Arbutus Biopharma - Q4 2023

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Arbutus Biopharma Fourth Quarter and year-end 2023 financial results and corporate 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'll need to press star one one on your telephone and 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 your first speaker today, Lisa Caperelli, VP of Investor Relations. Please go ahead.

Lisa Caperelli (VP of Investor Relations)

Thank you, Steven. Good morning, everyone, and thank you for joining Arbutus' fourth quarter and year-end 2023 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, David 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 fourth quarter and year-end 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 annual report on Form 10-K and from time to time in our other documents filed with the SEC. With that, I'll now turn the call over to Mike McElhaugh. Mike?

Michael McElhaugh (Interim CEO, President, and Director)

Thank you, Lisa. Good morning, everyone, and thank you for joining us today. In 2023, we made several important strategic choices to best position Arbutus for long-term success. In addition to streamlining our focus and resources on HBV, which extended our cash runway into the first quarter or January of 2026, we also announced my appointment as interim President and CEO. As a co-founder of Arbutus, I am honored to have this opportunity to lead my colleagues in our mission to develop a functional cure for the millions of people chronically infected with hepatitis B virus. I'm excited for my new role and plan to leverage my extensive scientific, strategic, transactional, and commercial experience with antiviral and infectious disease companies to continue to move Arbutus forward. In 2024, our focus is to position Arbutus for continued success and create value for all our stakeholders.

We remain committed to advancing the development of our proprietary clinical assets in HBV, including imdusiran, our RNAi therapeutic, and AB-101, our oral PD-L1 checkpoint inhibitor. There remains a need for finite and more efficacious HBV treatments that further improve long-term outcomes and increase functional cure rates, as fewer than 5% of patients currently achieve functional cure with currently approved NUCs or interferon. Our goal is to develop a treatment for chronic hepatitis B virus patients that results in at least a 20% functional cure rate to address this large unmet medical need. HBV is a complex virus that will most likely require a combination of compounds that inhibit viral replication, lower the viral antigen burden, and boost the immune response. We are executing on our three-pronged approach to functionally cure HBV with a combination therapy that includes imdusiran as a cornerstone.

A combination that includes imdusiran, AB-101, and a NUC is our ultimate goal. That said, our current strategy is evaluating imdusiran in combination with other agents in multiple phase II-A clinical trials, with the goal of gaining valuable insights on efficacy, safety, and optimal dosing to help inform the design of a phase II-B clinical trial with imdusiran as the cornerstone therapy. Throughout 2024, we anticipate reporting data from our two ongoing phase II-A clinical trials with imdusiran, including the potential to see patients with undetectable surface antigen. Achieving undetectable surface antigen levels in either of our current phase II-A clinical trials would certainly be an important validation of imdusiran's role in potentially achieving a functional cure for hepatitis B patients. This year, we also anticipate data from our healthy subject portion of our phase I-A/I-B clinical trial with AB-101, our immune modulator.

We expect to report preliminary safety and importantly, preliminary receptor occupancy and target engagement data in this population. With the potential of AB-101 to boost the host immune response, our goal is to move AB-101 through the clinic as quickly as possible to prepare it for a possible combination with imdusiran. I'd like to say a few brief words about our ongoing intellectual property litigation efforts before closing out this section of the call. All of our scientists take great pride in the intellectual property they develop, which takes great effort, time, resources, and expense. It is for these reasons that we continue to protect and defend our intellectual property, including our LNP delivery technology, which is the subject of ongoing lawsuits against Moderna and Pfizer-BioNTech. An important step in the litigation for Moderna took place on February 8 of this year.

This was the date of the Markman hearing, also known as a claim construction hearing, where the court heard each party's interpretation of the construction of claims in the disputed patents. We anticipate the judge to issue his order from the hearing within 60 days of February 8. The next steps will include expert testimony and depositions. In addition, the court has set April 21, 2025, as the trial date for this case. That date is subject to the court's availability. With respect to the Pfizer-BioNTech lawsuit, the only update I can provide is that the lawsuit is ongoing, but is behind the Moderna lawsuit as it was filed later. A date for the claim construction hearing for that case has not yet been set.

