Earnings Call Transcript - ABUS Q1 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Arbutus Biopharma Corporation First Quarter 2020 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After the speaker 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, Pam Murphy.

Pam Murphy, COO

Thank you, and good morning everyone. On the call from the Arbutus Executive team are Bill Collier, President and Chief Executive Officer; Dr. Mike Sofia, Chief Scientific Officer; Dave Hastings, Chief Financial Officer; and Dr. Gaston Picchio, Chief Development Officer. Bill will begin with a summary of recent accomplishments, a review of Arbutus' corporate objectives followed by Dr. Sofia who will then describe the recently announced Arbutus COVID-19 research effort. Dave Hastings will then provide a review of the Company's first quarter financial results, and I'll then open up 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, 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 the most recent Annual Report on 10-K, quarterly report from Form 10-Q and other periodic reports filed with the SEC. With that, Bill?

Bill Collier, CEO

Thank you, Pam, and good morning everyone. Thank you for joining us today. We hope that all of you are well and staying safe. Like many of you, I'm sure most of our employees are working virtually and I applaud them for their continued effectiveness in keeping our scientific, clinical and corporate operations and timelines on track. As we previously disclosed, we continue to move forward with our clinical development program for AB-729 at 60 milligram multi-dose and 90 milligram single dose, with data expected in the second half of 2020. We also intend to share additional data from the 12-week portion of the single dose 60-milligram cohort sometime this quarter. Additionally, under the direction of Mike Sofia, I'm proud to say that we've initiated our own COVID-19 preclinical research effort. Mike will describe the program in more detail in just a few moments. We've also joined forces with the COVID-19 R&D consortium. The mission of this consortium is to share data, find the molecules with the greatest rationale for advancement into clinical trials, and put them into studies designed to yield the most meaningful results in the fastest manner possible. Given the proven expertise in antiviral drug discovery and development that exists at Arbutus, I'm confident that it's both appropriate and important that we devote resources to address this global crisis. That said, I want to underline that our primary focus and our mission is to find a cure for hepatitis B and that remains unchanged. This is where substantially all of our resources will continue to be directed, and we're not changing our cash use guidance for 2020 as a result of our COVID-19 initiatives. Just as a reminder, hepatitis B remains a significant unmet medical need with over 257 million people chronically infected worldwide, including over 2 million right here in the United States. Around 900,000 people in the world die each year despite the availability of vaccines and nucleoside and interferon therapies. These existing therapies have very low cure rates, less than 5%, and it's our belief that in an HBV curative regimen could substantially increase diagnosis and treatment rates and unlock significant market opportunities. To conclude my opening comments, we remain focused on developing a portfolio of products with different mechanisms of action that when used in combination could result in a functional cure for HBV. Our objectives include advancing our Phase 1a/1b clinical trial of AB-729; progressing our next generation capsid inhibitor AB-836 through IND-enabling studies; and continuing our research efforts for a next-generation oral HBV specific RNA destabilizer and a lead oral compound that inhibits PD-L1. With that being said, I'll now turn the call over to Dr. Mike Sofia.

Mike Sofia, CSO

Thanks, Bill and good morning, everyone. Many of our Arbutus team members have a great deal of expertise in the discovery and development of safe and effective antiviral therapies, and we've been actively following the Coronavirus pandemic developments from the beginning. While there are many companies already well into the race to address this global health challenge, it is still early and much needs to be done. We believe we have a potentially important role to play and have developed a solid plan that is both appropriate for a company of our size and one that may lead to a new small molecule antiviral therapy for coronaviruses. Regarding our internal effort, this is a long-term commitment. We are not working on repurposed drugs, but rather the discovery and development of new molecular entities that address specific viral targets that fit well with our expertise. These targets include the nsp12 viral polymerase and the viral proteases. These targets are essential viral proteins which our team has much experience in targeting. Collectively, our team has been very successful in bringing novel therapies to the clinic against these types of targets for other viruses such as HCV, HBV, and HIV. As these targets have been shown to deliver clinical value for patients with other viruses, we believe that this is a proven and potentially fruitful approach to take for coronaviruses as well. You're likely to ask how soon we could have a lead compound or compounds to take into IND-enabling studies, and that's a hard question to answer. The discovery process doesn't happen overnight, and as I said, this is a long-term commitment. In terms of our goals for new antiviral agents, we believe we need a drug that will work effectively against a broad patient population that rapidly reduces viral load, especially in patients who are diagnosed with severe disease, has a high barrier to resistance, and works ideally as a pan-Coronavirus agent so that it can be used in future outbreaks. I also believe hitting the virus hard with a combination of agents with different mechanisms of action is likely to provide the best outcome for patients across the broad patient population. It also limits resistance. We will be focused initially on developing single agents, which could be used in combination with other new or existing therapies. Additionally, we are gratified that there has been such a tremendous response to the coronavirus arms and finding ways to control this virus. In this unprecedented situation, all scientifically sound ideas are worth investigating in an effort to identify something that can help patients. As we all learn more, the field will be able to make more educated choices on what to work on. This is why we have joined the COVID-19 R&D consortium. It's a highly organized collaboration among top pharmaceutical and several biotech company R&D leaders, with a singular focused goal. First, to push forward therapies and vaccines against COVID-19 as quickly and effectively as possible. Through this collaboration, Arbutus will be pooling resources and streamlining early stage discovery processes to identify novel targets and agents that inhibit SARS COVID-2 and other coronaviruses. We will be contributing our unique chemical library for screening and then further progressing any active molecules that are identified in the screening efforts. Through the consortium, we will be leveraging certain primary screen capabilities and lead optimization capabilities to identify novel clinical development candidates against both known and potentially unknown targets. We believe Arbutus is uniquely positioned with our focused expertise and capability in antiviral drug discovery and development that allows us to rapidly advance new Coronavirus therapies from discovery through development. I look forward to keeping you all updated on our progress; first, with our own portfolio of HBV compounds including our next-generation capsid inhibitor AB-836, our next generation HBV specific RNA destabilizer, and an oral PD-L1 compound that we believe may be useful in reawakening patients' own immune response to the HBV virus. Secondly, with our work on coronaviruses. With that, I will turn the call over to Dave.

