Vir Biotechnology - Q2 2023
August 3, 2023
Transcript
Operator (participant)
Hello, welcome to Vir Biotechnology's second quarter 2023 financial results and business update call. As a reminder, this conference call is being recorded. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. I will now turn the call over to Sasha Damouni Ellis, Executive Vice President, Chief Corporate Affairs Officer. You may begin, Ms. Damouni Ellis.
Sasha Damouni Ellis (EVP and Chief Corporate Affairs Officer)
Thank you. Good afternoon. With me today are Marianne De Backer, Chief Executive Officer, Dr. Phil Pang, Chief Medical Officer, and Sung Lee, Chief Financial Officer. Before we begin, I would like to remind everyone that some of the statements we are making today are forward-looking statements under the securities laws. These forward-looking statements involve substantial risks and uncertainties that could cause our clinical development programs, future results, performance, or achievements to differ significantly from those expressed or implied by such forward-looking statements. These risks and uncertainties and risks associated with our business are described in the company's reports filed with the Securities and Exchange Commission, including Forms 10-K, 10-Q, and 8-K. I will now turn the call over to our CEO, Marianne De Backer.
Marianne De Backer (CEO)
Thank you, Sasha. Good afternoon, and welcome to Vir Biotechnology's first earnings call. I'm Marianne De Backer, CEO of Vir, and I'm pleased to welcome you all here today. I joined Vir four months ago, and every day since, I'm reminded of how well Vir aligns with my commitment over the past 30-plus years to bring new medicines to patients. Vir is one of those unique companies that used its ingenuity in the discovery of a neutralizing antibody in the fight against COVID-19, and this during the very worst times of the pandemic. This was achieved in just 15 months and brought to nearly 2 million people around the world. Before that, Vir's drug discovery engine had already yielded an antibody to treat Ebola, now recognized by the World Health Organization for its impact.
After four months of learning about Vir's differentiating capabilities, platforms, pipeline, and strong partnerships, I could not be more enthusiastic to lead this team of passionate, driven professionals who always have the end goal in mind: serving patients. Today, over the next few quarters, I will share more about our focused efforts to drive our pipeline and our science forward. We hope you take away an understanding of our strategy, our development programs, and ability to execute. Infectious diseases continue to pose a major threat to global health, economic security, and to society as a whole. Just last month, in talking to a patient living with chronic hepatitis B, I was reminded of the deep personal impact such a disease has on not just the individual, but also on their families and their communities.
We aim here at Vir to address these needs with a broad range of drug candidates and additional data to come this year. First, I want to touch on our recently announced phase II PENINSULA trial, evaluating VIR-2482 for flu prophylaxis, which missed its primary endpoint. Phil will share more details momentarily. It is important to remember that in the world of drug development and clinical trials, unexpected outcomes are not uncommon. That is exactly why we take multiple approaches and have a broad pipeline. Seasonal flu affects about 1 billion people around the world and claims up to 650,000 lives each year. It is a significant unmet need that warrants our attention, and we will follow the data in guiding our next steps.
We do remain interested in this area. We have VIR-2981 as a preclinical candidate, which has a differentiated mechanism of action to VIR-2482, covering both influenza A and B, and may be a more efficacious alternative to vaccines. Second, Vir is working on a potential functional cure for the more than 300 million people living with chronic hepatitis B worldwide. Current standard of care is lifelong therapy, which decreases but does not eliminate the risk of cirrhosis or liver cancer. At Vir, we aim to achieve a functional cure, meaning allowing control of the virus without such chronic medical therapy. This is akin to remission and further reduces the risk of debilitating disease progression. Vir is focused on regimens such as combining an antibody with an siRNA designed to stop the virus and clear the infection.
We expect a data readout from part B of our ongoing MARCH phase II trial in the fourth quarter, which we hope will get us again, one step closer to a functional cure for chronic hepatitis B. First, I want to highlight what Vir is working on to address chronic hepatitis delta, which affects more than 12 million people worldwide and imposes a 4x greater risk of liver cancer compared to chronic hepatitis B alone. We know that around 5%-15% of patients with chronic hepatitis B are co-infected with hepatitis delta virus. The World Health Organization considers chronic hepatitis delta to be one of the most severe forms of viral hepatitis. Our goal is convenient, once or twice monthly injections with transformative efficacy. Initial data from our clinical trial, SOLSTICE, are expected in the fourth quarter.
We also expect to report significant progress in the discovery of new drug candidates using our proprietary antibody and T-cell platforms, which are yielding a robust pipeline that is optimized through AI and our unique data science capabilities. Currently, about 90% of our pipeline leverages data science tools, which enable us to discover, select, and develop drug candidates with the highest chance of success of becoming medicines that could benefit patients in need. Going forward, all our antibodies will be optimized using this approach. Phil will touch on the preclinical programs that have the potential for IND filings within the next 24 months. Lastly, we have a strong balance sheet that allows us the financial flexibility to fuel our development programs and grow our antibody platform. We are taking measures to continuously evaluate and judiciously allocate this capital to maximize value for our shareholders.