When able, we will provide updates on both the Pfizer and Moderna lawsuits, but please keep in mind that given the legal sensitivities, we're limited in what we can say. I'll now turn the call over to Karen Sims to provide an update on the continued progress we are making across our pipeline. Karen?

Karen Sims (CMO)

Thanks, Mike, and good morning, everyone. We are currently conducting three clinical trials with our hepatitis B assets, two phase II-A clinical trials with imdusiran and one phase I-A/I-B clinical trial with AB-101, and we expect to report data from all three of these trials throughout this year. We also plan to initiate a third phase II-A clinical trial with imdusiran and durvalumab, an approved anti-PD-L1 monoclonal antibody, in the first half of this year. We will share more details on that trial upon initiation. As Mike stated, the purpose of these multiple phase II-A combination clinical trials are to glean information on the safety and efficacy of imdusiran as a cornerstone therapy, and to identify a combination treatment regimen that reduces viral burden and boosts the host immune response to advance into a later stage clinical trial.

AB-729-201 is our phase II-A clinical trial evaluating imdusiran in combination with ongoing NUC therapy and interferon in patients with chronic hepatitis B. Last June at EASL, we reported preliminary data that continues to reinforce our confidence in imdusiran's ability to effectively lower surface antigen. At that time, we reported data on a small number of patients that had received imdusiran plus at least 12 weeks of interferon and showed that interferon may contribute to additional declines in surface antigen. In the first half of this year, we plan to announce end of interferon treatment data for all 43 study patients, which will include safety and changes in surface antigen from baseline. When we report these data, we could potentially have some subjects that achieved undetectable surface antigen. As a reminder, undetectable surface antigen is a key component of functional cure.

AB-729-202 is a phase II-A clinical trial that we are conducting in collaboration with Barinthus Biotherapeutics, formerly known as Vaccitech. Through this clinical trial, we are 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. Late last year at AASLD, we reported preliminary data that included all patients that received imdusiran treatment and several patients who had received VTP-300 or placebo. In these early data, we reported that surface antigen levels were reduced and sustained with a combination treatment of imdusiran and VTP-300.

In the first half of this year, we expect to report end of treatment data, which would include safety and change in surface antigen from baseline for all 40 patients that received imdusiran, VTP-300 or placebo, and NUC therapy. We are continuing to dose patients in the amendment to the AB-729-202 trial that explores the addition of a low dose of the anti-PD-1 monoclonal antibody nivolumab to the combination treatment regimen. We believe nivolumab may further boost the host immune response. Preliminary data from this portion of the trial is expected in the second half of this year. As noted for the AB-729-201 trial, we may also have the potential to see undetectable surface antigen in some patients, which is a prerequisite to achieving functional cure.

While our phase II-A clinical trials are evaluating imdusiran in combination with immune modulators, we intend to develop a proprietary combination therapy with imdusiran and AB-101, our oral PD-L1 checkpoint inhibitor. We believe that the immune checkpoint pathway plays an important role in HBV-specific immune tolerance and in T-cell activation. Our third ongoing clinical trial is our phase I-A/I-B clinical trial, AB-101-001. This double-blind, randomized, placebo-controlled trial is designed to investigate the safety, tolerability, pharmacokinetics, and pharmacodynamics of AB-101. This trial consists of three parts, starting with single and multiple ascending doses in healthy subjects and culminating with multiple doses in patients with chronic hepatitis B. We are now moving AB-101 into the second part of this trial, which includes evaluating multiple ascending doses of AB-101 in healthy subjects.

In the first half of this year, we anticipate reporting preliminary data from the healthy subject portion of this trial, which will include safety data in addition to preliminary target engagement and receptor occupancy data. As we continue to advance the clinical development of imdusiran and AB-101, we believe both compounds are well positioned to deliver on our goal of developing a functional cure for hepatitis B and driving value for our company. 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 2023 with approximately $132 million of cash, cash equivalents, and investments, compared to approximately $184 million as of December 31, 2022. During the year ended December 31, 2023, we received $29.9 million of net proceeds from the issuance of common shares under our at-the-market offering program. These cash inflows were offset by $85.9 million of cash used in operations. We anticipate a significant reduction to our cash burn in 2024 from 2023 as we focus our pipeline and research efforts on HBV. Therefore, we expect our 2024 net cash burn to range between $63 million-$67 million, excluding any proceeds received from our at-the-market offering program.

