Arbutus Biopharma Corp Q2 FY2021 Earnings Call

Good day, and thank you for standing by. Welcome to the Arbutus Biopharma Corporation 2021 Second Quarter Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference to your speaker today, Ms. Pam Murphy. Please go ahead.

Good morning, everyone. On the call from the Arbutus executive team are Bill Collier, President and Chief Executive Officer; Dave Hastings, Chief Financial Officer; Dr. Gaston Picchio, Chief Development Officer; and Dr. Mike Sofia, Chief Scientific Officer. Bill will begin with the review of the second quarter and first half accomplishments, clinical development and remaining 2021 corporate objectives, followed by Dave Hastings, who will provide a review of the company's second quarter financial results. We'll then open up the call for Q&A. And Mike and Gaston will be available to address research and clinical development related questions. 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 for Arbutus' proprietary HBV pipeline and HBV and pan-coronavirus discovery program, including potential clinical results and timelines for AB-729, AB-836 and any future compound; our expected cash runway and the potential for our drug candidates to improve upon the standard of care and contribute to a curative combination regimen for HBV. 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 the most recent Annual Report on 10-K, Quarterly Report on Form 10-Q and other specific reports filed with the SEC from time-to-time.

Thank you, Pam, and good morning, everybody. Thank you for joining us today. We appreciate your interest in Arbutus Biopharma. I'm very pleased to report on our significant progress so far this year and to outline our objectives for the rest of 2021. We continue to drive towards our goal of Arbutus, which is to focus primarily on developing a portfolio of products with different mechanisms of action that when used in combination, result in a functional cure for patients living with chronic HBV. During the first half of this year, we established a strong foundation towards achieving that goal by accomplishing the following. We continue to report compelling data on AB-729, with four abstracts at the EASL including a late breaker oral presentation that showed substantial declines in hepatitis B surface antigen in subjects with chronic HBV. Importantly, 729 continues to have a favorable safety and tolerability profile. From all four of these abstracts, we were selected for the best of EASL conference. Notably, in addition to reporting significant drops in surface antigen, we saw that in three out of five evaluable subjects there was an increased HBV specific immune response, providing support for combination therapy including immunomodulatory agents. This compelling 729 data, derived from up to one year of dosing, supports our view that 60 mg every eight weeks is an appropriate dose in our Phase 2a clinical trials. I'll discuss these trials in just a moment. Looking forward, we expect to provide additional data in the second half of 2021, including initial data for a 90 mg every 12 week cohort in HBV DNA negative subjects and initial data on a 90 mg every eight week cohort in HBV DNA positive subjects. As we've discussed in the past, we believe that 729 has the potential to be a cornerstone therapeutic in future HBV combination therapies. Our strategy has been to enter several clinical collaborations to evaluate 729 in combination with other agents with potential complementary mechanisms of action. I am pleased to report significant progress towards this goal with our previously announced collaborations with Assembly Biosciences, Antios Therapeutics, and Vaccitech. Additionally, we received authorization from the FDA to proceed with our IND application for 729 in a clinical trial in combination with a nucleoside analog and short courses of peg-interferon. The Antios collaboration will evaluate a triple combination of 729, the Antios proprietary active site polymerase inhibitor nucleotide, which is called ATI-2173, and Viread for the treatment of subjects with chronic HBV. The Vaccitech collaboration will evaluate a triple combination of 729 with Vaccitech's proprietary immunotherapeutic, VTP-300, and standard-of-care nucleoside analog therapy for the treatment of subjects with chronic HBV. A clinical trial evaluating 729 with interferon and Antios' ATI-2173 is expected to initiate in the second half of 2021. In addition to the substantial progress we've made with AB-729, I'm also gratified with the initiation of a Phase 1a/1b clinical trial with AB-836, a next-generation oral capsid inhibitor. This is an important program as it will allow us to potentially have our own proprietary combination therapy to treat patients with chronic HBV. At the recent EASL conference, Arbutus presented pre-clinical 836 data suggesting the potential for increased efficacy on an enhanced resistance profile relative to previous generation capsid inhibitors. Initial data from healthy volunteers and HBV subjects is expected in the second half of this year. We continue to make progress in all of our discovery programs, focusing on generating lead nomination candidates for our oral PD-L1 inhibitor and RNA-destabilizer programs. Additionally, our internal research program to identify new small molecule antiviral medicines to treat COVID-19 and future coronavirus outbreaks continues to progress. With that summary, I'll now turn the call over to Dave Hastings for a brief financial update. Dave?

