Arbutus Biopharma Corp Q4 FY2023 Earnings Call

Good day, and thank you for standing by. Welcome to the Arbutus Biopharma Fourth Quarter and Year End 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After the 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 over to your first speaker today, Lisa Caperelli, VP of Investor Relations. Please go ahead.

Thank you, Stephen. Good morning everyone and thank you for joining Arbutus' fourth quarter and year end 2023 financial results and corporate update call. Joining me today from the Arbutus executive team are Mike McElhaugh, Interim President and Chief Executive Officer; Dr. Karen Sims, Chief Medical Officer; David Hastings, Chief Financial Officer; and Dr. Mike Sofia, Chief Scientific Officer. Mike McElhaugh will begin with a corporate update, followed by Karen, who will review our ongoing clinical programs. Dave will then provide a review of the company's fourth quarter and year end 2023 financial results. After our prepared remarks, we will open the call for Q&A. Before we begin, I'd like to remind you that some of the statements made during the call today are forward-looking statements, which are subject to a number of risks and uncertainties that may cause our actual results to differ materially including those described in our annual report on Form 10-K and from time-to-time in our other documents filed with the SEC. With that, I'll now turn the call over to Michael McElhaugh. Mike?

Thank you, Lisa. Good morning everyone and thank you for joining us today. In 2023, we made several important strategic choices to best position Arbutus for long-term success. In addition to streamlining our focus and resources on HBV, which extended our cash runway into the first quarter of January 2026, we also announced my appointment as Interim President and CEO. As a co-founder of Arbutus, I am honored to have this opportunity to lead my colleagues in our mission to develop a functional cure for the millions of people chronically infected with the hepatitis B virus. I'm excited for my new role and plan to leverage my extensive scientific, strategic, transactional, and commercial experience with antiviral and infectious disease companies to continue to move Arbutus forward. In 2024, our focus is to position Arbutus for continued success and create value for all our stakeholders. We remain committed to advancing the development of our proprietary clinical assets in HBV, including imdusiran, our RNAi therapeutic and AB-101, our oral PD-L1 checkpoint inhibitor. There remains a need for finite and more efficacious HBV treatments that further improve long-term outcomes and increase functional cure rates as fewer than 5% of patients currently achieve functional cure with currently approved nukes or interferon. Our goal is to develop a treatment for chronic hepatitis B virus patients that results in at least a 20% functional cure rate to address this large unmet medical need. HBV is a complex virus that will most likely require a combination of compounds that inhibit viral replication, lower the viral antigen burden, and boost the immune response. We are executing on our three-pronged approach to functionally cure HBV with a combination therapy that includes imdusiran as a cornerstone. A combination that includes imdusiran, AB-101, and a nuke is our ultimate goal. That said, our current strategy is evaluating imdusiran in combination with other agents in multiple Phase 2a clinical trials with the goal of gaining valuable insights on efficacy, safety, and optimal dosing to help inform the design of a Phase 2b clinical trial with imdusiran as the cornerstone therapy. Throughout 2024, we anticipate reporting data from our two ongoing Phase 2a clinical trials with imdusiran, including the potential to see patients with undetectable surface antigen. Achieving undetectable surface antigen levels in either of our current Phase 2a clinical trials would certainly be an important validation of imdusiran's role in potentially achieving a functional cure for hepatitis B patients. This year, we also anticipate data from our healthy subject portion of our Phase 1a/1b clinical trial with AB-101, our immunomodulator. We expect to report preliminary safety and importantly, preliminary receptor occupancy and target engagement data in this population. With the potential of AB-101 to boost the host immune response, our goal is to move AB-101 through the clinic as quickly as possible to prepare it for a possible combination with imdusiran. I'd like to say a few brief words about our ongoing intellectual property litigation efforts before closing out this section of the call. All of our scientists take great pride in the intellectual property they develop which takes great effort, time, resources, and expense. It is for these reasons that we continue to protect and defend our intellectual property, including our LNP delivery technology which is the subject of ongoing lawsuits against Moderna and Pfizer-BioNTech. An important step in the litigation for Moderna took place on February 8th of this year. This was the date of the Markman hearing, also known as a Claim Construction hearing, where the court heard each party's interpretation of the construction of claims in the disputed patents. We anticipate the judge to issue his order from the hearing within 60 days of February 8th. The next steps will include expert testimony and depositions. In addition, the court has set April 21st, 2025 as the trial date for this case. That date is subject to the court's availability. With respect to the Pfizer-BioNTech lawsuit, the only update I can provide is that the lawsuit is ongoing but is behind the Moderna lawsuit as it was filed later. A date for the Claim Construction hearing for that case has not yet been set. When able, we will provide updates on both the Pfizer and Moderna lawsuits, but please keep in mind that giving the legal sensitivities, we're limited in what we can say. I'll now turn the call over to Karen Sims to provide an update on the continued progress we are making across our pipeline. Karen?