As part of this process, and under my leadership, we made the decision to phase out our small molecule platform. This is the third step as we continue to advance our core capabilities and scientific prowess. The combination of all the strengths we have here at Vir makes this a very exciting time. I am confident in our ability to advance our development programs and potentially impact the lives of many patients. I'll now turn the call over to Chief Medical Officer, Phil Pang, to provide more details on our pipeline.
Phil Pang (CMO)
Thank you, Marianne. Before speaking to our future research and ongoing development efforts, I want to address the top-line data from our influenza phase II PENINSULA trial. This trial failed to demonstrate a statistically significant difference between those who received VIR-2482 and placebo. Specifically, at 1,200 milligrams, which was the highest dose of VIR-2482 TUCtive, there was a non-statistically significant reduction in influenza illness of approximately 16%. Interestingly, in this same group, an approximate 57% reduction in influenza A illness was observed when illness was defined according to CDC criteria. More analysis is going to be needed to address why the study was unsuccessful. We are looking at the data from the perspective of how different symptoms, their duration, and severity might influence outcomes, and understanding drug concentrations, time to infection, and the sequence of the actual viruses the participants were exposed to will also be important.
As far as next steps, any other significant development of VIR-2482 will be guided by these analyses. To be clear, however, we will not be initiating a phase III trial. In the influenza space, as Maryanne noted, we are continuing our efforts on VIR-2981, an investigational neuraminidase targeting monoclonal antibody that covers not just flu A, but also flu B. In some animal models, it has shown markedly greater potency. The characteristics of VIR-2981's parent antibody was recently published in Nature. Because VIR-2981 has a different mechanism of action, targeting the enzymatic activity of the neuraminidase, not the stem of a hemagglutinin, we believe in its potential to prevent influenza illness. As we learn more from the PENINSULA trial, we will certainly apply relevant findings to the ongoing development of VIR-2981.
More broadly, as Maryanne noted earlier, the antibody platform of Vir has already resulted in a medicine for COVID-19 in just 15 months, and the only single antibody capable of treating Ebola. While this setback for VIR-2482 is unfortunate, it doesn't change our perspective on our platform's ability to identify potentially best-in-class antibodies and to then leverage data science and AI to further engineer them. Specifically, we can enhance antibody binding, potency, vector function, half-life, developability, and stability. Even more broadly, we recognize the importance of a fully integrated data strategy from research all the way through product development, and believe that this ability will continue to be differentiated here at Vir. We have 24 publications and numerous patents and awards related to our data science achievements. Now let's turn to chronic hepatitis B.
Unlike the current standard of care, which requires taking antiviral medicines for the rest of one's life and does not eliminate the risk of cirrhosis or liver cancer, our goal is a functional cure. After completing a functional cure therapy, there should be no need for further treatment, and there should also be a further reduction in the risk of liver complications. Our functional cure hypothesis is based on the now more widely accepted belief that chronic hepatitis B is an immunologic disease caused by a virus. As such, we believe that combinations of antivirals alone are not enough. Instead, we believe functional cure requires a combination of antivirals with immunologic agents. We call our approach stop and clear. We stop the virus from replicating and clear already infected cells by immunostimulation. This is a fundamentally different hypothesis we seek to prove in our clinical trials.
Our clinical development pathway has been as follows: We began with phase I and phase IIa studies that are exploring different combinations of antivirals and immunomodulators. By specifically using small cohorts in these studies, we are able to explore a broad space of possibilities to help identify the right combination, dose, duration, frequency, and population. In these studies, we have made two major advances towards a functional cure for chronic hepatitis B that highlight why we believe we can succeed. One, at EASL in June, we showed that we could achieve a durable off-treatment response in 16% of participants who received VIR-2218, our siRNA, and pegylated interferon alfa for 48 weeks. While the sample size was small and the confidence intervals large, it's worth noting that interferon alfa alone is generally thought to result in an off-treatment response only 3%-7% of the time.
Two, at the AASLD conference in 2022, we showed that a short course of VIR-2218 with VIR-3434 resulted in nearly a 3-log knockdown in hepatitis B surface antigen. This is a viral protein that is a measure of virus activity. Notably, antiviral activity was additive and no new safety signals were observed. Our next development step has been to build upon these observations. Last summer, we started part B of our Phase 2 MARCH study, which is exploring the combination of VIR-2218 and VIR-3434, with and without pegylated interferon alfa, for durations of 24 and 48 weeks. We expect to present end of treatment data for the 24-week cohorts in the fourth quarter. Let me now direct your attention to chronic hepatitis delta.
For chronic hepatitis delta, the only treatment approved, which is only available in some parts of the world and not the U.S., requires lifelong daily subcutaneous injections and has only a 45% chance of benefiting the patient. Our goal is a highly efficacious treatment that only needs to be administered once or twice a month. Because hepatitis delta requires the surface antigen protein from hepatitis B, we can target delta using our existing chronic hepatitis B assets, VIR-2218 and VIR-3434. At EASL, we shared the preclinical data demonstrating their potent antiviral activity against hepatitis delta. A phase 2 clinical trial is now underway, evaluating VIR-2218 and VIR-3434, individually or in combination with one another in a small cohort of hepatitis delta patients. We expect to present data from this trial in the fourth quarter.