Importantly, we believe our cash runway is sufficient to 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'll turn the call back to Mike. Mike?

Michael McElhaugh (Interim CEO, President, and Director)

Thanks, Dave. As I mentioned earlier, we have a data-rich year, with end-of-treatment data expected from our two phase II-A clinical trials with imdusiran and preliminary data from our phase I-A/I-B clinical trial with AB-101. We also anticipate initiating a third phase II-A clinical trial with imdusiran and durvalumab. Operator, we're now ready to open the call for Q&A.

Operator (participant)

All right, 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 on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. First question comes from the line of Dennis Ding, Jefferies. Your line is now open.

Dennis Ding (VP and Equity Research Analyst)

Hi, good morning. If I can ask a question around the patent litigation. Can you just help frame for us what to expect at the upcoming claim construction order? What is perhaps a good outcome, and do you need the judge to rule in favor of you for all three, or could just one disputed claim be good enough? Thank you.

Michael McElhaugh (Interim CEO, President, and Director)

Yeah. Good morning, Dennis. Dave, do you want to handle that question?

David Hastings (CFO)

Yeah, sure. I mean, look, Dennis, as you know, we're a little bit, we have to be very careful about what we say publicly about this case. We look forward to the judge's ruling. I really don't think we want to comment sort of on the play-by-play of that until it actually happens. We appreciate everyone's interest. We take this, obviously, very seriously. We were pleased with the actual hearing itself, and we look forward to Justice Goldberg's ruling, which we expect, as you know, within 60 days of February eighth.

Dennis Ding (VP and Equity Research Analyst)

Maybe as a follow-up to that, like, as you look for 6 months-12 months, is there an opportunity for a summary judgment or anything that could happen potentially in your favor before actually going to trial? Thank you.

David Hastings (CFO)

Yeah, I believe that the schedule is that there will be that opportunity at some point. I believe we're expecting that in the late summer. You know, all these timelines are subject to change, obviously. I think that's the best estimate of the company at this point in time.

Dennis Ding (VP and Equity Research Analyst)

Thank you.

Michael McElhaugh (Interim CEO, President, and Director)

Thanks, Dennis.

Operator (participant)

All right, thank you. One moment for our next question. The next question comes from the line of Brian Skorney of Baird. Your line is now open.

Brian Skorney (Senior Research Analyst)

Hey, good morning. Thank you for taking my question. I just wanted to get a little bit more of a handle on the PD-1/PD-L1 antibodies study designs and rationale. I guess first, how do you think about PD-1 versus PD-L1 targeting? It's been a while, but I think some of the initial Merck's literature showed that maybe preclinically, PD-L1 was the more desirable of a target for infectious disease. Any thoughts on that differential? Then how did you kind of go about thinking about selecting nivolumab for 202 and durvalumab for study 203?

Michael McElhaugh (Interim CEO, President, and Director)

Yeah.

Brian Skorney (Senior Research Analyst)

Thanks.

Michael McElhaugh (Interim CEO, President, and Director)

Good morning, Brian. Thanks for the questions. A couple of questions there. Maybe what I'll do is I'll turn it over to Mike Sofia to answer the PD-1 versus PD-L1 question, and then, and then we can go to Karen for some considerations on design, if that works. Mike, do you want to handle the PD-1, PD-L1 question?

Michael Sofia (Chief Scientific Officer)

Sure, sure. Hi, Brian. We do know that PD-L1 is certainly upregulated on hepatocytes in chronic hepatitis B patients, right? The decision for PD-1 versus PD-L1 really come from a strategy standpoint, in the sense that, you know, we were able to identify small molecule agents that target, you know, that block PD-L1, essentially. Obviously, as we reported in the literature, that, you know, this is a novel mechanism of action by which it internalizes the PD-L1, causes degradation, et cetera, and you can then reconstitute PD-L1 on the surface of hepatocytes completely by just washing out drugs. That all fit within our strategy for small-molecule, liver-centric agents that circumvents, you know, the concerns with, let's say, general systemic activation of immune, the immune system.

