Arbutus Biopharma Corp Q2 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Arbutus Biopharma Corporate 2020 Second Quarter 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. Please be advised that today's conference is being recorded. I would like to hand the conference to one of your speakers today, Ms. Pam Murphy. Ma'am, please go ahead.

Good morning and thank you for joining Arbutus’s Q2 2020 Conference Call. On the call from Arbutus Executive team are Bill Collier, President and Chief Executive Officer; Dr. Mike Sofia, Chief Scientific Officer; Dr. Gaston Picchio, Chief Development Officer, and Dave Hastings, Chief Financial Officer. Bill will begin with a summary of recent accomplishments and a review of Arbutus's corporate objectives, followed by Gaston and Mike Sofia who will provide you with updates on the clinical development of AB-729, Arbutus early stage HBV program pipeline and its COVID-19 research effort respectively. Dave Hastings will follow and provide a review of the company's second quarter financial results and will then open the call for Q&A. Before we begin, we'd like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding expectations, timelines and clinical results for Arbutus's proprietary HBV pipeline, the patents providing the Arbutus’ LNP technology that the company licensed to Genevant, achievement of the company's 2020 objectives and its expected cash use and cash runway. These forward-looking statements 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 10-K, Quarterly Report on 10-Q and our other periodic reports filed with the SEC. Bill?

Thank you, Pam, and good morning and thank you everyone for joining us today. We hope that all of you are well and obviously continuing to stay safe. To begin, I'd like to confirm that despite the challenges of COVID-19, our Arbutus team continues to execute efficiently and effectively, so our scientific, clinical and corporate operations and timelines all remain on track. As described in the press release this morning, we expect to report AB-729 safety and efficacy data in the second half of 2020 for the 60 mg multi-dose cohorts at four and eight week intervals, and also the 90 mg single-dose cohort and an additional cohort of new data from a 90 mg single-dose cohort in HBV DNA positive subjects. As most of you know, we provided a clinical update on the positive interim 729 single-dose 60 mg results in May and Gaston will review these results and provide more details on the ongoing Phase 1a/1b clinical trial program in just a few minutes. Additionally we've made progress in our own COVID-19 preclinical research effort, as well as in our collaboration with the COVID R&D consortium whose mission is to find molecules with the greatest rational for advancement in clinical trials and put them into study designed to yield the most meaningful results in the fastest manner possible. Turning to a different topic, on July 23, 2020 the United States Patent and Trademark Office before the Patent Trial and Appeal Board announced their decision in Moderna Therapeutics, Inc.’s challenge to the validity of U.S. Patent 8,058,069 what we often call the 069 Patent. In this decision they determined that no challenged claims were unpatentable. Now, while Arbutus is the patent holder, this patent is licensed to Genevant. Arbutus is gratified by this decision upholding the validity of one of the patents protecting our LNP technology, that as I said we’ve licensed to Genevant, and this decision reinforces our continuing belief in the potential of this technology. Also, on July 31, 2020 Roivant recapitalized Genevant through an equity investment and conversion of previously issued convertible debt securities held by Roivant. Arbutus participated in the recap of Genevant with an equity investment of $2.5 million. Following the recapitalization, Arbutus now owns approximately 16% of the common equity of Genevant. Importantly though, Arbutus’s entitlement to receive future royalties or sublicensing revenue from Genevant remains unchanged. Before turning over the call to Gaston and Mike, I'd like to just quickly review our key objectives for the next six to twelve months, and these are especially to advance our Phase 1a/1b clinical trial of 729, our RNAi compound, including the initiation of two new 90 mg multi-dose cohorts. Second, to progress on next generation Capsid Inhibitor 836 through IND enabling studies and initiate the Phase 1a/1b clinical trial, with a goal of moving to proprietary combination studies as rapidly as possible; and thirdly, to continue our research efforts to advance a lead oral compound that inhibits PD-L1 and a lead oral next generation HBV specific RNA destabilizer. Let me turn the call over now to Gaston, who’ll update you on 729.

Thank you, Bill, and good morning everyone. In May, we provided you with the interim results from the ongoing Phase 1a/1b clinical trial for AB-729, which included data from the single-dose 60 mg cohorts at week 12. This data demonstrated a 60 mg single-dose at week 12 led to a mean HBsAg decline of approximately 1 log that actually matched what we saw with the 180 mg cohort for week 12 as well. All subjects receiving the 60 mg single-dose experienced a significant HBV surface antigen decline and all subjects in this cohort had normal ALTs and ASTs throughout the dosing and follow-up period. Importantly, we continue to follow the subjects through week 48 and we will be reporting new follow-up data in the second half of the year. We're currently dosing chronic HBV subjects in two 60 mg multi-dose cohorts evaluating those in intervals of four and eight weeks and a 90 mg single-dose cohort. We are also dosing HBV DNA positive subjects in a 90 mg single-dose cohort with results expected in the second half of 2020. Importantly, this cohort would allow us to evaluate for the first time the impact of AB-729 on HBV DNA replication. As mentioned previously, we also intend to initiate two 90 mg multi-dose cohorts in the second half of this year. We're also considering several Phase 2 trial designs in combination with other agents pending review of over 60 mg multi-dose data. We will be announcing this in the coming months. With that, I'll turn the call over to Mike.