It is worth noting that because hepatitis delta is a potential orphan disease with high unmet medical need, the regulatory path for a treatment for delta may be accelerated. Turning now to our early stage pipeline. We've already highlighted VIR-2981, our neuraminidase flu antibody. I will now touch on other key assets based on our proprietary monoclonal antibody platform. First, VIR-190, which in vitro, can neutralize both RSV or respiratory syncytial virus and human metapneumovirus. Both of these viruses pose a serious threat to infants and the immunocompromised. Second, VIR-7229, our next generation COVID-19 monoclonal antibody, which in vitro, is differentiated by both extreme breadth and potency against a broad spectrum of historical and currently circulating variants. With respect to our T-cell platform, which is based on human cytomegalovirus, we are advancing 2 assets.
VIR-1388 is our novel next generation HIV vaccine, which will soon be in our first patient in Q3 of this year. VIR-1949 is a potentially therapeutic vaccine against HPV-associated cervical, anal, and head and neck dysplasia and cancer, and is the second asset in our T cell platform based on HCMV. We look forward to sharing more about these INDs in the future. I will now turn the call over to Chief Financial Officer, Sung Lee.
Sung Lee (CFO)
Thank you, Phil. We're pleased to share our financial results for the second quarter of 2023. Total revenues were $3.8 million compared to negative $40.6 million for the same period a year ago. Recall that in 2022, the company recorded a revenue constraint related to sotrovimab in the amount of $397.4 million, which caused the total revenues and collaboration revenue in the second quarter of 2022 to be negative. Specific to sotrovimab in the second quarter of 2023, collaboration revenue was negative $13.8 million. mainly due to sotrovimab sales being more than offset by manufacturing costs and expenses to support activities in countries where sotrovimab continues to have a marketing authorization.
Going forward, and barring a reauthorization of sotrovimab in the US, we believe collaboration revenues will be at minimal levels and potentially make a negative contribution to our top line due to the ongoing required investments to support the marketing authorization, which our partner, GSK, leads the efforts in. Turning to operating expenses, R&D expenses in the second quarter of 2023 were $171.9 million, compared to $115.1 million in the same period in 2022. Included in the 2023 amount is a non-cash charge of $10.7 million related to the impairment of legacy in-process R&D and consolidation of our labs. The year-over-year growth in R&D expenses was primarily driven by investments in the phase II study, PENINSULA, for VIR-2482 and manufacturing activities in anticipation of initiating a phase III study.
While the costs associated with the PENINSULA study will ramp down in the next few quarters, we are currently evaluating the impact of the phase III manufacturing capacity and supply for VIR-2482. We expect to communicate more on this with our third quarter results. SG&A expenses in the second quarter of 2023 were $47.1 million, compared to $41.6 million for the same period in 2022. The year-over-year growth was primarily driven by higher personnel costs to support the overall growth of the business. For the second quarter of 2023, we reported a consolidated net loss of $194.8 million, compared to a net loss of $76.5 million for the same period in 2022. Turning to the balance sheet.
We ended the second quarter of 2023 with cash and investments of $1.9 billion, compared to $2.4 billion at the end of 2022. As communicated previously, we made a payment of $273.6 million in the second quarter to our collaborator, GSK, which comprised the majority of cash utilization during the quarter. This payment primarily relates to the amount reserved in 2022 for excess sotrovimab supply and manufacturing capacity due to reduced demand expectations for sotrovimab. There remains a balance of $69.7 million related to this reserve, which we expect a payment of approximately $41.8 million to GSK in the third quarter of 2023. As I conclude, I would like to make a few comments about our financial position and capital allocation.
As Marianne stated earlier in the call, we are making decisions and taking actions to become more focused, which has resulted in the discontinuation of our small molecule platform. We're well capitalized to see our current phase II programs in hepatitis B and hepatitis delta through the end of phase II and beyond. We also have the balance sheet strength to pursue further innovation by investing in our core antibody platform. Finally, you can expect us to be strong stewards of capital and have a disciplined approach to capital allocation and expense management. I'll now turn the call back to Sasha.
Sasha Damouni Ellis (EVP and Chief Corporate Affairs Officer)
Thank you, Sung. We will now start the Q&A section. Please limit questions to two per person, so that we are able to get to all of our covering analysts. Operator, please open up the line.
Operator (participant)
Our first question comes from Gena Wang, from Barclays. Your line is open.
Gena Wang (Managing Director)
Thank you. I have two questions regarding the flu VIR-2482 program. First, you know, regarding the PENINSULA study, why the design didn't have a lower bound of a 30%, like Pfizer and Moderna studies? You know, if we use 30% lower bound, the study would look like underpowered. Could that be the reason leading to the failure? The second question is: With the negative top line, are you terminating VIR-2482, and also the work in flu and also any through to the other Vir programs or antibody platform?
