Arbutus Biopharma - Q3 2023

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Arbutus third quarter corporate and financial update conference call. 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 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 Lisa Caperelli. Please go ahead.

Lisa Caperelli (VP of of Investor Relations)

Thank you, Brianna. Good morning, everyone, and thank you for joining Arbutus' third quarter 2023 financial results and corporate update call. Joining me today from the Arbutus executive team are Bill Collier, President and Chief Executive Officer, David Hastings, Chief Financial Officer, Michael McElhaugh, Chief Operating Officer, Dr. Mike Sofia, Chief Scientific Officer, and Dr. Karen Sims, Chief Medical Officer. Bill will begin with a corporate update, followed by Dave Hastings, who will provide a review of the company's third quarter 2023 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 most recent annual report on Form 10-K, our quarterly report on Form 10-Q, which will be filed later today, and from time to time in our other documents filed with the SEC. With that, I'll turn the call over to Bill Collier. Bill?

Bill Collier (President and CEO)

Good morning, everyone, and thank you very much for joining us today. As you likely saw, in addition to reporting our third quarter results earlier this morning, we also announced that I will be retiring at the end of the year. I'll speak more about that shortly, but first, let's discuss our results. At Arbutus, we remain committed to our goal of developing a functional cure for patients with chronic hepatitis B virus by advancing the development of our clinical assets that can be combined to create a curative treatment regimen. Over the last few months, we've optimized our pipeline, including the discontinuation of our coronavirus research programs and our oral, RNA destabilizer. This allows us to sharpen our focus and resources on our most promising clinical programs, imdusiran and AB-101, both of which are expected to have data readouts next year.

As a result of this pipeline prioritization, we are also announcing today the difficult decision to streamline our organization by reducing our workforce by 24%. We want to underscore how grateful we are to all of our employees, especially those departing the organization, for their dedication and passion in developing novel therapeutics for viral diseases at Arbutus. And while these changes primarily impact our research, research function, we have maintained a group of research scientists as we remain committed to continuing discovery research in chronic HBV. Now, we know that changes that impact our people are not easy, and we're committed to providing those employees with support as they transition to their next roles. At the same time, we're confident that Arbutus remains positively positioned for the future. Now, I'd like to provide some updates on the continued progress that we're making across our pipeline.

With more than 290 million people worldwide chronically infected with HBV, and with current lifelong treatment options resulting in less than a 5% cure rate, there remains a large unmet medical need for a functional cure for chronic HBV. We believe we're well suited to address this need with our team's extensive expertise in virology and with imdusiran, which is one of the most advanced RNAi therapeutics in development. Based on data generated to date, imdusiran has shown to impact all three components needed for a functional cure for patients with chronic HBV. Those are reducing HBV DNA, suppressing surface antigen, and reawakening the HBV-specific immune response. Our strategy to develop a functional cure for HBV involves exploring imdusiran in combination with other investigational and approved products that can further stimulate the immune system to induce functional cure in chronic HBV patients.

imdusiran is our lead asset, and later this week, at a prestigious liver-focused medical conference, AASLD's The Liver Meeting, we will be presenting a late-breaking poster with preliminary data from our phase 2a clinical trial that we're conducting with Barinthus Biotherapeutics, formerly known as Vaccitech. Through this clinical trial, we're testing whether the combination of imdusiran, NUC therapy, and Barinthus' HBV antigen-specific immunotherapeutic, VTP-300, can lower surface antigen and stimulate the host immune system to fully suppress the virus. As I've mentioned previously, this is an early look at data, as not all patients have received the full VTP-300 or placebo dosing regimen. In addition to safety data, from an efficacy standpoint, we're hoping to see a reduction in surface antigen within 24 weeks of indi... Sorry....

We're hoping to see a reduction in surface antigen with 24 weeks of imdusiran treatment that is similar to what we've seen in our other clinical trials to date, and further impact on HBsAg and HBV-specific immune activation with the addition of VTP-300. We look forward to reporting these data at AASLD. Now, you may recall that we've expanded this trial to explore the addition of a low dose of the anti-PD-1 monoclonal antibody inhibitor, nivolumab, to the combination treatment regimen. We believe nivo may further boost the host immune response. The data that we're reporting at AASLD will not include any data from this expanded arm, as we're in the early stages of this trial. We will have more to report on this portion of the clinical trial next year.

