition to the follow-up data from the patients from IMPROVE-1 that are trending towards a functional cure, we expect to report preliminary data from the nivolumab arm of the IMPROVE-2 trial, evaluating imdusiran plus VTP-300 in the second half of this year. As a reminder, IMPROVE-2 includes an additional cohort of patients who received imdusiran plus nucleoside analog therapy for 24 weeks, followed by VTP-300 plus up to 2 low doses of nivolumab, an approved anti-PD-1 monoclonal antibody. Because we are now focused on advancing imdusiran into Phase IIb clinical development and ensuring we have the resources to do so, we have made the difficult decision to further streamline the company by eliminating our HBV discovery efforts. These actions will result in a reduction in workforce of 40%, affecting our discovery, research, and G&A functions.

We know changes that impact our people are not easy, and we are committed to providing our departing employees with support as they transition to their new next roles. At the same time, we are confident that Arbutus remains well positioned for the future. I want to emphasize how grateful we are to all our employees, especially those departing, for their dedication and passion in developing novel therapeutics that may lead to a functional cure in hepatitis B. In addition to eliminating our research discovery efforts, we have also decided, prior to dosing any patients, to discontinue our recently initiated IMPROVE-3 trial, also known as AB-729-203, which was a Phase IIa trial evaluating the addition of durvalumab to imdusiran.

Our decision to discontinue the IMPROVE-3 clinical trial is not related to any concerns regarding imdusiran or our belief that the addition of controlled checkpoint inhibition may be a key component of a functional cure regimen. The decision was based solely on prioritization of resources for the advancement of imdusiran into a Phase IIb clinical trial and the projected availability of IMPROVE-3 clinical data, given the advancement of AB-101 through Phase I clinical development. I want to emphasize that our decision to discontinue this clinical trial has no impact on our oral small molecule PD-L1 checkpoint inhibitor, AB-101, that is differentiated from checkpoint antibodies and is currently in a Phase Ia/Ib clinical trial.

Recall, AB-101 is liver-centric and in preclinical studies had typical small molecule pharmacokinetics, and therefore likely a much shorter duration of effect than long-acting antibodies. These features were designed with the goal of minimizing systemic exposures and reducing the chance of immune-related adverse events that are often seen with checkpoint antibodies. It is for these reasons that we continue to remain excited about the potential of AB-101 in hepatitis B and are continuing to evaluate multiple ascending doses of AB-101 in healthy subjects in our Phase Ia/Ib clinical trial. Importantly, the actions today have allowed us to extend our projected cash runway into the fourth quarter of 2026. Before I turn the call over to Karen, I would like to provide a brief update on the litigation with Moderna and Pfizer-BioNTech around our LNP intellectual property.

In the Moderna case, next steps include expert reports and expert depositions. The court has set April 21, 2025, as a trial date for this case, which is, of course, subject to change. The Pfizer-BioNTech lawsuit is ongoing, with no updates at this time. With that, I'll now turn the call over to Karen to review the data we presented at EASL. Karen?

Karen Sims (CMO)

Thanks, Mike, and good morning, everyone. The end-of-treatment data we reported at the EASL Congress in June was from our ongoing Phase IIa combination clinical trials, evaluating imdusiran with two immunomodulatory approaches and supports advancing the development of imdusiran as the cornerstone therapeutic of an HBV functional cure regimen that reduces surface antigen, suppresses HBV DNA, and boosts the immune system. The first trial, IMPROVE-1, evaluated the safety, tolerability, and antiviral activity of a 24-week lead-in of imdusiran 60 milligrams, given every eight weeks, followed by 12 or 24 weeks of weekly interferon, with or without additional doses of imdusiran in Nuc-suppressed chronic hepatitis B patients. At the end of interferon treatment, patients remained on their Nuc therapy for an additional 24 weeks, and at that point, if protocol criteria were met, they could stop their Nuc therapy and remain off all therapy for 48 weeks of follow-up.

While we presented the full end-of-treatment preliminary data set for all four patient cohorts at EASL, I will focus on the two cohorts of patients in the trial that received 24 weeks of interferon, as more patients in these cohorts reached and maintained undetectable surface antigen levels than in the 12-week interferon cohort. 12 patients received 24 weeks of imdusiran dosing, followed by 24 weeks of weekly interferon, with continued imdusiran dosing every eight weeks. Four of those 12 patients, or 33%, had undetectable surface antigen at the end of treatment. All four patients maintained undetectable surface antigen after stopping interferon treatment and continuing just their Nuc therapy for 24 weeks. These same four patients discontinued their Nuc therapy and are in follow-up, and if they continue to maintain undetectable surface antigen and HBV DNA levels for another 24 weeks, they will be considered functionally cured.