Phil Pang (CMO)
Thank you, Gena. Really appreciate the chance to answer your questions. Let me begin with your first question with regards to the design of the PENINSULA trial. The first thing I want to say is, is that the real- the short answer is that it was a well-powered study, and we need to think of it in the context of the fact that our desire was to show an efficacy beyond that of traditional vaccines. When you think about how to power a study, it's not just about demonstrating statistical significance, but it's about demonstrating clinical significance in the context of that. For example, we could have powered a study to demonstrate that a 10% effect size was, was statistically significant.
However, of course, as you know, Gena, that wouldn't have been clinically meaningful, given the vaccines that are currently out there. This is in contrast to vaccine flu trials, which do have a desire to, that basically power their study for clinical significance and statistical significance to a lower bound confidence interval of 30%.
I would like to remind you that with regard to monoclonal antibodies, both RSV and COVID, neither of them used such a flu vaccine-specific endpoint. I think that we were definitely well powered to ask the question and answer the question, could we achieve transformative efficacy? Unfortunately, we did not. With regard to the other aspects of VIR-2482, I really want to point to the fact that we are undergoing more analysis right now as to why this study was unsuccessful. We're looking at it from many different angles, including different symptoms, the PK, time to infection, and a number of the other things I talked about earlier on this call. Really, we need to be guided by those results and that analysis and that data to really decide what next to do.
Clearly, as I said earlier also, we're not going to be embarking on a phase III. Then finally, with regard to your question about read-through, I would say that as I think that Marianne said it best when she said that, you know, we've already had two successes with our antibody platform. The Ebola antibody, the only single antibody to treat and cure Ebola, as well as sotrovimab, which was brought to market in less than 15 months. I don't think there's any read-through on our ability to really design and identify successful medicines using this antibody platform.
Marianne De Backer (CEO)
Thank you, Phil. I would just add, Gena, obviously, we want to be very strategic about how we allocate our capital. As you know, Phil pointed out, we are not going to rush into any next steps. We really want to do a thorough analysis of the data and then really be guided by that outcome as to what we will be doing next. Thank you.
Operator (participant)
All right. Our next question is from Paul Choi from Goldman Sachs. Your line is open.
Paul Choi (Biotechnology Analyst)
Hi. Thank you. Good afternoon, everyone. My first question is, if we think about stripping out the 1-time true-up for the excess sotrovimab supply and manufacturing to GSK. I know there's a couple of moving parts there still. If we strip that out, if we look at the maybe the year-ago OpEx, is that sort of the normalized rate that you, you, you would think, think would be normal here going forward? What does that imply for your, your cash runway? If you're, you can prepare and just say how, you know, how long your cash balance will go through.
Then secondly, on, on hepatitis B, for the VIR-2218 VIR-3434, plus or minus PEG, data set that will be coming up in the later, later this year. Can you maybe level set expectations on how we should think about, you know, potential efficacy there? Is there potential for, for, for synergy, or should we, you know, potentially think about it largely as, as additive? And also, you know, what can you say on, you know, potential tolerability of, of the regimen given peg interferon's historical challenges? Thank you.
Marianne De Backer (CEO)
Okay. Thank you very much, Paul. Maybe the first question on cash runway, Sung, you can give some more information there.
Sung Lee (CFO)
Yeah, Paul, thanks for your question. I, I think you had a couple of questions there on basically operating expense, normal levels, last year comparable and the implications for our cash runway going forward. When you think about our operating expense and specifically R&D expense, for the last several quarters, the last three or foup quarters, it's been heavily driven by the investment in the flu phase II study, the PENINSULA study. In addition to that, we also invested in manufacturing activities for an anticipated phase III study in flu. These have been the primary drivers of our R&D operating expense for the last several quarters.
Going forward, obviously, you know, if I go back to the prepared comments I made on the ramping down of the PENINSULA study in the next few quarters, there are some variables here where we have an ongoing phase II study in hepatitis B and hepatitis delta. We're going to get to some important data readouts in quarter four this year. Pending the readouts of those data, that could be a big swing factor for where our OpEx trajectory will be in the future and certainly has implications for our cash utilization as well. I just want to make a clarification here. The cash utilization, when you go from Q1 to Q2, is not indicative of a run rate.
As I mentioned in my prepared comments, there was a $273.6 million payment to GSK related to a liability booked last year. I think you have to really cancel that noise out, and then you, you'll kind of understand what our true cash utilization has been. It's been averaging somewhere close to $120 million per quarter in each of the quarters this year so far. Then going forward, you know, just coming back to something I said before, the cash utilization will largely depend on the data readouts for hepatitis delta and hepatitis B.
Just to finish answering your question, with $1.9 billion of cash and investments, you know, we're really in a good position here to fund not only to the end of phase II for those programs, but also through phase III.