We also have a second phase 2a clinical trial that is evaluating imdusiran in combination with ongoing NUC therapy and interferon in patients with chronic HBV. Earlier this year, we reported preliminary data that continues to reinforce our confidence in imdusiran's ability to effectively lower surface antigen. We're continuing to follow these patients and expect to provide updates from this clinical trial in 2024. Our second HBV asset is AB-101, our oral PD-L1 inhibitor that is currently in a phase 1a/1b clinical trial. Immune checkpoints have been shown to play an important role in HBV-specific immune tolerance and in T-cell activation. This double-blind, randomized, placebo-controlled clinical trial is designed to investigate the safety, tolerability, pharmacokinetics, and pharmacodynamics of AB-101.

The trial will be conducted in three parts, starting with single and multiple ascending doses in healthy subjects, and culminating with multiple doses in patients with chronic HBV. In September, we announced that we dosed the first patient in the single ascending dose group of the trial and expect initial data from that group in the first half of 2024. Finally, let me spend a moment talking about my decision to retire as CEO at the end of this year. As many of you know, I've had the privilege to lead Arbutus since June 2019, and since then, we've accomplished so much. This was a particularly challenging decision for me to make personally, and one that is completely unrelated to recent activities at Arbutus.

I remain confident in imdusiran and AB-101, and the ability of this team to develop these compounds to possibly provide a functional cure for patients with chronic HBV. My four-year-plus tenure at Arbutus is one of the most rewarding positions I've had in my career. The opportunity to lead a group of talented and passionate researchers, clinicians, and professionals with a drive to serve the HBV patient community has been a true privilege. We've achieved many successes and key milestones, and as I look to my future retirement, I'm confident in the future of Arbutus. Now, Mike McElhaugh will succeed me as interim CEO, effective January 1. As many of you know, Mike is a co-founder of Arbutus and serves as our Chief Operating Officer.

He has more than 20 years of scientific, strategic, transactional, and commercial experience, spanning various operating roles within Bristol-Myers Squibb, Pharmasset, Merck, and ViroPharma. The board and I have the utmost confidence in Mike's ability to be successful in leading Arbutus, and to continue to create value for our shareholders. Mike has worked very closely with me over the last 4+ years, and I'm confident that there will be a smooth transition. I will also continue to be a resource for Mike as he becomes acclimated to his new role. In closing, I'm confident in Mike's leadership as he leads Arbutus into its next chapter. Imdusiran and AB-101 are well positioned to deliver on our goal of developing a functional cure for HBV and driving value for our company as we advance these HBV assets.

With that, I'll hand the call over to David Hastings for a brief financial update.

David Hastings (CFO)

Thanks, Bill, and good morning, everybody. We ended the third quarter of 2023 with approximately $145 million of cash, cash equivalents, and investments, compared to approximately $184 million as of December 31, 2022. During the nine months ended September 30, 2023, we received approximately $26 million of net proceeds from the issuance of common shares under Arbutus' at-the-market offering program. These cash inflows were offset by approximately $69 million of cash used in operations. As Bill mentioned, today, we announced that we reduced our workforce by 24%. Importantly, we have maintained a discovery research capability in HBV and continue to believe we have the people necessary to advance our clinical stage HBV pipeline.

With this reduction in workforce, we will incur a one-time restructuring charge of approximately $1.1 million that will be recorded in the fourth quarter of 2023. We expect our 2023 net cash burn to range between $90 million-$95 million, excluding any proceeds received from our at-the-market offering program. Now, importantly, we believe our cash runway will be sufficient to now fund our operations into the first quarter of 2026. In closing, we have a strong financial position to advance our mission, and we remain committed to developing our HBV assets to provide a functional cure for chronic HBV.

...With that, I will now turn the call back to Bill.

Bill Collier (President and CEO)

Thanks, Dave. As I mentioned earlier, we're looking forward to reporting preliminary data from the AB-729-202 phase 2a study, combining imdusiran NUC therapy and VTP-300 at the AASLD Liver Meeting in the coming weeks. Immediately following that medical congress, we'll be attending the Jefferies Healthcare Conference in London. So please reach out to Lisa if you want to schedule time to meet with the team to review that data. In closing, I wish the best to our departing employees, and again, thank them for their dedication and many contributions to the company as we continue to pursue our goal of developing a functional cure for patients with chronic HBV. Operator, we're now ready to open the call for any Q&As.