Of note, there are also two patients that received 24 weeks of imdusiran, followed by 24 weeks of interferon with no additional doses of imdusiran, that also reached and maintained undetectable surface antigen and have discontinued Nuc therapy. So in total, there are six patients from the 24-week interferon cohort that achieved sustained surface antigen loss, have seroconverted with high surface antibody levels, and are now being followed off all therapy to assess for a functional cure. The 33% response rate seen with 24 weeks of interferon is one of the highest response rates seen in the field, including from studies testing interferon treatment durations of 48 weeks. In addition, unlike other RNAi candidates in development that have been evaluated in combination with interferon, imdusiran was administered less frequently and at a lower dose. The key opinion leaders in the HBV field have found these data to be impressive.

There's been prior skepticism around the use of interferon in HBV functional cure regimens, especially since 48 weeks of interferon treatment is not always well tolerated. This clinical trial evaluated 24 weeks of interferon treatment, which is one of the shortest courses leading to sustained surface antigen loss in patients with HBV to date. Additionally, in this clinical trial, interferon was generally safe and well-tolerated, giving us and others in the field the belief that this may be a viable treatment regimen to advance into a Phase IIb clinical trial. Our second trial, IMPROVE-2, is evaluating the safety and immunogenicity of a 24-week lead-in with imdusiran, followed by Verve Therapeutics' immunotherapeutic VTP-300, while continuing Nuc therapy. At the end of treatment, week 48, if patients met protocol criteria, they could stop their Nuc therapy and continue to be followed for 48 weeks off all treatment.

During the 24-week imdusiran lead-in period, we saw a 1.8 log decline in surface antigen from baseline on average. This decline in surface antigen, seen with imdusiran treatment alone, is in line with data we have seen to date from our other clinical trials. In addition, 95% of patients had surface antigen levels less than 100 IUs per mL at the time of dosing with VTP-300 or placebo. After VTP-300 administration, more patients maintained surface antigen thresholds of less than 100 or less than 10 IUs per mL versus placebo through 24 weeks post end of treatment. Statistical significance was achieved in mean surface antigen levels between the treatment arm of five patients and placebo, with six patients reaching the 24-week post end of treatment time point.

The data from this trial supports our thesis that by first lowering surface antigen with imdusiran, we increase the patient's ability to respond to additional treatment. Recall that we've expanded the IMPROVE-2 clinical trial to evaluate the addition of a low dose of the anti-PD-1 monoclonal antibody nivolumab to the imdusiran and VTP-300 combination treatment regimen. We believe nivolumab may further boost the host immune response. We are on track to report preliminary data from this portion of the trial later this year. Now let's briefly review the Phase Ia/Ib clinical trial with AB-101. As Mike mentioned, AB-101, our liver-centric oral small molecule PD-L1 checkpoint inhibitor, is differentiated from checkpoint inhibitor antibodies and is developed for potential use in combination with imdusiran as a potential treatment regimen to functionally cure chronic hepatitis B.

The Phase Ia/Ib clinical trial consists of three parts, starting with single and then multiple ascending doses in healthy subjects and culminating with multiple doses in patients with chronic hepatitis B. Last quarter, we reported data from part one, showing that AB-101 is generally well tolerated, with evidence of dose-dependent receptor occupancy. In the 25 milligram cohort, all five evaluable subjects showed evidence of PD-L1 receptor occupancy between 50%-100%, indicating that AB-101 is interacting with its intended targets. We are now in part two of this trial, where cohorts of healthy subjects are receiving multiple ascending doses of AB-101. We anticipate announcing preliminary data from part two later this year. Our goal is to move as quickly as possible into part three, which will enroll patients with chronic hepatitis B.

We believe that the immune checkpoint pathway plays an important role in HBV specific immune tolerance and in T cell activation, and the addition of a checkpoint inhibitor in combination with imdusiran could potentially further enhance HBV specific immune responses. With that, I'll turn the call over to Dave Hastings for a brief financial update. Dave?