It was, a, partly the decision around the fact that, you know, PD-L1 is highly upregulated in hepatocytes. Therefore, we can, you know, target the hepatocytes with a PD-L1 agent, and the ability to design and develop a small molecule that fits within our overall concept of how to address this from a liver disease standpoint.

Karen Sims (CMO)

Yeah, thanks, Mike. I can jump in about the questions regarding the nivo versus durvalumab in our clinical trials. For the 202 trial, that's the trial we're doing in collaboration with Barinthus Biotherapeutics and their VTP-300 asset. As you probably know, they have performed some studies already using VTP-300 in combination with low-dose nivolumab and their HBV002 and ongoing HBV003 studies. In those studies, they have suggested that there is potentiation of response in subjects that receive VTP-300 plus a dose of low-dose nivolumab given at the time of the MVA boost. For that reason, we incorporated that strategy into the 202 study as an amendment, based on their prior and ongoing experience with using nivolumab in this context.

For the 203 study, we did decide to utilize the anti-PD-L1 antibody, durvalumab, basically for the reasons Mike just suggested, and to be able to inform our upcoming combination study with AB-101 and imdusiran in terms of starting to explore the optimal timing and administration of a PD-L1 inhibitor in the context of imdusiran therapy. That's kind of the rationale for the difference between the two studies, and certainly as the 203 study moves forward, we'll be able to share more details about the study design.

Brian Skorney (Senior Research Analyst)

Great, thanks. That's really helpful.

Michael McElhaugh (Interim CEO, President, and Director)

Great. Thanks, Brian.

Operator (participant)

All right, one moment for our next question. Next question comes from the line of Roy Buchanan of Citizens JMP. Your line is now open.

Roy Buchanan (Equity Research Analyst)

Hey, thanks for taking the question. A couple, I guess, for 101, just when do you think you might be in a position to reengage the FDA on 101? I guess more broadly, what are your plans following the phase I-A/I-B? Can you elaborate on those a little bit?

Michael McElhaugh (Interim CEO, President, and Director)

Sure. Karen, do you want to handle that one?

Karen Sims (CMO)

Sure, absolutely. You know, as we said, you know, throughout this process, you know, we certainly do intend to reengage the FDA for this program. Really, the criteria for that is, are when we feel that we have sufficient data to return to them with a robust package to be able to move forward in the U.S. You know, that line of communication is certainly always open, and, we're looking forward to the AB-101 trial continuing to proceed, you know, as it is, and accumulating that data to be able to share back with the FDA. You know, this development strategy is something we've done before.

We've, you know, frequently taken assets initially outside of the United States for a phase I study and then brought them back to FDA to initiate, you know, phase II trials along with other global, you know, jurisdictions as we need to increase study populations and study size. Then in regards to, you know, how the study is progressing in outputs, as we said, you know, just now we have progressed the study into multiple dosing in healthy subjects. We do intend to share preliminary data from healthy subjects in the first half of this year. The study is designed as an umbrella study, so a seamless transition into chronic hepatitis B patients once we have sufficient data to move forward into that population. you know, certainly we'll be sharing updates, you know, as they become available with the study in an ongoing fashion.

Roy Buchanan (Equity Research Analyst)

Okay, great. Then if I could ask, what about VTP-300? What do you need to see from the results this half to kind of move that approach forward, and potentially, I guess, make it a cornerstone? You mentioned combos with imdusiran and AB-101, yeah, what do you need to see to add VTP-300 or another vaccine to that approach? Or do you really need to see the nivolumab data? Thanks.

Michael McElhaugh (Interim CEO, President, and Director)

Yeah, it's a good question, Roy. You know, honestly, I think we just need to see what the data look like, and, you know, we'll continue to evaluate as it comes forward. As you rightfully mentioned, we added the nivo arm to that study as well. I think we probably want to see that nivo data before moving that combo forward, unless, of course, we see something spectacular out of the VTP-300 plus imdusiran arm, and I have no insight into that. Currently, I just, you know, it'll depend on what the data look like. Obviously, with VTP-300 not being a proprietary asset, we're considering thinking about imdusiran plus 101 and moving that forward as quickly as we can. That's always been sort of the goal. You know, the data will guide us, I think is probably the best way to think about it.