Operator (participant)

Thank you. At this time, we will conduct the 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, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Roy Buchanan for JMP. Your line is now open.

Roy Buchanan (Director and Equity Research Analyst)

Hi, great. So congrats to Bill for the retirement, just as things are getting exciting over there, and congrats to Mike for the promotion. I guess, maybe if you let's start with AB-101, just the results in the first half of next year. Are you gonna have, sounds like maybe not, but the complete SAD results, and maybe just give us some patient number details if you can. And then, are you gonna share the data regularly with the FDA, or are you gonna wait to complete the whole phase 1? And then just remind us what other activities, like preclinical studies, are underway with AB-101.

Bill Collier (President and CEO)

Okay, Roy, thank you. Thank you for your, your well wishes. I'll turn it over to Karen in a moment. Maybe the best thing we could do to answer your question is just to describe the structure of the 101 phase 1a study. I think I misspoke earlier on when I said it was a double blind randomized study. So, Karen, perhaps you could clarify that, and answer Roy's question.

Karen Sims (CMO)

Absolutely. So actually, no, Bill, you were correct. It is a double blind-

Bill Collier (President and CEO)

Oh, right

Karen Sims (CMO)

clinical trial. So it is a, what we call, umbrella trial. So there are healthy subject portions of the trial and chronic hepatitis B patient portions of the trial. So we begin in single ascending dose in healthy subjects, and then move to multiple dose in healthy subjects, and then on to chronic hepatitis B patients. So the way these trials run, you obviously need data from each part of the trial to advance to the next part of the trial. So right now, as Bill said, we're in the single ascending dose portion of the trial. We do expect to have data next year. It really depends on the cadence of the trial. If things continue to move smoothly, we recruit, you know, our subjects in a timely manner.

So we should have some safety data, some PK data, some preliminary pharmacodynamic data in the first half of the year for the single dose portion of the trial in healthy subjects. Beyond that, it really just depends, again, on the cadence of the trial, the recruitment, and, you know, we will disclose data once we have a meaningful data package to report.

Roy Buchanan (Director and Equity Research Analyst)

Okay, great. And then just maybe, what other activities are you doing? Some preclinical studies or anything that's underway with, with 101?

Bill Collier (President and CEO)

Mike, do you want to take that one?

Mike McElhaugh (Chief Business Officer)

Well, you know, the standard, the standard non-clinical safety studies continue to move forward with AB-101. You know, I think we've established a pretty solid package of data, preclinical data that, you know, supports the mechanism, which is novel, which supports efficacy in animal models. So, and obviously, a peak, you know, ideal PK profile, which is liver targeting for this, for this agent. But really, right now, the only activities is all the non-clinical toxicology assessments that are required to support further progression of the drug.

Roy Buchanan (Director and Equity Research Analyst)

Okay, great. And one more detailed question. Just in the imdusiran studies, how frequently do you check for seroconversion of S antigen? And then on the really crystal ball or speculative question, have you guys ever considered hepatitis delta? You know, some of your competitors are using the same agents for hepatitis B and potentially hepatitis delta. Have you considered that indication, and just what are your thoughts around that? Thanks.

Bill Collier (President and CEO)

So, Karen, do you want to take the first part, and then Mike, the second?

Karen Sims (CMO)

Absolutely. So we are checking frequently in all of our clinical trials for surface antigen loss and seroconversion. The timing really depends on how these clinic visits were set up for subjects. So typically, whenever there's a clinic visit for a subject, we do collect those parameters just for monitoring. So it can vary anywhere from every month to every 8 weeks, depending on where the subject is in the clinical trial, whether they're in the dosing phase, in the follow-up phase. So we do collect those parameters at pretty much every study visit, and yeah, I would say ballpark every month, if not more frequent.

Bill Collier (President and CEO)

Mm-hmm.

Mike McElhaugh (Chief Business Officer)

Yeah, Roy, on the delta question. Yeah, look, we've looked at a lot of targets, and, you know, delta was clearly one of them. You know, the idea initially was that potentially one could use AB-729 as an siRNA to knock down antigen load, or, you know, it's required for delta to exist. Recent clinical data certainly has-

Bill Collier (President and CEO)

... You know, the generated data that's not supportive of that, there seems to be some liver safety issues associated with potentially the accumulation of delta-related antigens in the, you know, in the cell, and therefore some significant ALT elevations. So, our assessment is that, you know, an siRNA developed for hepatitis B is probably not an option for delta. So, you know, also, Bill has mentioned that the focus our efforts with our, you know, reduced headcount on hepatitis B, we felt—still think that's a, you know, significant challenge that needs to be overcome. And, you know, we believe in our strategy, so that's where we're focusing our efforts.