Thanks, Gaston, and good morning everyone. First, I want to update you on AB-836, our next generation Capsid Inhibitor. Currently, we expect to complete our IND-enabling studies by December 2020. Everything looks on track to meet that objective. In addition, we continue to make progress with our next generation oral-HBV specific RNA destabilizer that primarily targets HBsAg reduction and in oral PD-L1 compound that we believe may be useful in reawakening a patient’s own immune response to the HBV virus. In May of this year, we announced our commitment to help address the coronavirus global pandemic by establishing a long-term effort directed to this problem. We committed to bringing our recognized expertise to the discovery and development of new antiviral therapies that would prove to be safe and effective against not only SARS-CoV-2 but also against future coronavirus outbreaks. As we laid out our plan, we intended to focus our directed discovery efforts on two targets, the nsp5 viral main protease and the nsp12 viral polymerase. These two targets are highly conserved across coronaviruses; a Crystal Structure is available for structure-based drug design efforts to lend themselves to the deep expertise we have within Arbutus Discovery Development functions. In addition, we joined the COVID R&D consortium to leverage early-stage screening capabilities to screen our own proprietary libraries against SARS-CoV-2 in the hope of identifying novel agents with potential new mechanisms of action. As of today, we are in full execution mode. We have chemistry underway to prepare Arbutus-designed molecules that target the viral proteases and polymerases. We have already screened several Arbutus libraries of small molecules as part of the COVID R&D consortium and are in the process of evaluating the data. In addition, we continue to screen molecule candidates through this effort. We have also established a network of testing capabilities that will help to rapidly progress the evaluation of our molecules. We believe Arbutus’s COVID-19 program has differentiated our focused expertise and capabilities in our viral drug discovery development that puts us in a position to rapidly advance new coronavirus therapies. We are committed long-term to this program with the expectation of delivering novel therapies to patients. With that, I’m turning the call over to Dave.

Okay. Thanks, Mike, and good morning. Our ending cash, cash equivalents, and short-term investments were approximately $84 million as of June 30, 2020, compared to approximately $91 million as of December 31, 2019. Our cash used from operations for the first and second quarters of 2020 was approximately $24 million, and in addition, we received approximately $17 million in net proceeds from the issuance of shares under our ATM program in the second quarter of 2020. Now during July, Arbutus fully utilized the remaining availability under the ATM program, resulting in an additional $36.5 million of net proceeds. Therefore, based on our ending second quarter cash, cash equivalents and investments of $84 million, plus the additional $36.5 million of proceeds received under the ATM program during July, we now believe our cash position is sufficient to fund the company's operations into mid-2022 versus our prior guidance of mid-2021. So with that, Bill I’ll turn the call back to you.

Thank you very much, Dave. And with that, operator, let's go to open up the lines for the question-and-answer session.

Alright. [Operator Instructions] And our first question comes from the line of Mayank Mamtani with B. Riley. Your line is open. Please go ahead.

Good morning team. Thanks for taking our questions and good to hear the progress you're making across the pipeline. Just a quick three questions and a follow-up. Maybe starting with you Gaston, any color, now that you are learning a lot more about RNAi targeted therapies including S-Antigens and X-Antigen targeted. So, maybe could you just give us some color on how you think about the 729 positioning in the landscape, including obviously the learnings you had on the high dose, but also sort of working through the mid-dose and the low-dose now. Can you just give us an update on how you think about the competitive positioning?

Sure, hi. So we believe that 729 remains a very competitive agent in the landscape of RNAi, so I think we're very satisfied with the rate of decline in the S-Antigen and so with the 60 mg single-dose cohort all the way throughout week 12, and that was with a – as we pointed out with a single-dose of what we would call a low-dose. So, we are awaiting our 90 mg single-dose data and obviously we’re awaiting our multi-dose data. Also, the safety profile on the 60 mg single-dose was remarkable. Achieving those in the absence of any ALT flares. I’ll just remind that one of those subjects actually achieved a 2.4 log decline, and the way that we are seeing these and this I think will become clearer as the data becomes available later in the year. We will be able to compare the multi-dose versus the single does, and even the durability of the response that we're seeing, you know with the 60 mg dose. We believe that we may have some advantages in terms of the dose and the frequency of the dosing. So, as you know we're studying four and eight, which is different from what others have done, but they are only studied every four weeks. We’re going to do a four and eight and we are extending this less frequent doses schedule to over a 90 mg dose, but we're going to study 8 and 12. So we see those aspects that potentially have some advantages over the other agents in this space.