Roy Buchanan (Equity Research Analyst)

Okay, thanks.

Michael McElhaugh (Interim CEO, President, and Director)

Sure.

Operator (participant)

All right, one moment for our next question. Next question comes from the line of Ed Arce of H.C. Wainwright. Your line is now open.

Thomas Yip (Equity Research Associate)

Hi, good morning, everyone. This is Thomas Yip asking a couple of questions for Ed. Thank you for the kind questions. First question for the new 203 phase II-A study with durvalumab. Can you discuss the design in broad strokes, you know, how big would the study be and any specific elements that we can expect in the study that is learning from the ongoing 202 study?

Michael McElhaugh (Interim CEO, President, and Director)

Yeah. Karen, do you want to handle that one, please?

Karen Sims (CMO)

Yeah, sure. You know, again, we typically don't, you know, dive into the details of our study designs until, you know, we're able to announce the first subject, first dose in the study. I can't elaborate, you know, much beyond what we've already said. You know, again, the goal of the study is to try to help inform upcoming studies with imdusiran in combination with AB-101. Looking at, you know, different options in terms of the timing of adding a PD-L1 inhibitor to imdusiran therapy is really the high level goal. In terms of the size of the study, it is a typical two-way size study. This is, again, an exploratory study to try to basically learn about, again, that optimal timing, optimal duration of that combination approach.

The study is listed on ClinicalTrials.gov, and you're certainly welcome to peruse that for any additional details there. Again, you know, we will share, you know, more specific details about the trial, you know, once we have subject enrolled.

Thomas Yip (Equity Research Associate)

Got it. Understood. Then, same thing, similar along that line, just thinking ahead of the combination study with imdusiran and then with 101. Will the first study be a similar proof of concept study, phase II-A, that we've seen with other combinations as well?

Karen Sims (CMO)

Yeah, I can jump into that one as well. Typically, it is. I mean, you know, the rationale really for starting with a phase II-A study is, you know, certainly for AB-101, you know, we will still be increasing the safety database for that molecule. We'll be, you know, still learning additional information about PK and pharmacodynamics in a larger population of subjects. Moving to a phase II-A study is fairly routine with an early development asset, just to make sure we're, you know, fully understanding the different aspects of the molecule before taking it into a larger phase II-B type study. That really is just all about de-risking the compound and making sure that, you know, we're completely comfortable taking it into these larger studies, which, you know, as you know, are very technically difficult, very expensive.

It's most likely it'll start with a smaller II-A study. Again, you know, as Mike mentioned throughout the call, we need to see the data and see how the data guides us. You know, more to come on that as the AB-101 program moves through phase I.

Thomas Yip (Equity Research Associate)

Got it. Understood. Then, one final question from us. Just try to narrow down the timing of the first half readouts, most notably the 101 end of treatment data readout, and then also the AB-101 healthy volunteer data. Are these separate events, or should we expect kind of like a big splash at EASL?

Michael McElhaugh (Interim CEO, President, and Director)

Yeah, good question, Thomas. That's kind of a tough question to answer. I think, the reason I say that is because, of course, we'd love to present our data at EASL. We always love to present our data at EASL, but of course, we have no idea whether any abstracts we may or may not submit will be accepted. It's hard to guide specifically to a particular conference. I think you're kind of thinking about the timing correctly, that that's probably around the time when either through a conference or through some other mechanism, the data will likely be available.

Thomas Yip (Equity Research Associate)

Got it. Thank you again, everyone, for the questions, and we're looking forward to the data readout in the next two months.

Michael McElhaugh (Interim CEO, President, and Director)

Great. Thank you, Thomas.

Operator (participant)

Thank you. One moment for our next question. Next question comes from the line of Keay Nakae of Chardan. Your line is now open.

Keay Nakae (Director of Research and Senior Research Analyst)

My question's been answered. Thanks.

Michael McElhaugh (Interim CEO, President, and Director)

Thanks, Keay.

Operator (participant)

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

Michael McElhaugh (Interim CEO, President, and Director)

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

Operator (participant)

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