Thanks Bill, and good morning, everybody. As I have mentioned in the past, our key financial metric is cash and financial runway. Our cash, cash equivalents, and investments were $121.3 million as of June 30, 2021, compared to $123.3 million as of December 31, 2020. Our cash use from operations for the first half of 2021 was $31.9 million, which was offset by $30.7 million in net proceeds from an issuance of common shares under Arbutus' ATM program. For all of 2021, we expect our cash use to range from $70 million to $75 million. Therefore, we expect our current cash runway is sufficient to fund operations through the third quarter of 2022. So with that, Bill, I'll turn the call back to you.

Thanks very much, Dave. So operator, let's now open the lines for Q&A, please.

Your first question comes from the line of Ed Arce with H.C. Wainwright.

Hi, good morning everyone. This is Thomas Yip asking a couple of questions for Ed. First, about the new Phase 2a study with 729. Specifically regarding those in choice. In the press release you indicated that you really selected a 60 mg every eight weeks as the dose to go forward. I'm just wondering will this study include only one dose or is there a possibility to improve additional doses with the 90 mg dose stay there or they are expected in the second half this year?

Yes, good question. Thank you very much, good morning. Gaston, would you like to take that one?

Sure. Hi, good morning from us. For now, the decision has been made to include a single dose, but since we are in the early stages of preparation for the trial and our 90 mg data will come later this year, there is always an opportunity to reconsider that decision and include additional doses. But right now, we're going with one dose.

Okay, sounds good. Regarding 836 and the ongoing Phase 1a/b study, you mentioned that data from both healthy volunteers and HBV patients will be included, and that this will increase in the second half of this year. I'm curious about the single data readout and what we should expect from this readout on safety data.

Yes. Gaston, you want to add to?

Sure. We expect obviously safety data and the availability as well as some HBV DNA data coming from the cohorts. We may also be able to deliver some HBA RNA data as well. Sorry, let me just add one thing. We will as usual measure as antigen, pending whether, as you know, 836 potentially it's much more effective but targeting the second mechanism. So, we will be measuring that antigen as well and see what happens in that front.

Alright. So, perhaps some areas comparable to 729 area, daily releases?

Yes, correct.

Yes, that's correct. I have one last question. You mentioned the progress on the 729 combination studies. Have you reported on the involvement for the 729 combo study with Assembly, and if not, what can we expect from this study going forward?

Yes Gaston, want to again?

So, it's a limit for maturity, yet the study is recruiting and pending the progress in terms of rolling this study, we will make a later announcement regarding what data can we share before the end of the year. But the study has been rolling as planned as we speak.

Okay. So, we should expect a new update by the end of the year?

I guess, I think it's going to be dependent on how successful the enrollment process moves forward. There are challenges around the world right now in terms of COVID. So, so far so good, the study's enrolling, the studies are opening, but it's very difficult to predict these days the pace of enrollment in any way around the line.

Yes. So just, on that we haven’t guided to having results by the end of the year. In that Assembly collaboration, what we have said in conjunction with our partners at Assembly, is that the study has initiated and is recruiting.

Okay, understood and completely understandable given what's going on around the world. Thank you so much for taking the questions and we look forward to the multiple data releases in the second half of this year.

Thank you very much.