Roy Buchanan (Director and Equity Research Analyst)

Got it. Thank you.

Bill Collier (President and CEO)

Thank you, Roy.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from Dennis Ding of Jefferies. Your line is now open.

Anthea Li (Senior Associate)

Hi, good morning. This is Anthea on for Dennis. Two questions from us. What are your thoughts on GSK in-licensing the J&J siRNA, and what does that mean for the hep B space? Was Arbutus also in discussions with GSK? And then second, could you comment on the LNP litigation and what we should expect heading into the joint construction brief in December? Thank you.

Bill Collier (President and CEO)

Yeah. So, let me take the second part first, and then maybe Mike Mack can talk about, you know, our business development efforts. So on, on the litigation front, as I think we put in the press release, there, there's no new news to announce. We continue to remain, you know, passionate about defending our patents. In the Moderna case, there is a claims construction meeting scheduled for February seventh.

Anthea Li (Senior Associate)

Mm-hmm.

Bill Collier (President and CEO)

Right? So that's the next kind of data point in the Moderna trial. In the Pfizer case, there is not yet a date set for claims construction. I think that's about all we can say at this stage. So, Mike, do you want to take the-

Mike McElhaugh (Chief Business Officer)

Sure.

Bill Collier (President and CEO)

GSK news?

Mike McElhaugh (Chief Business Officer)

Business development question?

Bill Collier (President and CEO)

Yeah.

Mike McElhaugh (Chief Business Officer)

So I think the way we look at the GSK news is that any consolidation in the field, any licenses that happen in the hepatitis B space are good for the field generally. And of course, we want to see success in the hepatitis B space with people getting to functional cure. That's opportunity for everybody. So as you know, it's a very, very large market and can certainly support multiple competitors. With regards to conversations with any particular company, we can't comment on that, obviously, but I think it's fair to say that we stay closely in touch with everyone in the field, and we continue those conversations whenever appropriate.

Anthea Li (Senior Associate)

Great. Thank you so much.

Operator (participant)

Thank you, and one moment for our next question. Our next question comes from Brian Skorney of Baird. Your line is now open.

Charlie Moore (Senior Associate)

Hey, guys, this is Charlie on for Brian. Thanks for taking our question. One is, you know, you mentioned that with the reduction in force, the cash runway is extended through 2026, and I was just hoping you could contextualize this for us, with your kind of ideal clinical development timeline and possibly, you know, other scenarios, just to kind of get a better grasp on what this cash runway means for you and your development efforts, as well as could you do, based on your research, just a little bit of comparing and contrasting, following up on the recent question about the GSK deal with the asset that they just in-licensed compared to imdusiran. Thanks.

Bill Collier (President and CEO)

Yeah. Okay. So, I mean, I think we're pleased that we've now extended the runway into 2026. It allows us, you know, a good, clear two years worth of funding. And as we continue to progress the phase 2a studies, we'll get further readouts, further data readouts, and then that will inform the next phase of either phase 2b or phase 3 work. It's also going to allow us to continue to progress AB-101 through its phase 1 activity. So, all of that, I think, is quite encouraging. On the GSK question, a couple of comments. I think, one, it's another recognition of the fact that combination therapy is the way to go in hepatitis B.

As far as comparing imdusiran with the asset that they've licensed in, I think there are a couple of key differences. As I mentioned in my comments earlier on, 729 has shown activity on all three of the components we believe are necessary for a functional cure, reducing HBV DNA, reducing surface antigen, and reawakening the immune system. And 729 is the only RNAi that's generated data showing dosage intervals of either monthly, every 8 weeks, or every 12 weeks. So we have, you know, built in some dosage flexibility moving forward. And then, Mike, you might wanna just comment upon the single trigger aspect and any of the preclinical differences.