Thanks Mike and good morning everyone. We are currently conducting three clinical trials with our hepatitis B assets, two Phase 2a clinical trials with imdusiran and one Phase 1a/1b clinical trial with AB-101, and we expect to report data from all three of these trials throughout this year. We also plan to initiate a third Phase 2a clinical trial with imdusiran and durvalumab, an approved anti-PD-L1 monoclonal antibody, in the first half of this year. We will share more details on that trial upon initiation. As Mike stated, the purpose of these multiple Phase 2a combination clinical trials is to gain information on the safety and efficacy of imdusiran as a cornerstone therapy and to identify a combination treatment regimen that reduces viral burden and boosts the host immune response to advance into a later-stage clinical trial. AB-792-201 is our Phase 2a clinical trial evaluating imdusiran in combination with ongoing nuke therapy and interferon in patients with chronic hepatitis B. Last June at EASL, we reported preliminary data that continues to reinforce our confidence in imdusiran's ability to effectively lower surface antigen. At that time, we reported data on a small number of patients that had received imdusiran plus at least 12 weeks of interferon and showed that interferon may contribute to additional declines in surface antigen. In the first half of this year, we plan to announce end of interferon treatment data for all 43 study patients, which will include safety and changes in surface antigens from baseline. When we report these data, we could potentially have some subjects that achieved undetectable surface antigen. As a reminder, undetectable surface antigen is a key component of functional cure. AB-729-202 is a Phase 2a clinical trial that we are conducting in collaboration with Barinthus Bio Therapeutics, formerly known as Vaccitech. Through this clinical trial, we are testing whether the combination of imdusiran, nuke therapy, and Barinthus' HBV antigen-specific immunotherapeutic VTP-300 can lower surface antigen and stimulate the host immune system to fully suppress the virus. Late last year at AASLD, we reported preliminary data that included all patients that received imdusiran treatment and several patients who had received VTP-300 or placebo. In these early data, we reported that surface antigen levels were reduced and sustained with the combination treatment of imdusiran and VTP-300. In the first half of this year, we expect to report end of treatment data, which would include safety and change in surface antigen from baseline for all 40 patients that received imdusiran, VTP-300 or placebo and nuke therapy. We are continuing to dose patients in the amendment to the AB-729-202 trial that explores the addition of a low dose of the anti-PD-1 monoclonal antibody nivolumab to the combination treatment regimen. We believe nivolumab may further boost the host immune response. Preliminary data from this portion of the trial is expected in the second half of this year. As noted for the AB-729-201 trial, we may also have the potential to see undetectable surface antigen in some patients, which is a prerequisite to achieving a functional cure. While our Phase 2a clinical trials are evaluating imdusiran in combination with immune modulators, we intend to develop a proprietary combination therapy with imdusiran and AB-101, our oral PD-L1 checkpoint inhibitor. We believe that the immune checkpoint pathway plays an important role in HBV-specific immune tolerance and in T cell activation. Our third ongoing clinical trial is our Phase 1a/1b clinical trial, AB-101-001. This double-blind, randomized, placebo-controlled trial is designed to investigate the safety, tolerability, pharmacokinetics, and pharmacodynamics of AB-101. This trial consists of three parts, starting with single and multiple ascending doses in healthy subjects, and culminating with multiple doses in patients with chronic hepatitis B. We are now moving AB-101 into the second part of this trial, which includes evaluating multiple ascending doses of AB-101 in healthy subjects. In the first half of this year, we anticipate reporting preliminary data from the healthy subject portion of this trial, which will include safety data in addition to preliminary target engagement and receptor occupancy data. As we continue to advance the clinical development of imdusiran and AB-101, we believe both compounds are well positioned to deliver on our goal of developing a functional cure for hepatitis B and driving value for our company. With that, I'll turn the call over to Dave Hastings for a brief financial update. Dave?