Marianne De Backer (CEO)
Thank you, Sung. Paul, related to your question on our chronic hepatitis B functional cure program. As you rightly pointed out, in fourth quarter of this year, we will be reporting data on combining VIR-2218, our siRNA, with VIR-3434, our antibody, plus minus interferon alfa, 24 weeks end of treatment. We have actually some really promising data that we have seen and have announced at EASL earlier this year. I would invite Phil to talk a little bit more about what we have seen as the signals of efficacy and also additivity.
Phil Pang (CMO)
Thank you, Marianne. Paul, great to talk to you again. Before we get going here, as Marianne mentioned, I think it's important to say before we can talk about what's going to be new, I just wanted to reiterate what we've seen most recently at the last two liver congresses. As Marianne noted in, at AASLD last year, we saw that a short course of the siRNA 2218 and 3434 was additive, but that duration was only four and 13 weeks. What we're looking for, that's going to be new at AASLD, in the fourth quarter this year, is the 24 week data of combining the two of these drugs together. We're also going to be looking at these two drugs together with the addition of interferon alpha.
I think all of that together is, is what will be new, along with, of course, new data from hepatitis delta.
Marianne De Backer (CEO)
Operator, can you go to the next question?
Operator (participant)
Okay, our next question comes from Roanna Ruiz, Ruiz from Leerink Partners.
Roanna Ruiz (Senior Managing Director)
Great, thanks. Hello, everyone. Maybe first question on delta virus. What specific measures could you disclose in the phase II SOLSTICE trial, and what's the efficacy bar that you're looking for?
Marianne De Backer (CEO)
Thank you for that question, Roanna. I will ask Phil to give you some more details on that.
Phil Pang (CMO)
Thank you, Marianne, and thank you, Roanna. With regard to our hepatitis delta trial, SOLSTICE, remember at EASL this last year, this last June, actually, sorry, this past June, we just showed that in preclinical models, VIR-3434, our Fc-enhanced monoclonal antibody, was able to knock down the hepatitis delta virus or the RNA from the virus. We also showed that VIR-2218, our siRNA, could do the same, and that when combined in an animal, they were additive in their behavior. Now we're looking at SOLSTICE, which also began in the earliest part of the spring, and we're asking ourselves the question: Can VIR-3434 alone, VIR-2218 alone, and what's going to happen if you add the two of these drugs together in terms of their ability to knock down hepatitis delta RNA virus?
That's what we're looking forward to seeing at in the fourth quarter of this year. As you know, the efficacy bar is rather the bar for getting approval is a two-log reduction in hepatitis Delta RNA and normalization of ALT, which is only seen 45% of the time with the only currently available drug, and that drug requires daily subcutaneous injections. What we're hoping for is transformative efficacy, along with maybe having only an injection once or twice a month. I think that that could be very differentiating for us. Now, in terms of what we're going to actually see in terms of data, as I mentioned, it'll be the monotherapy and the combination, but this is early data from a small cohort, we want to be able to quickly be able to see are they actual antivirals in patients?
That's what we look forward to seeing.
Marianne De Backer (CEO)
Yes, more data coming quarter of next year. Yeah.
Roanna Ruiz (Senior Managing Director)
Okay, great.
Marianne De Backer (CEO)
Go ahead, Roanna.
Roanna Ruiz (Senior Managing Director)
I just want to follow up. Yeah, maybe bigger picture, could you give us a sense of what your strategic priorities for the company will be in 2024? I guess thinking about flu, hepatitis, delta virus, HBV, and all the programs you have going on, are some of them going to shift to, like, higher focus next year? Like, what should we be following more closely along those lines?
Marianne De Backer (CEO)
Yeah, thank you for that question. As mentioned before, as it relates to our flu program, what next steps are going to be, are really going to be determined by further analysis of the data. Our, you know, near and intermediate-term focus is really on our clinical programs, so chronic hepatitis B and chronic hepatitis delta. Those are really our top priorities. We will also bring HIV program into the clinic in the next this quarter. Our focus, our capital allocation will really be all around, you know, making sure that as fast and as efficiently possible, we can progress those programs towards towards data.
Roanna Ruiz (Senior Managing Director)
Got it. Thanks.
Operator (participant)
Our next question comes from Eric Joseph, from J.P. Morgan.
Eric Joseph (Executive Director)
Hi, good afternoon. Thanks for taking the questions. Just one or two on HBV. Just trying to get a better sense of the update we might see from MARCH Part B in the fourth quarter, whether we should expect, well, really, the types of patient numbers, I guess, we should anticipate and whether we should expect readouts across the different, the four different treatment regimens. I'm also curious to get a sense from you guys of what level of HBeAg clearance would support the addition of 34, 34 being additive to-... what you've reported so far from the Yuan trial of 2218 plus, plus PEG, the, the doublet alone. Thanks.
Phil Pang (CMO)
All right. Eric, thanks for the question. I would like to begin by saying, let's level set to what was shown at EASL. At EASL, what we showed was that 48 weeks of VIR-2218, the siRNA with interferon alfa, was able to result in an off-treatment response in about 16% of patients, six months after the end of treatment. That was preceded by an on-treatment seroclearance, as you referred to earlier, of around 30%. Basically, 30% of patients had an on-treatment response, and then 16% had a continued off-treatment response with 48 weeks of VIR-2218 plus interferon alfa. What we're going to be seeing at in the fourth quarter of this year is, of course, the 24-week on treatment data from the triplet and the doublet.