David Hastings (CFO)

Thanks, Karen, and good morning, everybody. We ended the second quarter of 2024 with approximately $148.5 million of cash, cash equivalents, and investments in marketable securities, compared to approximately $132 million as of December 31, 2023. During the first half of 2024, we received $44.1 million of net proceeds from the issuance of common shares under Arbutus' at-the-market offering program. These cash inflows were offset by $33.8 million of cash used in operations. As we announced today, we are reducing our workforce by 40%. Importantly, we continue to believe we have the financial and human resources necessary to advance our clinical stage HBV pipeline.

Now, with this reduction in workforce, we will incur a one-time restructuring charge of approximately $3 million-$4 million that will be recorded in the third quarter of 2024. We still expect our 2024 cash burn to range from $63 million-$67 million. Importantly, with the actions we announced today, we extended our cash runway into the fourth quarter of 2026 and significantly strengthened our ability to fund an anticipated imdusiran Phase IIb clinical trial. In closing, we have a strong financial position to advance our mission of developing our HBV assets to provide a functional cure for chronic HBV. With that, I'll turn the call back to Mike.

Michael McElhaugh (Interim President and CEO)

Thanks, Dave. With the reporting of end-of-treatment data from IMPROVE-1 and IMPROVE-2, we have now achieved all of our first half of 2024 key milestones. All second-half milestones are on track, including reporting preliminary end-of-treatment data from the nivolumab arm of the IMPROVE-2 trial and reporting preliminary multiple ascending dose data from healthy subjects in the AB-101-001 trial. In closing, I wish the best to our departing employees and again thank them for their dedication and contributions to the company as we continue to pursue our goal of developing a functional cure for patients with chronic hepatitis B. Operator, we're now ready to open the call for Q&A.

Operator (participant)

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. The first call comes from Dennis Ding with Jefferies. Go ahead, your line is open.

Dennis Ding (Analyst)

Hi, good morning. Thanks for taking our questions. I just have one on the Phase IIb that you guys were mentioning. Can you just talk a little bit about what this trial would look like in terms of size and design and approximately how much it would cost to run? And as a follow-up, you know, I'm just curious, would this include AB-101 as part of the regimen? Or I guess maybe it would just include interferon and VTP-300, pending some more data in the second half of this year. Maybe just comment on that as well, please. Thank you.

Michael McElhaugh (Interim President and CEO)

Sure. Good morning, Dennis. Karen, would you like to handle that question?

Karen Sims (CMO)

Sure. That's fine. Hi, Dennis. So there's really not much I can share at this point in terms of the Phase IIb study design. Obviously, we're in the planning stages of that study, so it would be premature to describe any specific study design features or the timing of the study. So that will need to be the subject of a future discussion. In terms of, you know, including-

... compounds in that trial, you know, I think we're evaluating all the options we have at our disposal right now. As you know, we shared very exciting data at EASL with our interferon combination in IMPROVE-1. With VTP-300, we're awaiting that additional nivolumab data from the IMPROVE-2 additional cohort coming later this year. So at this point, I think, you know, all options are, are open and on the table, and we're evaluating all those as we speak.

Dennis Ding (Analyst)

Okay, thank you.

Operator (participant)

Thank you. Stand by for our next question. Next question comes from Ed Arce with H.C. Wainwright. Please go ahead. Your line is open.

Thomas Yip (Analyst)

Well, good morning, everyone. This is Thomas Yip asking a couple of questions for Ed. Thank you for taking our questions. First question, for the IMPROVE-2 expansion cohort data and expected in the second half of this year. Is the data announcement expected to be in conjunction with any major medical conference in the second half of this year?

Michael McElhaugh (Interim President and CEO)

Good morning, Thomas. Thanks for the question. I will tell you what we tell you every time we talk about the release of data. We hope that that's the case, but of course, we can't commit to that because we don't know. We won't know, you know, the disposition of the abstracts yet. So, we hope that's the case. We anticipate that that will be the case, but of course, we can't confirm that till we get closer to the end of the year.

Thomas Yip (Analyst)

Understood. And then perhaps as an add-on question to that, are there any plans to report, you know, new interim data from IMPROVE-1 and IMPROVE-2 studies, you know, before year-end?

Michael McElhaugh (Interim President and CEO)

Yeah, I think the answer to that question, Thomas, is yes. Timing TBD.

Thomas Yip (Analyst)

Got it. And then perhaps one question from us on the operational streamlining plans. Are there any other impacts on your clinical programs other than the planned IMPROVE-3 study? And then also, if you can discuss any pre-clinical programs that are affected by the streamlining.