Dave Hastings, CFO

Thanks, Mike, and good morning, everybody. Our ending cash, cash equivalents, and short-term investments were approximately $88 million as of March 31, 2020, compared to approximately $91 million as of December 31, 2019. Our cash use from operations for the first quarter of 2020 was approximately $15 million. In addition, we received approximately $12 million in net proceeds from the issuance of shares under our ATM program for the first quarter of 2020. For 2020, we still expect our cash use to range from $54 million to $58 million and therefore, we expect our current cash runway is sufficient to fund operations into mid-2021.

Bill Collier, CEO

Thank you very much, Dave and to Mike Sofia. And with that, operator Joelle, could you please open up the lines for questions and answers.

Mayank Mamtani, Analyst

Good morning. Thanks team for taking my questions, and I appreciate the efforts on Coronavirus therapeutics. Just first question on the update you had on the 180-mg, that went up. Could you maybe just comment on sort of how to think about this longer-term duration, but also obviously you're not having that comment which you've seen with other peers, so could you maybe talk about how this is.

Bill Collier, CEO

Yes, Mayank, it's Bill. Let me make a comment first and then I'll hand it over to Gaston. So as I'm sure you've already picked up, in this particular press release there is no new news on the 729. Obviously, our last press release was March 26 I think, and what we are still awaiting for and moving forward on is the 60 multiple dose, 90 single dose. What we have now said is the 12-week data on the 60-milligram single dose available this quarter. So, that's a slight change in the timeline for the 12-week single dose 60-milligram follow-up. But having said that, let me hand over to Gaston.

Gaston Picchio, CDO

Yes, hi, good morning. Did that help you answer the question or do you have any further questions? I mean because without that additional 12-week follow-up date, I think it's difficult to speculate. But maybe...

Mayank Mamtani, Analyst

I was just curious with the 180-mg, you saw some deepening of responses, even with the single dose. So I was just curious how to think about the 60-mg, should we expect the same or you think that really comes with the multi-dose that we've seen with other compound experience?

Gaston Picchio, CDO

Yes, well, I think we -- I mean as we said back on March 24th, the 180-milligram data I think beat our expectations in terms of the durability and continuous decline of that dose. So with 60-mg, day 29, we didn't have the same type of decline that we saw day 29 with the 180-mg. But obviously, that's why we're continuing to follow the subjects. We need to see that data to conclude where do we end and so forth. As Bill pointed out, that data now, we are announcing that's going to be available in the second quarter 2020. I want to add that one of the other striking pieces of the information we derived from the 60-mg was extremely safe from an ALT/AST level. The levels were all normal throughout the 29 days of follow-up. So, we'll see very soon what happens with the 12-week follow-up.

Mayank Mamtani, Analyst

Great. I appreciate the clarification on timing and what to expect. Just on the enrollment front for either the multi-dose 60 mg or 90 mg, just qualitative color would be helpful.

Bill Collier, CEO

Yes, Mayank it's Bill again. As we settled back in March, given the COVID situation, we're trying to progress carefully and thoughtfully. So we -- I guess what we can comment is looking at site selection and patient screening and trying to find locations where we can conduct these trials safely from a patient protection point of view, that work is all underway. We actually haven't disclosed whether we dosed a patient or whatever yet, but we are sticking to our projections that we'll have the data available in the second half of the year.

Mayank Mamtani, Analyst

Okay, great. And Mike, maybe I -- just switching gears on the Coronavirus efforts, I may have missed -- have you -- did you disclose any targets? I know you said antivirals and could you maybe just talk to -- obviously you are learning a ton about how the virus proliferates and enters the cells. Just could you talk to what scientific approaches you're prioritizing and if -- how that is incremental to, say, for example, remdesivir? Could you maybe comment on that?