Mike McElhaugh (Chief Business Officer)

... Yeah, so preclinically, if you look at imdusiran, right, it's a single trigger agent, which can knock down all viral transcripts with one siRNA, including integrated transcripts that comes off of the integrated S antigen transcript that comes off of the host genome. One of the challenges with the J&J asset is that it requires two siRNAs to be able to accomplish what we're able to accomplish with one. So I think there's a big difference in when you look at cost of goods and feasibility of commercialization of those two different assets. And we're a lower dose than they are as well. So there is a, you know, I think, a differentiating profile for imdusiran versus the J&J siRNA.

Anthea Li (Senior Associate)

Great. Thank you. That's very helpful.

Mike McElhaugh (Chief Business Officer)

Okay.

Operator (participant)

Thank you, and one moment for our next question. Our next question comes from Thomas Yip of H.C. Wainwright. Your line is now open.

Thomas Yip (Research Associate)

Hi, good afternoon, everyone. I mean, good morning. Sorry about that. Thank you for taking my question. Asking a couple of questions for Ed. Just first of all, I just want to say, Bill, Ed and I both have the honor of working with you, and best of luck in the future endeavors and yeah, just kind of caught us by surprise. But first, perhaps the first question, from the extended cohort from the 202 study, the one with low dose nivolumab. Perhaps can you provide more specific timeframe for this preliminary readout? Should we expect something in the first half of the year?

And then also, how many weeks of treatment data can we expect from this preliminary data set?

Bill Collier (President and CEO)

All right. Thomas, thank you very much for your, your well wishes. I appreciate that. Yeah, so this additional arm that we've included in the 202 study, that includes nivo. Obviously, we announced that, you know, a good time after we started the original study design. So it is running on a, on a later time track. As we've announced, we have started dosing in that, in that arm. So that arm is underway. We've not yet disclosed when we're likely to get, data from that specific arm. I mean, I would, I would point to the fact that, you know, most years we normally do a press release with our kind of expectations early in January, and that might, might be another time to ask your question.

Thomas Yip (Research Associate)

Okay. Got it. And then, perhaps pertaining to this preliminary readout, can you discuss what would be your state, you know, of points that you would consider to be a successful trend?

Bill Collier (President and CEO)

Yeah. Karen?

Karen Sims (CMO)

Sure. No, absolutely. So, you know, as we've discussed, you know, our goal certainly is to look for functional cure in hepatitis B. You know, certainly there'll be interim steps, readouts that will have to be taken before we get to functional cure. So for this particular data set, certainly we'll be looking at surface antigen decline based on the imdusiran lead-in period, which is 24 weeks of imdusiran treatment prior to randomization to receive either the VTP-300 immunotherapeutic or placebo.

So you know, certainly looking for imdusiran's contribution to lowering surface antigen during this lead-in period, and then certainly any impact that VTP-300 has in terms of maintaining that surface antigen decline, increasing that surface antigen decline, and certainly anything related to additional immunomodulatory, you know, impacts, in addition to what we've observed previously with imdusiran on its own. So I think those are what we'll be looking for, you know, in this data readout that's coming up at AASLD. Unfortunately, it's still under embargo, so I can't share, you know, any of the details of that, but to be disclosed in the next few days as the conference begins.

Thomas Yip (Research Associate)

Okay. Understood. Perhaps just one more question from us for AB-101. Can you talk about how far along the enrollment for each of the three parts and especially data for the third part in the HBV patients, if the data positive, any possibility to those 101 in combination with imdusiran as we have seen in the expansion expansion cohort?

Bill Collier (President and CEO)

Yes, I think what we said so far on that study is that we'll have some initial data in the first half of next year. I think Karen also mentioned earlier on, you know, it's still somewhat dependent upon recruitment rates into each of those arms. You're right that our, our ultimate aim would be to combine 79 and 101 with, with a nucleoside, but we've not yet provided any timelines for that.

Thomas Yip (Research Associate)

Okay, understood. Thank you again for taking our questions, and we're looking forward to the AASLD presentation.

Bill Collier (President and CEO)

Thank you. Thanks, Thomas.

Operator (participant)

Thank you. This concludes the question and answer session. I would now like to turn it back to management for closing remarks.

Bill Collier (President and CEO)

Okay. Well, look, thank you very much, everyone, for joining us this morning. We appreciate your continued interest in and support of Arbutus and your questions. We very much look forward to providing you updates as we progress the development of our HBV clinical stage assets over coming months. So Operator, that concludes our call for this morning.

Operator (participant)

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