Great! And then on the PTAB ruling, can you just give us an update on what next steps are; specifically in terms of timing and also Moderna filing an appeal? Any update can you provide on the next steps there?

Yeah Mayank, this is Bill. So thank you very much for your question. I obviously appreciate and understand why you're asking it. You know as we disclosed previously, the intellectual property is licensed to Genevant, and as we also explained today, after the recap of Genevant, we now have an equity investment amounting to 16%. But importantly still we’ll receive the future royalties or sub-licensing revenue from Genevant. So yeah, I think it's important to understand that you know Genevant as the licensee, has the first right to pursue full control of any enforcement actions taken in connection with this IP. So, that being said, you know I wouldn't want to comment or speculate on what those actions may be.

Okay, good, and my final question for Mike, can you comment on the two targets that you had for the coronavirus efforts? How do you think about proof of biology there and also maybe be specific on the models and the sort of timelines that you're thinking about?

Yeah, thanks. So we are looking at two highly conserved targets in the coronavirus gene; that’s the nsp12 viral polymerase and the nsp5 viral protease. We chose those because our specific interest is to look at a pan-Coronavirus agent and so we’re looking for targets that will be conserved across coronavirus as that is really important to us. These two particular targets have a lot of structural information associated with them. So they help facilitate our design and development efforts with regard to this particular virus. You know the proof of biology here is clearly Remdesivir here does target the nsp12 viral polymerase, so there's clearly a direct proof-of-concept here. In the viral proteases, we’re looking clearly towards other viruses that have proteases associated with them, specifically HCV and HIV where protease inhibitors have become part of the regiment for treating those particular diseases. But also even in the SARS-CoV-2, there are early leads that people have identified against the nsp5 viral protease that at least in preclinical models seem to have activities. So I think when you look at both of these particular targets, you know I think there is ample evidence and support for the idea of pursuing them as potential therapies for SARS-CoV-2.

Great! Thanks for taking my question.

Thank you. And our next question comes from the line of Madhu Kumar with Baird. Your line is open, please go ahead.

Hi, thanks for taking my question. This is Rob on for Madhu. I was just wondering, based on what we've seen for the various HBV RNAi programs, what kind of service management declines in the 60 mg or 90 mg cohorts to get excited about 729?

I have to say – Hi, Gaston here. So I have to say that we are really excited about 729 with the magnitude of decline that we saw with the 60 mg in a single dose on the safety profile. So we anticipate that this is going to continue to decline with multi-dosing. To give you a number, I think it’s a little premature to try to say it is 1.5 or 2. I think what matters here is throughout a period of dosing, one would like to see this antigen disappear or become unquantifiable at least and remain as such. So, you know in some patients that may be 2 logs, in other patients it may be 3 logs, so it’s really variable and I wouldn’t like to really give you a number. But, you know obviously, it we will like to remain competitive, but again I just want to reiterate that we are very pleased with the decline that we saw with the 60 mg after a single dose at week 12.

Alright, thank you. I have another question, and it’s to what extent do you believe you can distinguish an ALT elevation that’s a safety signal from one that’s an immune response?

Well, that's a great question and it's a question that hasn't been answered over the past 20 years and we continue to discuss it. As you may recall, we took some efforts in our AB-506 program to try and distinguish them because we saw flares. In one case the flares were associated with the potential preferences and in another case we saw S-Antigen going down and DNA going down. But even if DNA is going down and S-Antigen is going down, there is no guarantee that that flare is happening is not related to drug toxicity, I can tell you. There was a recent meeting by the HBV forum where many of the sponsors presented with the presence of key opinion leaders as well as regulators and we continue to discuss this and I think it's fair to say that the matter hasn't been solved. There are no good biomarkers to say the flare is potentially related to drug toxicity versus the beneficial flare as we understand in chronic Hepatitis B. So I cannot give you an answer. Obviously there are certain things that will allow you to determine a flare is a bad flare, such as meeting the criteria and so forth now and other markers. But if those things don’t happen, like there is no clear indication, that doesn’t guarantee that the flare is a bad flare, so it’s still an open question I think.

Okay, thank you.

Thank you. And our next question comes from the line of Roy Buchanan with JMP Securities. Your line is open, please go ahead.