Your next question comes from the line of Brian Skorney with Baird.

Hi, this is Luke on for Brian. So, regarding peg-interferon outlook combo study, beyond safe, could you maybe talk about what you're hoping to see, you're going biomarkers and also kind of early here. But also when do you think we could see initial data?

Well, on that study, we said that we will initiate in the second half of this year. As to the study design, I'll let Gaston answer that.

Thank you for the question. We shared data at EASL indicating a revival of HBV specific immunity after approximately 20 weeks of dosing with 729. We believe this opens up significant opportunities to incorporate additional treatments, such as immunomodulatory agents like interferon. We expect that adding interferon will likely lead to quicker results and improvements in the S-antigen levels. Our plan also includes assessing T cell responses, and we anticipate that these responses could be more robust and extensive in the presence of interferon. Additionally, we have other biomarkers to evaluate, such as HBV RNA, but those findings will depend on whether the initial baseline levels are appropriate. Ultimately, we hope to observe an increase in anti-S-antibodies in the presence of interferon, which has not been observed in our ongoing studies thus far.

Great, thanks.

Thank you, Luke.

Your next question comes from the line of Roy Buchanan with JMP Securities.

Hi, thanks for your questions. The first one I want to ask about is Vaccitech's approach and what makes that approach therapeutically appealing for the therapeutic vaccine. However, why not consider using an approved potent vaccine like Heplisav-B as a possible option?

Yes, thank you for the question. We have always had a strategy that involves a combination of drugs, and we have included a specialist slide in our corporate presentations for many years that outlines various potential combinations, including both positive and negative indicators. We have also consistently acknowledged that vaccines are part of this strategy. We were intrigued and interested in the collaboration with Vaccitech. I'll let Gaston provide more details.

Yes, thanks for the question. I think it's along the lines of what we've discussed previously. So, now we have evidence, I think for the first time, we believe we're the first ones to show that as we've done with siRNA, you're able to reawaken HBV-specific immune responses. This provides an excellent opportunity to explore enhancing the HBV-specific immune response in different ways. One way is with the broad immunomodulatory agent such as interferon, and the other would be with HBV-specific vaccines. Now specifically, the data we have gathered in the AB-729 program, especially the immunology data, really provides a very good foundation and justification to build this study with Vaccitech. We believe Vaccitech's platform provides a much stronger HBV-specific immune response than existing prophylactic HBV vaccines. I think you should discuss their data directly with them, but based on what we've learned, we believe their therapeutic vaccine, with the adeno platform as well as MVA, provides a much better opportunity at enhancing HBV-specific responses compared to prophylactic HBV vaccines that may be in the market.

Okay, great. And I had a question on Antios' ATI-2173. How does that clinically differ in targeting versus the background which is tenofovir in this case? And is the goal to replace the background with a more potent one or what's the aim of the combination?

Yes, good question. It's set up in the study as with nucleoside. Maybe Mike Sofia, do you want to chime in on that?

Sure. If you look at clonidine as a nucleoside, it has a very interesting profile in vivo studies. Even in some of the earlier historic clinical trials, what you saw was this longer duration of effect compared to a typical nucleoside, whether tenofovir or entecavir. It also has a slightly different mechanism of action. Although it does target the polymerase, it binds to the active site but does not function as a chain terminator like tenofovir or entecavir, which differentiates it in some ways. The rationale for combining it with 729, which reduces S-antigen, is to see very deep suppression of viral replication that is more sustained over time than with a single nucleoside. So, that was the rationale for including the Antios molecule into the mix.

Thank you, that’s helpful. I have a couple of questions about the interferon program. They presented some preliminary results on their combination of RNAi and interferon. Is there anything from that program that can be applied to 729? Are you making any changes with 729 that would set it apart from the other candidates, or is differentiation not necessary? Also, what do you anticipate the baseline functional cure rate will be for the interferon combined with the new guidelines? I notice you don’t have the interferon number available, and I’m unclear if the slide decks show the combination or just interferon alone.

