Arbutus Biopharma Corp Q3 FY2022 Earnings Call

Good day. And thank you for standing by, and welcome to Arbutus Biopharma Corporation's 2022 Third 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 now like to hand the conference over to your speaker today, Lisa Caperelli, Vice President of Investor Relations. You may begin.

Thanks, Justin. Good morning, everyone, and thank you for joining Arbutus' third quarter 2022 financial results and corporate update call. Joining me today from the Arbutus executive team are Bill Collier, President and Chief Executive Officer; David Hastings, Chief Financial Officer; Dr. Gaston Picchio, Chief Development Officer; and Dr. Mike Sofia, Chief Scientific Officer. Bill will begin with a corporate update, followed by Dave, who will provide a review of the company's third quarter 2022 financial results. After opening remarks, we will open the call for Q&A. Gaston and Mike will be available to address clinical development and research-related questions. Before we begin, I'd like to remind you that some of the statements made during the call today are forward-looking statements, which are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our most recent annual report on 10-K, quarterly report on Form 10-Q to be filed later today, and from time to time in other documents filed with the SEC. With that, I'll turn the call over to Bill Collier. Bill?

Thank you, and thank you everyone for joining us today. We really do appreciate your continued interest and support of Arbutus Biopharma. Now, this morning we issued our third quarter 2022 financial results and corporate update press release, which highlights the significant progress we have made in advancing our preclinical and clinical programs in support of our mission to develop a functional cure for hepatitis B virus and to treat COVID-19 and future coronavirus outbreaks. Late last week, we issued a press release and hosted a webcast focusing on the encouraging off-treatment data with our lead clinical asset, AB-729. This data was also presented as a poster at the AASLD Medical Congress on Monday. This morning, I'd like to review a few key highlights of the AASLD data and provide some updates on our programs as they relate to our milestones plan for the remainder of this year. So, first of all, we believe that AB-729 is one of the most advanced RNAi therapeutics in development and continue to believe that 729 can be a cornerstone therapeutic in the treatment regimen for HBV. AB-729 is capable of suppressing HBV DNA, reducing surface antigen, and immunologically controlling HBV, hitting all three of the components that we consider critical to achieving a functional cure. At AASLD, we revealed additional data for 729 that supports this claim by showing the following. First, nine out of nine patients with chronic HBV that were treated with 729 plus a nuke for one year and were eligible to stop all therapy were able to control HBV biomarkers while off all therapy. Their surface antigen remained well below pre-study levels, and their HBV DNA remained suppressed. Second, none of these nine patients had a clinical relapse, and none met the protocol-defined criteria to restart nuke therapy. And third, there was some level of reawakening of HBV-specific immunity. This was not only shown by maintaining surface antigen below baseline levels without therapy but also through control of bursts of viral replication without restarting treatment. So, we're extremely impressed by this data. And for the first time, the medical field has seen the ability of an RNAi therapeutic to control HBV disease biomarkers while off treatment. While the criteria for a functional cure, which consists of undetectable HBV DNA and surface antigen for six months after therapy has not yet been met, we do believe that this data suggests that we can ultimately get there. Now, we also presented data from a preclinical study that assessed the ability of monotherapy and combination treatment with AB-101, our small-molecule oral PD-L1 inhibitor, and an HBV-targeting RNAi agent to reinvigorate HBV-specific T cell activity in an HBV mouse model. We were pleased that this confirmed liver engagement and HBV immune enhancement of AB-101 and further supports our development strategy of potentially using 101 in combination with 729 in our pursuit of a functional cure in HBV. I'd now like to switch to the key milestones that we anticipate for the remainder of this year and provide an update on our progress towards achievement. Now, we anticipate reporting preliminary data from our Phase IIa clinical trial evaluating 729 in combination with interferon in chronic HBV patients. In this trial, patients receive AB-729 for 24 weeks and are then randomized to receive either 729 plus a nuke plus interferon or a nuke plus interferon for 12 to 24 weeks. The goal of this trial is to determine the additive, if any, benefit that interferon provides in addition to AB-729. Our HBV preclinical assets, AB-101, our oral PD-L1 inhibitor compound, and AB-161, our oral RNA destabilizer, are both in IND-enabling studies which are on track to complete this year, and also in our coronavirus program. By year-end, we expect to nominate a clinical candidate that inhibits the SARS-CoV-2 nsp5 main protease inhibitor or Mpro. So, the rest of the year will be quite busy for us as we continue to progress our HBV and coronavirus assets, and I look forward to providing updates as we achieve these milestones. I'll now turn the call over to Dave Hastings for a brief financial update.