Hi, great. Thanks for taking the questions. I had a few on 729 and then one of 836. So for 729, it sounds like you are honing in on the 90 mg dose based on the selection for the new cohorts in the Phase 1. Are you guys seeing any signs of greater efficacy in that dose in the ongoing cohorts or is there a lack of safety signals that we need to choose that 90 mg dose?

We haven’t evaluated the data yet. So this data, we haven’t evaluated, so I can’t comment about that at this point. As I said, we are very pleased with what we see with the 60 mg single-dose data.

Okay, great. And on the 60 mg single-dose, you presented the data earlier this year that the data later this year, what’s the duration on that going to be?

So, the protocol actually was a multi-dosing. So I’m now referring to the multi-dosing cohorts. So we can dose for six months and there is an option for subjects to reconsent and continue those in for an additional six months, so a total of one year. The probable stage that the duration of dosing in the multi-dosing cohorts is six months with the option of reconsenting on a rolling basis in a protocol extension if you wish, and continue to dose for an additional six or probably one year of dosing. So we will have long-term dosing data eventually by next year.

Long term, okay. But for the 60 mg single-dose you presented three months for the 60 mg single-dose in May. In the second half of this year, can you tell us what the duration for that cohort is going to be?

I'm sorry, I thought you were asking about the duration of the cohorts in general. So while we will present data in the second half of the year, it will be up to week 12 or beyond depending on where the rate of control is; you know there may be data beyond week 12 as well.

Okay, great. And then for 836, can you just give us any details on what remains to be completed for the IND submission? Thanks.

Hi, this is Mike Sofia. So for 836 we're in the midst of the IND-enabling studies. So we're completing the 28 day toxicology assessment and all the manufacturing requirements. But everything is clearly on track and as we have guided, as Bill has said, you know we expect to deliver a package by the end of the year for that molecule.

Great! Thanks for taking the questions.

Thank you. [Operator Instructions]. I am showing no further questions, and I would like to turn the conference back over to Mr. Bill Collier for any further remark. Oh! I'm sorry Mr. Collier. I do see a question that just popped up from a line of [Inaudible] Your line is open, please go ahead.

Hey, good morning. Thanks for taking my call. I have a slightly different question. You know, I see cross-ownership or common ownership of intellectual properties between Arbutus and Genevant. Has there been any discussion about maybe combining the two companies together to better put resources as well as to reflect the potential of the combined company? Utilize capital markets for additional R&D going forward.

Hi, this is Bill. Thanks for the question. I think the best response to that is just outline again of what we’ve said in the press release this morning about the recent recapitalization of Genevant. So there's a little bit of history here of when Genevant was formed between Arbutus and Roivant, but the most recent update is in July 31 when Genevant was recapitalized. So it is, you know a standalone private company of which we now have a shareholding of 16%. I think what’s important to Arbutus you know in that recap is that it doesn’t impact in a way the future royalties or sub-licensing revenue that we may get from Genevant for any sub-licensing. So at the moment, Arbutus and Genevant are separate companies and like I said, the most recent corporate update is what we just disclosed. I don't know, Dave do you want to add anything on to that?

No, I think it’s well said Bill. I’ll just say, look, Arbutus’s core mission is to find a functional cure for hepatitis B, that remains our core mission, and that's where the majority of our resources along with our COVID effort will be dedicated.

Yep. Thank you, good point.

Thank you. And I'm showing no further questions at this time and I would like to turn the conference back over to Mr. Bill Collier for any further remarks.

Thank you very much, Michelle. Let me close out then just by thanking each of you for your interest in Arbutus and we do look forward to updating you on our key objectives as we progress through the year. Now those objectives as we’ve summarized today include the following. So we look forward to preliminary results of 729 60 mg dose cohorts, dosed at every four and eight weeks in the second half of the year. Also in the second half of this year we expect results at week 12 for the 90 mg single-dose cohort in both HBV positive and negative subjects. As you’ve also heard in the second half of this year, we plan to initiate two 90 mg multi-dose cohorts, and in addition to clinical trial results for AB-729, we expect to progress on next generation Capsid Inhibitor AB-836 through IND-enabling studies and look forward to the initiation of Phase 1a/1b trials thereafter. Regarding our earlier stage pipeline, we hope to report continued progress for a lead oral next-generation HBV specific RNA destabilizer and a lead oral compound that inhibits PD-L1, as well as obviously continuing to progress our COVID-19 research program. So again, thank you very much everyone for joining us on the call this morning, and that concludes the meeting. Thank you.

Ladies and gentlemen, that does conclude today’s program and you may all disconnect. Everyone, have a great day!