Gaston, do you want to take that one?

Sure. Let me start from the last question. We don't think we are in a position to provide a number on our expectations for functional cure. So, we just let the data speak for itself. When it comes to what we've learned, the approach that we undertook was adding interferon at the beginning, so from the start they would add RNAi plus interferon. This resulted, if I remember correctly, in an increase in the decay of S-antigen. We have a slightly different approach, in line with findings from our immunology studies presented at EASL. We believe it's better to first lower S-antigen and allow that immune response to come back, and then add the interferon. I believe that the others will also be testing that as well, adding interferon later. We will be adding interferon after 24 weeks of 729 treatment. We expect that after adding interferon, the S-antigen will continue to decay. We may see some sort of conversion, and we will measure if there is a better HBV specific immune reawakening compared to subjects that did not receive interferon.

Okay, great. Thank you.

Your next question comes from the line of Keay Nakae with Chardan.

Hi, Keay Nakae from Chardan. Just back on that same topic with the timing of adding interferon in your study, is there a threshold drop in S-antigen before you'll advance the patient to the interferon or is it just simply the 24-week duration standpoint?

There is no threshold. We're very confident that by week 24, all subjects have achieved at least a log and for the vast majority more than a log and a half of S-antigen drop. So, in response to your question, there is no minimum threshold that they need to meet, but we're very confident everyone is going to have in excess of one log decay of S-antigen.

Okay. And then, how long is the course of interferon?

Yes, great question. We're testing two courses, 24 weeks as well as 12 weeks.

Okay.

Again, we remind everyone the details are in clinical trials, I'll go for it right now.

Okay, alright great. That's all I have.

Thank you, yes.

There are no additional questions at this time. I would like to hand it back to management, but there is a question from Kelechi Chikere with Jefferies.

Kelechi.

Yes hey, how's it going? Thanks for fitting me in here. Just a couple of questions on my end. I guess, on a high level, are there any competitor datasets over the coming quarters, the actuals specifically, that you'll be looking at for read-through or to provide information for your clinical studies?

Alright, good question. I mean, we just had obviously the EASL conference, and as always we had our eyes peeled for interesting data from actually any source.

Uh-huh.

And then, as we think about the second half of the year, the typical event is AASLD, which is in November. I don’t know that I would single out any particular dataset, I'm just wracking my brains here. Gaston or Mike, can you think of anything that, other than obviously staying on top of what all the major companies are doing in the area. So, Gaston?

Got it.

It's intriguing because we have shown a year's worth of dosing with AB-729. We anticipated data from a year of dosing based on their week study. It will be interesting to see if this data is presented at AASLD later this year, especially since they also have triple combinations being studied, which will also be worth watching.

Yes, right, great. Great, thank you. That's great color there. And I guess lastly, with respect to your earlier Phase programs, is there any additional color you can provide around when you might be able to enter the clinic with those, so your destabilizer as well as the PD-L1?

Yes, Mike, do you want to take that one?

Yes. So, we're very close. Now we're kind of in the latter stages of our candidate selection process. I think we'll be able to update soon, and we expect to be in the clinic.

Perfect, and thank you.

There are no additional questions at this time.

Alright. Well, thank you very much for joining us this morning. We appreciate your interest and your questions, actually. We look forward to a productive remainder of 2021 and we continue to be confident with further data from the 729 Phase 1a/1b trial. Our progression of 729 into two additional Phase 2a proof-of-concept studies and data from our 836 clinical trial as well as continued progress in our HBV discovery programs. We'll be building on a strong foundation to achieve a functional cure for people with chronic HBV and of course, we're also looking forward to leveraging our antiviral discovery and research efforts in progressing our pan-coronavirus discovery program. So, with that being said, thank you again for your time and operator, that concludes our call this morning.

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.