Bill Collier, CEO

Sure. COVID-19 is a positive sense RNA virus and we're specifically interested in direct-acting antivirals here. We've chosen the nsp12 viral polymerase and the viral protease, as these are key proteins involved in the virus' lifecycle and appear to be highly conserved across coronaviruses. These targets have similarities to virus polymerase and protease seen with other RNA viruses like HCV. As far as clinical agents that can come from targeting of our polymerase or protease, you only have to look at HCV, HIV or HBV where nucleosides or nucleotides have been used as targets for preliminary or viral or reverse transcriptase bases, backbones of HCV or HIV therapy, and where proteases have been shown to be important components in several therapeutic regimens. Remdesivir does target the nsp12 polymerase and appears to provide some benefit. It's not the perfect drug, so there is a lot of room for identifying a much better agent by using a focused approach that we're going to use.

Mayank Mamtani, Analyst

Great. That's very helpful, thanks. Thanks for the clarification.

Operator, Operator

Thank you. Our next question comes from Madhu Kumar with RW Baird. Your line is now open.

Unidentified Analyst, Analyst

Hi, this is Jennifer on for Madhu. Thanks for taking our questions. I'm just curious as to if the cash runway that you guys specified includes further clinical trials or additional expenses? Thanks.

Bill Collier, CEO

Yes, sorry, you broke up on the last part of your question, could you just repeat that?

Unidentified Analyst, Analyst

Yes, absolutely. So I was wondering if the cash runway that you guys provided includes starting clinical trials for AB-836?

Dave Hastings, CFO

Yes, hi, this is Dave. Yes, it does, because if you think about the cash runway into mid-2021, that would assume that we would start a Phase 1a/1b with our capsid.

Unidentified Analyst, Analyst

Okay, great. And then so in terms of 836 as well, do you have any thoughts on the competitor's core inhibitor treatments that have been discontinued and plans to assess the same virological response? And also how do you imagine that you would maybe need quite co-inhibitors to go -- how long you would need them to go before stopping therapy? Thanks.

Bill Collier, CEO

So maybe I'll hand that one to Mike first for the first part and then maybe, Gaston, you can talk about length of therapy.

Mike Sofia, CSO

The issue with competitor compounds discontinuation, look, we really had an issue with one compound we discontinued because of ALT elevations we saw in an extended healthy volunteer study. That particular molecule was shown to be quite clean and safe in preclinical studies and preclinical toxicology studies, L2 6-month and 9-month studies. Unfortunately, we saw a clinical signal with that molecule. Not clear at this point in time what was the basis for that safety signal in patients, but 836 is a completely different chemical series with a very differentiating profile and preclinical profile. We're very confident that these molecules are going to provide the profile that we're looking for clinically, including an enhanced profile against resistance as well as a much more potent molecule overall.

Bill Collier, CEO

Thanks, Mike. And Gaston, just on length of therapy, I guess there we need to look at one study start when we actually can feel confident about stopping capsid therapy?

Gaston Picchio, CDO

Yes, so thanks for the question. So maybe a clarification about the duration of therapy with capsid inhibitor, do you mean specifically for our programs or you mean this is a general question what is our thinking around what will be the duration of therapy with capsid inhibitors?

Unidentified Analyst, Analyst

Sure. I would say, more of a general question about phase therapy.

Gaston Picchio, CDO

Yes. So that's I think a very relevant and important question. I think it will depend on many factors. The way we like to look at it is in two different ways. One is, what's the regimen? Depending on what the regimen is, you can have different expectations about the duration. For example, if you would treat with nucleosides and a capsid, you may need longer than you would if treating with a nucleoside and a capsid and RNAi. Secondly, I think the other area we think about is the endpoints. There is a lot of discussion around endpoints. For example, if your endpoint could be the most relevant at this point, which is functional cure defined as undetectable or unquantifiable surface antigen six months after end of therapy with or without manual therapy. I think that's kind of the most challenging endpoint to attain. I think everyone is thinking around somewhere between a year and two years of therapy. If one thinks of our softer endpoints such as undetectable RNA, another endpoint that people are looking at, perhaps shorter therapy would be sufficient. I think it depends a little bit on what's your regimen and what's the endpoint that you're looking for. Whether undetectable RNA is a relevantly clinically relevant endpoint that down the road will translate into functional cure, I think it's early to say. So, we still are sticking to the endpoint defined by the agency functional cure.

Unidentified Analyst, Analyst

Great, thank you so much.

Operator, Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Bill Collier for closing remarks.

Bill Collier, CEO

Thank you very much and thank you for your questions. Let me close out just by thanking you all again for your interest in Arbutus. I'd also like to repeat my gratitude to our employees for their continued effectiveness in keeping our corporate operations and timelines on track. As summarized on this call, for AB-729 we intend to share additional data from the 12-week portion of the single-dose 60-milligram sometime this quarter, that's Q2. We expect data from the 60-milligram multi-dose cohort as well as data for the 90-milligram single dose cohort in the second half of 2020. Thanks again for dialing in. That concludes our call for today. Thank you.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.