Thanks Karen and good morning everybody. We ended 2023 with approximately $132 million of cash, cash equivalents, and investments compared to approximately $184 million as of December 31st, 2022. During the year ended December 31st, 2023, we received $29.9 million of net proceeds from the issuance of common shares under our at-the-market offering program. These cash inflows were offset by $85.9 million of cash used in operations. We anticipate a significant reduction to our cash burn in 2024 from 2023 as we focus our pipeline and research efforts on HBV. Therefore, we expect our 2024 net cash burn to range between $63 million to $67 million, excluding any proceeds received from our at-the-market offering program. Importantly, we believe our cash runway is sufficient to fund our operations into the first quarter of 2026. In closing, we have a strong financial position to advance our mission, and we remain committed to developing our HBV assets to provide a functional cure for chronic HBV. With that, I'll turn the call back to Mike. Mike?

Thanks Dave. As I mentioned earlier, we have a data-rich year with end of treatment data expected from our two Phase 2a clinical trials with imdusiran and preliminary data from our Phase 1a/1b clinical trial with AB-101. We also anticipate initiating a third Phase 2a clinical trial with imdusiran and durvalumab. Operator, we're now ready to open the call for Q&A.

All right. Thank you. At this time, we will conduct a question-and-answer session. First question comes from the line of Dennis Ding, Jefferies. Your line is now open.

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

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

Yes, we need to be careful about what we say publicly regarding this case. We look forward to the judge's ruling. It's best not to discuss the details until it happens. We appreciate everyone's interest and take this matter very seriously. We were pleased with the hearing and anticipate Justice Goldberg's ruling, which we expect within 60 days of February 8th.

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

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

Thank you.

Thanks Dennis.

All right. Thank you. Next question comes from the line of Brian Skorney of Baird. Your line is now open.

Hey, Good morning. Thank you for taking my question. I just wanted to get a little bit more of a handle on the PD-L1 antibody study designs and rationale. I guess, first, how do you think about PD-1 versus PD-L1 targeting? It's been a while, but I think some of the initial Medarex literature showed that maybe preclinically, PD-L1 was the more desirable of a target for infectious disease. Any thoughts on that design trial? And then how do you kind of go about thinking about selecting nivo for 202 and durva for study 203? Thanks.

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

Sure. Hi Brian. We know that PD-L1 is significantly increased on hepatocytes in patients with chronic hepatitis B. The choice between PD-1 and PD-L1 is primarily a strategic one because we have identified small molecule agents that effectively block PD-L1. As we have discussed in the literature, this represents a novel mechanism of action since it internalizes and degrades PD-L1, and we can restore PD-L1 on hepatocyte surfaces simply by removing the drug. This approach aligns with our strategy for small molecule liver-targeted agents that avoid the issues related to broad systemic immune activation. Consequently, our decision is partly based on the fact that PD-L1 is elevated in hepatocytes, allowing us to target them with a PD-L1 agent and design a small molecule that fits within our overall approach to addressing liver disease.

Yes. Thanks Mike. And I can jump in about the questions regarding the nivo versus durvalumab in our clinical trials. So, for the 202 trial, that's the trial we're doing in collaboration with Barinthus Biotherapeutics and their VTP-300 asset. So, as you probably know, they have performed some studies already using VTP-300 in combination with low-dose nivolumab and their HBV002 and ongoing HBV003 studies. And in those studies, they have suggested that there is potentiation of response in subjects that receive VTP-300 plus a dose of low-dose nivolumab given at the time of the MVA boost. So, for that reason, we incorporated that strategy into the 202 study as an amendment based on their prior and ongoing experience with using nivolumab in this context. For the 203 study, we did decide to utilize the anti-PD-L1 antibody, durvalumab, basically for the reasons Mike just suggested, and to be able to inform our upcoming combination study with AB-101 and imdusiran in terms of starting to explore the optimal timing and administration of a PD-L1 inhibitor in the context of imdusiran therapy. So, that's kind of the rationale for the difference between the two studies. And certainly, as the 203 study moves forward, we'll be able to share more details about the study design.

Great. Thanks. That’s really helpful.