Thanks, Bill, and good morning, everybody. As I've mentioned in the past, our key financial metrics are cash and financial runway. Our cash, cash equivalents, and investments were approximately $190.2 million as of September 30, 2022, as compared to approximately $191 million as of December 31, 2021. Now, during the nine months ended September 30, 2022, the company received a $40 million upfront payment from Qilu Pharmaceutical Company related to a technology transfer and license agreement for AB-729 in Greater China, $15 million of gross proceeds from Qilu's equity investment in the company, and approximately $9.2 million of net proceeds from the issuance of common shares under Arbutus' At-the-Market offering program. These cash inflows were partially offset by approximately $62.4 million of cash used in operations. Now, the company expects a net cash burn between $90 million to $95 million in 2022, not including the $55 million of proceeds received from Qilu. And we believe our cash runway will be sufficient to fund operations into the second quarter of 2024. Additionally, we were pleased to see that OMERS, who we sold our primary royalty interest in ONPATTRO to, now has earned $16.5 million in cumulative royalties. Now, as a reminder, once OMERS collects $30 million in ONPATTRO royalties, that entitlement will revert back to us. After that reversion, our royalty rate for ONPATTRO annual net sales greater than $500 million will be slightly higher than 3%. So, in closing, we are well-positioned financially to advance our mission to develop a functional cure for HBV and a treatment for COVID-19 and potential future coronavirus outbreaks. With that, I'll turn the call back to Bill.

Thanks very much, Dave. So, Justin, our operator, can we open up the lines now for the Q&A session?

Thank you. And our first question comes from Dennis Ding from Jefferies. Your line is now open.

Hi, good morning. Thanks for taking my questions, two for me. First on hep B, can you just comment on the Phase II study that's reading out in the fourth quarter with peginterferon, what do you expect to show for that study and how much incrementally better do you hope adding 729 will be? And then, secondly on the patent litigation, what are next steps here, what are the key dates you can provide in terms of these next updates? I'm just looking for more factual information that you guys can provide. Thank you.

Thank you, Dennis. This is Bill. So, on your first question around the interferon study, I would make a couple of comments here. At AASLD, there were some interesting data from Vir with their study with interferon and some, what I would say, mixed data from J&J. So, there's that context out there. But as far as our own study is concerned, we're eagerly awaiting our own study results, and that study is close to being fully enrolled. We expect to have some initial results by the end of the year. Between now and the end of December, we'll be back to you with some of those initial readings. On your second question around the litigation, we were pleased to see the district court deny Moderna's partial motion to dismiss. We're now moving forward with our patent infringement lawsuit. However, I can't comment on specific dates or activities. We will let the legal process follow its path.

Operator, we can move to the next question.

Thank you. Our next question comes from Roy Buchanan from JMP. Your line is now open.

Hi. Thanks for taking the questions. I actually had a couple of non-hepatitis B ones. Now still early days but as far as COVID treatment landscape, do you expect the market to eventually require combination treatments due to resistance or other reasons? And then, anything you can tell us about your Mpro candidates? Like if they are peptide mimetics, covalent warheads? Any details you can provide? Thanks.

Sure. Hi, Roy; it's Mike Sofia. So, yes, clearly in the lab you can see resistance against some of these Mpro candidates that have been sort of progressed forward that we have seen either on the market or in the literature. As one would expect with a protease inhibitor, there is a significant possibility. So, combination therapy, as we have always said, we believe is going to be an important piece of our strategy that's going to help address that. Moreover, as we have always said, the single agent protease inhibitors really have had no impact on pre and post-exposure prophylaxis or symptomatology which we hope that a really potent combination agent will alleviate. An nsp12 polymerase inhibitor typically has a high barrier to resistance, covering resistance aspects while providing an added boost to intrinsic potency and hopefully clinical efficacy.

Okay, great. Any details on the Mpro trial…

Yes, we haven't really disclosed anything yet on our compound. We clearly stated the profile that we are looking for: pan-coronavirus, intrinsic potency at least competitive or better than what's currently available with oral dosing and the need for Ritonavir boosting, as Paxlovid requires. So, I think that's what we just described. We clearly have a multi-prong approach going on, with our internal program and our collaboration with X-Chem and Proteros that gives us a number of different options for what we ultimately can deliver to the clinic.

Okay, great. The collaboration program started with a library screen, right, a DNA-encoded library?

That is correct, yes.

And thank you. And our next question comes from Keay Nakae from Chardan. Your line is now open.

Yes, thanks. As you look to advance 101 and 161 into the clinic next year, at least from where you are standing now, what might those initial clinical study designs look like for each?

Yes, Keay, thank you very much. This is Bill. We haven't described that yet publicly. When we have talked about the end-of-year deadline and getting these IND-enabling studies completed, we anticipate coming up with a 2023 guidance in early January. Clearly, that will include what the plans look like for 101 and 161 as well as the other assets that we are moving forward with. But right now, we are focused on working hard to complete those IND-enabling studies.

Okay. And just back to the combination study with interferon. When you talk about kind of reporting initial results, I guess maybe beyond safety, what type of efficacy might you plan to report?

Yes, good question, and thank you for your interest. The only other thing I could say at this stage is that obviously the way that study was designed, there was a leading period with 729 before we then stratified into adding interferon. One of the things we have been looking at is how that initial leading period has performed as well as some of the initial data on interferon, but that is still in the hopper. We are still assessing the results that we see. We will provide that information before the end of December.

Okay, thank you.

And thank you. And I am showing no further questions. I would now like to turn the call back over to management for closing remarks.

All right, thank you very much. And thank you for your questions. Thanks for joining us this morning. Obviously, we appreciate your interest in hepatitis B and coronavirus. We look forward to sharing these additional updates on our assets as we move forward through the remainder of November and December this year. Thanks very much for joining us this morning.

This concludes today's conference call. Thank you for participating. You may now disconnect.