David Hastings (CFO)

Yeah, no, look, the we don't anticipate any other impact on the clinical programs. In fact, the focus really is to focus on the later stage imdusiran studies, and that's the intent. And using the existing resources we have to fund the Phase IIb study, which we believe we can substantially fund with the current cash on hand. Obviously, we can't give exact guidance as to that until the study design is complete, but with the streamlining today, that positions the company well to advance imdusiran quickly.

Thomas Yip (Analyst)

Got it. Thank you again for taking our questions.

Michael McElhaugh (Interim President and CEO)

Of course. Thanks, Thomas.

Operator (participant)

Stand by for our next question. The next question comes from Roy Buchanan with Citizens. Go ahead, your line is open.

Roy Buchanan (Analyst)

Hey, thanks for taking the questions. Just a couple quick ones. I guess, just to make sure I'm clear, just and I'm sure you're gonna need to talk to the FDA, but it sounds like the next and possibly only trial that you're going to start is gonna be this Phase IIb. Is that correct?

Michael McElhaugh (Interim President and CEO)

Yeah, Roy, I don't know how to answer that. I mean, we're what we said today was we're planning to move imdusiran into the later stage clinical development, which is likely a Phase IIb study. We have lots of thinking to do. We are in the process of doing that, and, you know, we'll come back when we have some more details.

Roy Buchanan (Analyst)

Okay, and still some data to see. Okay, I got it-

Michael McElhaugh (Interim President and CEO)

Still some data to see.

Roy Buchanan (Analyst)

Right.

Michael McElhaugh (Interim President and CEO)

Correct. Yeah.

Roy Buchanan (Analyst)

Yeah. Okay, and then just one, just I guess you're thinking, and I think you mentioned it in the prepared remarks about focusing on patients with baseline HBs less than 1,000. You know, other companies are looking there. Just how, how are you potentially thinking about that today? Thanks.

Michael McElhaugh (Interim President and CEO)

Yeah, that's a good question, Roy. I mean, yes, you're right. You did hear that comment in the prepared remarks. One of the things that we found very intriguing about the data that we generated in IMPROVE-1 is that if you looked at the response rate in patients with surface antigen less than 1,000 at baseline, the number increased dramatically from 33%-67%. Now, of course, we're gonna have to see how that continues to hold as we move forward here. But remember, we're talking about, you know, 350 million patients globally with hepatitis B. So even if you start to cut that down into some patient populations and you think about how you could, you know, potentially segment that market, we're still talking about substantial numbers of patients.

We're working on specifically what that looks like, but there is a very large base number of patients to work from. So, so yeah, we're excited about that.

Roy Buchanan (Analyst)

Okay, thank you.

Operator (participant)

One moment.

Michael McElhaugh (Interim President and CEO)

Thank you.

Operator (participant)

For our next question. The next question comes from Keay with Chardan. Go ahead, your line is open.

Keay Nakae (Analyst)

Yeah, thanks. Yeah, just again, not to beat a dead horse here, but just trying to understand the path forward for the next clinical trial. It sounds like you're trying to position your resources to be able to at least start this on your own, if needed. But can you just firm up when you think you might start it? I know you can't give us any details on design, but you know, you're gonna have more data, you know, in the second half of this year. So is this a first half 2025 study or later?

Michael McElhaugh (Interim President and CEO)

Yeah, Keay, good, good question. Good, good to have you on the line. Thanks for the, thanks for the question. I can't give you any more specifics about design or timing at this point. All I can say is that we'll get it started just as quickly as we possibly can. There are still some discussions to be had. We are, as you know, as you mentioned, we're still waiting for some data, which is obviously gonna help drive that decision. But the goal here is to start this as quickly as we can. And yes, we do have the legs to kick this off on our own. And as Dave said, to fund substantially all of it at this point with the cash we have on hand.

You know, we're diligently working to get this kicked off quickly, and, you know, stay tuned for more information.

Keay Nakae (Analyst)

Okay, thanks.

Michael McElhaugh (Interim President and CEO)

Thank you.

Operator (participant)

I'm showing no further questions at this time, so I would now like to turn it back to the company for closing remarks.

Michael McElhaugh (Interim President and CEO)

Thank you, everyone, for joining us this morning. We appreciate your continued interest and support of Arbutus. And of course, we look forward to providing updates as we progress the development of our HBV assets. Operator, that concludes our call.

Operator (participant)

Thank you, and thank you for your participation in today's conference. This does conclude the program. You may now disconnect.