Great. Thanks Brian.

All right. Next question comes from the line of Roy Buchanan of Citizens JMP. Your line is now open.

Hey, thanks for taking the questions. A couple, I guess, for 101, just when do you think you might be in a position to re-engage with the FDA on 101? And I guess, more broadly, what are your plans following the Phase 1a/1b, too? Can you just elaborate on those a little bit?

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

Sure, we do plan to re-engage with the FDA for this program when we have enough data to present a strong package for moving forward in the U.S. Our communication with the FDA is always open, and we are eager for the AB-101 trial to continue and collect more data to share with them. We have a history of taking assets outside the U.S. for Phase 1 studies before bringing them back to the FDA for Phase 2 trials, and we will do this to expand our study population as needed. Regarding the study's progress, we have moved into multiple dosing with healthy subjects and expect to share preliminary data from these subjects in the first half of this year. The study is structured to allow a smooth transition into chronic hepatitis B patients once we have enough data, and we will provide updates as they become available.

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

Yes, that's a good question, Roy. Honestly, we need to see what the data looks like and will continue to evaluate it as it comes forward. As you mentioned, we added the nivo arm to the study as well. We would likely want to see that nivo data before proceeding with that combination, unless something spectacular arises from the VTP-300 plus imdusiran arm, which I currently have no insight into. Ultimately, it will depend on the data. Since VTP-300 is not a proprietary asset, we are considering the combination of imdusiran plus 101 and moving that forward as quickly as possible. That has always been the goal. The data will guide us, which I believe is the best approach to take.

Yes, thanks.

Sure.

All right. Next question comes from the line of Ed Arce of H.C. Wainwright. Your line is now open.

Hi, good morning everyone. This is Thomas Yip asking a couple of questions for Ed. Thank you for taking our questions. First question for the new 203 Phase 2a study with durvalumab, can you discuss the design in broad strokes how big will the study be? And any specific elements that we can expect the study that is learning from the ongoing 202 study?

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

Yes, sure. So, again, we typically don't dive into the details of our study designs until we're able to announce the first subject, first dose in the study. So I can't elaborate much beyond what we've already said. Again, the goal of the study is to try to help inform upcoming studies with imdusiran in combination with AB-101, so looking at different options in terms of the timing of adding a PD-L1 inhibitor to imdusiran therapy is really the high-level goal. In terms of the size of the study, it is a typical Phase 2a size study. This is again an exploratory study to try to basically learn about, again, that optimal timing, optimal duration of that combination approach. So, the study is listed on clinicaltrials.gov, and you're certainly welcome to peruse that for any additional details there. But again, we will share more specific details about the trial once we add and have subjects enrolled.

Got it. Understood. And then, same thing, similar along with that line, just thinking ahead of the combination study with imdusiran and then with 101. Will the first study be a similar proof-of-concept study, Phase 2a that we've seen with other combinations as well?

Yes, I can address that. Typically, the reasoning behind starting with a Phase 2a study is to expand the safety database for AB-101. We are also gathering more information about pharmacokinetics and pharmacodynamics in a larger group of subjects. Transitioning to a Phase 2a study is a standard procedure for early development assets to ensure we fully understand the different characteristics of the molecule before advancing to a larger Phase 2b study. This process is focused on minimizing risk and ensuring we are thoroughly comfortable proceeding with larger studies, which we know are technically complex and costly. Most likely, it will begin with a smaller Phase 2a study. However, as Mike mentioned during the call, we need to analyze the data and let it guide our decisions. We will provide more updates as the AB-101 program progresses through Phase 1.

Got it. Understood. And then one final question from us. Just trying to narrow down the timing of the first half readouts, most notably the 201 end-of-treatment data readout and then also the AB-101 preliminary data. Are these separate events? Or should we expect kind of like a big splash at EASL?

Yes. That's a tough question to answer. We would love to present our data at EASL, and we always enjoy presenting there. However, we cannot predict whether any abstracts we submit will be accepted. Therefore, it's difficult to provide specific guidance for a particular conference. You are thinking about the timing correctly, as that is likely when the data will be available, either through a conference or some other means.

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

Great. Thank you, Thomas.

Thank you. Next question comes from the line of Keay Nakae of Chardan. Your line is now open.

My questions have been answered. Thanks.

Thanks Keay.

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

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

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