What we should be looking for is if that VIR-2218 plus VIR-3434 gets us to the patients who have a seroclearance. Remember, when you give VIR-2218 and VIR-3434 for only 4 or 13 weeks, we did not see any patient with seroclearance. Therefore, the goal will obviously be to see more patients or a number of patients with seroclearance and whether or not we can match or exceed the 30% we saw with 48 weeks of the prior doublet. The other thing that's important to look forward to is, of course, adding interferon onto that combination of VIR-2218 and VIR-3434, and seeing how much better we can do with that.
Going back to, you know, Paul's earlier question about tolerability, you know, clearly interferon alpha has some tolerability issues if given for a long period of time, but that's in the context of low efficacy. If we can achieve functional cure rates greater than 30% or 40%, we think that this is something that patients will really be keen to understand better and appreciate, given the fact that, you know, living with a chronic disease is, as Marianne alluded to in the prepared remarks, something we've heard a lot about from patients as something that they want.
Marianne De Backer (CEO)
I would just add. Yeah, that as it relates to enrollment and timing, I mean, we're right on track as to, you know, our expectations.
Eric Joseph (Executive Director)
Okay. Would it be too, would it be premature at, in the fourth quarter to see any, post-treatment follow-up or off-treatment follow-up for patients that only received the 20 or 24 week regimen?
Phil Pang (CMO)
Eric, at this time, all we've guided to is the on-treatment data from the 24 week ons. We are definitely looking forward to that information, along with, as, as I alluded to earlier, with Roanna, the chronic hepatitis delta. I think those are going to be the two exciting data sets that we hope to be able to share in the fourth quarter.
Eric Joseph (Executive Director)
Excellent. Thanks very much. Looking forward to it.
Operator (participant)
Our next question comes from Eva Privitera from TD Cowen.
Eva Privitera (VP of Biotech Equity Research)
Hi. Good afternoon. Thanks for taking our questions. Just to follow up on the prior question, for the triple combination with data in the second half, what rate of on-treatment seroclearance would get you excited or be indicative of the, the off-treatment clearance?
Phil Pang (CMO)
Yeah. To answer that question, I think, again, context is important. For VIR-2218 plus interferon alone for only 24 weeks, we saw only a 5% rate of seroclearance on treatment. I think anything beyond that is biological proof of principle that VIR-3434, when added to VIR-2218 interferon, is moving the needle. Of course, if you can get there without interferon and VIR-2218 plus VIR-3434, I think that that would also be quite impressive. I think both of those things are important steps forward. Of course, the higher the on-treatment response rate, the more excited we will be in terms of whether or not this is going to be able to make a meaningful difference to patients.
Eva Privitera (VP of Biotech Equity Research)
What delta between... what delta would you anticipate between the on treatment and the, and the off treatment? Is there any way to know?
Phil Pang (CMO)
I think one of the exciting things that we saw at EASL was one of the first times that there was a predictor of off-treatment response. Now, granted, it was a small cohort of patients, but we demonstrated in that small cohort of patients, that patients who seroconverted, not just serocleared, but seroconverted to anti-HBs antibodies at high levels greater than 100 or 200, that they were the ones most likely to have an off-treatment response. Certainly we're going to be looking at that metric in our studies to see what the off-treatment response will be. Clearly, in our studies, it went from 30% down to 16%, really, I think it's going to be guided by which patients mount an anti-S response and what level of anti-S response that they mount.
We'll look forward to seeing what that data looks like.
Eva Privitera (VP of Biotech Equity Research)
Great. Thank you very much.
Operator (participant)
Our next question comes from Mike Ulz with Morgan Stanley.
Mike Ulz (Executive Director)
Hey, guys. Thanks for taking the question. Maybe just another follow-up on the MARCH Part B data expected later this year. Just based on what you've seen so far, do you, in terms of some of the other studies from Part A, et cetera, do you think 24 weeks will be enough, or do you think you may have to go to 48 weeks? Is this a situation where longer term tends to be better, or could there be a reason why longer would not be better for some reason? Maybe your thoughts on the need for peg interferon or not. Thanks.
Phil Pang (CMO)
Great. That sounded, I think like a three-part question, Mike, so let me make sure I get all three parts. The reason for longer being better biologically is, of course, based on historical precedent, that when you give pegylated interferon alfa for 24 versus 48 versus even 72 weeks, you do get a better response, even if it's still low single digits. That's why longer has been historically better, because, of course, that's balanced by what I think Paul was alluding to earlier when he talked about tolerability, which is the issue, is that the longer you give pegylated interferon alfa, the more side effects accumulate for the patient. You're trying to find a balance between those two things, because in the end, it's really going to come down to efficacy.
As once, I was once jokingly told, efficacy is always along with safety, really where the balance gets where the rubber hits the road. I would say that if we can demonstrate a 24-week cure that is similar to the 48-week cure, we'll of course go with the 24 weeks, because I think that that would allow patients to have a shorter course of interferon therapy. Really, if it's a meaningful efficacy delta, then we'll have to decide as we look forward to talking to patients and talking to providers, what exactly would be most desirable in that group. That's really the balance between longer is better from an efficacy perspective and longer being less ideal from a safe- not a safety, but a tolerability perspective. Does that answer your question, Mike?
Mike Ulz (Executive Director)
Yep. No, it makes sense. Your thoughts on the need for, for peg, I guess, shorter with peg.
Might work, but longer maybe doesn't make sense?
Phil Pang (CMO)
Let me answer that in two ways. Let me answer that from a biological perspective, and then from a patient perspective. From a patient perspective, I think that it is, it is really going to depend on what the efficacy is. Imagine you're a patient right now and someone says, "I'm going to give you a year-long course of therapy.
It's going to have some side effects, but you only have a one in 20 chance of it, of it actually benefiting you at all." Most people say, "You know, I'm not willing to roll the die in that circumstance." However, if you were to come back to that same patient and say, "I'm going to give you a year of therapy, but if I do it in combination with these other drugs, I could increase your chance of cure to, you know, one in three or one in, you know, one in two," I think that's a very different story. I don't think it's just about absolute duration. I think it's about efficacy in the context of that duration.
As far as the biological need for interferon, I think there are things in favor of suggesting why it might be necessary. I think the fact that, you know, it is the only known way to cure hepatitis B right now, that has been approved is one interesting point. I think it points more broadly to the need for an immune modulator to really achieve a functional cure, which is really a immunologically induced remission. One of the aspects about VIR-3434 that we're really excited about is the fact that it's not just a neutralizing antibody. It has a modified Fc domain, which allows it to act as a potential therapeutic vaccine. It's that aspect of VIR-3434, which we believe may allow it to act as a substitute or an alternative to interferon alfa.
Of course, the jury's still out on that. We're going to see what 24 weeks looks like on treatment, this coming Q4. Then we'll of course, have what 48 weeks of that treatment look like next year.
Mike Ulz (Executive Director)
That's helpful. Thank you.
Operator (participant)
All right. Our next question comes from Joseph Stringer, from Needham & Company.
Joseph Stringer (Principal)
Hi. Thanks for taking our questions. Two from us. First, on the HIV program. You were previously evaluating VIR-1111 in phase I trials. What, what's different about VIR-1388, and what gives you confidence that this T-cell vaccine is the right approach? What are timelines around initial data? Then secondly, given current cash balance, what are your thoughts on external BD? What's your appetite for bringing in external assets, whether they be early or late stage? Thanks.
Marianne De Backer (CEO)
Thank you, Joe. Maybe I'll start with the last question first. Obviously, we are in a very unique position where we have a strong balance sheet that will allow us to really fund our critical phase II and phase I assets to the next stages of inflection. It also offers us the opportunity to remain opportunistic. If we see assets or opportunities out there that can really strengthen our pipeline and our capabilities within Vir Biotechnology, then, of course, we would take advantage of that. For your first question related to the differentiation of VIR-1111 versus VIR-1388, maybe Phil, you can take that one.
Phil Pang (CMO)
Thanks, Marianne. Joseph, we are on track to dose our first patients, this quarter in Q3 with VIR-1388, which, as you noted, is a prophylactic HIV vaccine. In terms of what's different about it compared to VIR-1111, I think that, you know, obviously we need to wait for the results in humans, but at least we can say in tissue culture, the biggest difference is, is that VIR-1111 was deliberately attenuated, which means we made it less able to replicate in tissue culture because we wanted to really get some basic understanding of how this vector, which is based on human CMV, behaves in people. We now have the opportunity with 1388, based on that safety information from VIR-1111, to take what we call a less attenuated virus into the clinic.
This virus, at least in tissue culture, is able to replicate a little bit better and therefore, we believe can be more immunogenic in humans. I think that that's really the big difference. There is, of course, some other minor differences in terms of some other deletions or insertions we have made, but that's the key difference between VIR-1111 and VIR-1388.
Marianne De Backer (CEO)
Thank you, Phil. Then maybe, Sung, if you could, comment a little bit more about our cash, position.
Sung Lee (CFO)
Yeah, happy to do that, Joey. Yeah, this is Sung. I mentioned earlier, I think there was a question about our cash runway. You know, with $1.9 billion on the balance sheet, it gives us a lot of financial flexibility. As Marianne said earlier, certainly to fund our current development programs, which are broadly in phase II, and HIV obviously is in phase I, we can get to the next inflection point for all of those programs, should the data support it. It's a real fortunate position to be in. Just to reiterate again, and I, I really want to make this clarification because I, I do think some information might have been misunderstood.
We did have a large payment to GSK during the second quarter, and that certainly is, you know, we don't consider that to be part of our run rate.
Joseph Stringer (Principal)
Great. Thank you for taking my question.
Operator (participant)
All right. Our next question comes from Patrick Trucchio from H.C. Wainwright.
Patrick Trucchio (Managing Director)
Thanks. Good afternoon. I have a couple of follow-up questions on HBV program. First, I'm just wondering if you can talk about the bar for regulatory success in HBV. Specifically, if you need to demonstrate a 30% sustained clearance of HB surface antigen, six months after treatment is halted to achieve approval, or if a rate below this can be sufficient for approval in the setting of HBV. Then, can you talk about the potential for demonstrating a partial cure in HBV? You know, what's the latest around how this is being defined, and if it could, at some point, become part of maybe a regulatory bar for approval in the setting of HBV treatments?
Then separately, with the preclinical pipeline candidates unveiled today, how should we think about the remaining preclinical work that remains in potential timing for filing of INDs?
Marianne De Backer (CEO)
Excellent. Thank you so much, Patrick. Perhaps, Phil, you can start with talking a bit about our preclinical pipeline.
Phil Pang (CMO)
Definitely, Marianne. Patrick, in terms of your third question, I think that, you know, it really is an exciting time for Vir. I already mentioned to you with the last question, VIR-1388, which is the HIV prophylactic vaccine that is going to be entering the clinic this quarter. I did want to actually add a note to that, which is to say that it is based on human cytomegalovirus, as I noted earlier, and human cytomegalovirus is one of the most immunogenic vectors that has ever been described.
Sometimes up to 20% of your T cells can be mounted against that vector. Importantly, it generates a type of T cell known as an effector memory mucosal T cell, which is quite important, we believe, in the prevention of diseases like diseases like HIV, but also allows us to use it in other diseases such as human papillomavirus. That is another thing that is going to be entering the clinic in the next 24 months. A basically a therapeutic T cell vaccine called VIR-1949, which is for the control of precancerous lesions caused by human papillomavirus. Both of those things are quite unique and exciting for Vir.
In terms of the respiratory franchise and the antibody platform, we've already talked about VIR-2981, our neuraminidase targeting monoclonal antibody that has activity not just against influenza A, but influenza B. We also have VIR-8190, which I touched on earlier, which is uniquely able to neutralize not just RSV, but human metapneumovirus. Also VIR-7229, a next-generation COVID-19 monoclonal antibody that has really shown, quite broad activity and quite potent activity against historical and current strains. We really have a broad set of things that we believe will that can make a huge patient impact in the future, that will be entering in the clinic in the next couple of years. Going backwards to your questions around HBV.
In terms of, you know, partial cure, I, I think that this is an area that's, what I would say, evolving in regulatory science. As you know, the guidelines for the EU and the US are somewhat different. Right now that is going to be something we need to follow. As you know, whether or not you could achieve patients who do not require treatment because their DNA is suppressed, but their HBV surface antigen is still present, is sort of a, a middle ground that people are still unclear on. Certainly that is a fallback position one could always take, but I think the important thing, as you said, is truly to achieve an HBV functional cure, which is, as you defined, loss of surface antigen six months after the end of treatment.
With regard to what the bar is, I actually don't think 30% is a regulatory bar. I think 30% is a gross estimate of what was, what we would consider clinically meaningful to patients. That obviously always comes with context. What do I mean by that, Patrick? For example, if you were able to achieve a functional cure of, let's say, 20%, but you were able to do it with, you know, a simple set of injections that had very or minimal side effects and very well tolerated, I think people would be willing, and patients, more importantly, would be certainly willing to give that a try.
Because what you're offering to patients is, "I'm gonna give you a regimen that may have-- that is extremely well tolerated, that has a one in five chance of being, of, of really benefiting you." Versus on the other hand, if it is, for example, an interferon-containing regimen, I think that the functional cure rate would probably have to be higher because, of course, then they have to balance the tolerability concerns with the bene- with the chance of benefit. I think 30% is more of a ballpark over the thumb estimate many clinicians will give you. I don't think it's a regulatory bar. I think it is a contextual, it, it is a, is a rule of thumb, and context is gonna really matter.
Marianne De Backer (CEO)
Thank you, Phil. Thank you so much. Patrick, just to reiterate, what we have focused here today is on discussing those preclinical candidates for which we could potentially expect an IND within the next 24 months. Thank you.
Patrick Trucchio (Managing Director)
Thank you so much.
Operator (participant)
All right. If there are no other questions, I will now turn the call back over to Dr. Marianne De Backer.
Marianne De Backer (CEO)
Thank you, Operator, thank you all again for your attention today. Vir Biotechnology is a truly vibrant and dynamic company that I believe is poised for significant growth and, most importantly, for patient impact. I am thrilled to lead here into what I believe will be the next transformational trajectory as we build on the progress that we have achieved so far. I feel confident that we have the internal scientific expertise and the passion to power our mission forward. Thank you all for joining us here today. We really appreciate your time and your interest in Vir Biotechnology. Thank you. Operator, you may end the call.
Operator (participant)
This concludes the meeting. You may now disconnect.
