Earnings Call Transcript - ABUS Q2 2023

Operator, Operator

Good day, and thank you for standing by. Welcome to the Arbutus Biopharma Q2 Conference Call. 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. Please go ahead.

Operator, Operator

Thank you, Jeda. Good morning, everyone, and thank you for joining Arbutus' second quarter 2023 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. Mike Sofia, Chief Scientific Officer; and Dr. Karen Sims, Chief Medical Officer. Bill will begin with a corporate update, followed by Dr. Sims who will review recent data shared at the Medical Congress. David Hastings will then provide a review of the company's second quarter 2023 financial results. After our prepared remarks, we will open the call for Q&A. Dr. Sofia will be available to address 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 Form 10-K, our quarterly report on Form 10-Q, which will be filed later today and from time to time in our other documents filed with the SEC. With that, I'll now turn the call over to Bill Collier. Bill?

Bill Collier, CEO

Thank you, Lisa, and good morning, everyone. Thank you very much for joining us today. Our goal at Arbutus has always been to develop a combination of therapeutic agents that will lead to a functional cure of chronic Hepatitis B. Today we are excited to share with you the continued progress that we've made in advancing this effort. We believe that AB-729, which we will now refer to by its generic name, imdusiran, has the potential to be a cornerstone therapy to functionally cure chronic HBV. To date we've generated meaningful inpatient data showing that imdusiran appears to be the only RNAi to impact both surface antigen and the reawakening of the HBV specific immune response. The effects of imdusiran are sustained in some patients even after all therapy is discontinued. We remain impressed with the compelling safety and efficacy profile of imdusiran and look forward to evaluating it in combination not only with other available compounds but ultimately with our early-stage HBV assets that are concurrently progressing. We expect additional combination data from our ongoing Phase 2A clinical trial with our partner Vaccitech in the second half of this year. We continue to be well positioned to advance our goal of developing a functional cure for HBV and driving value for our company as we advance our broad pipeline of HBV assets. With respect to our early-stage HBV assets, this morning we announced our CTA has been approved for us to initiate a Phase 1 clinical trial with AB-101, our oral PDL1 inhibitor, in New Zealand. As you may recall, the FDA placed the IND application for AB-101 on clinical hold before we had initiated a trial or dosed any patients. To get AB-101 into a clinical trial as quickly as possible, we made the strategic decision to work with New Zealand to advance AB-101 while in parallel working to address the FDA concerns. We continue to believe that AB-101 as an oral, more rapidly titratable checkpoint inhibitor compared to an antibody approach has the potential to be an important component of a combination of therapy that could be combined with imdusiran to provide a functional cure for HBV. The Phase 1 clinical trial for our RNA destabilizer AB-161 is ongoing. AB-161 is our next generation oral HPV specific RNA destabilizer which is being developed as part of a potential all-oral treatment regimen to functionally cure HBV. We expect to have initial data from the single ascending dose portion of this trial in the second half of the year. Beyond our HBV assets, we remain committed to identifying and developing new antiviral small molecules to treat COVID-19 and future coronavirus outbreaks. Our strategy is to target the two essential enzymes for the coronavirus life cycle, SARS COVID-2 NSP5 main protease also known as MPRO and nsp12 viral polymerase. These enzymes are critical for viral replication and are highly conserved across all known coronaviruses. AB-343 is our lead oral MPRO inhibitor designed to address the urgent need for oral antiviral therapies that are both potent and active against circulating SARS-CoV-2 variants and that do not require a ton of air boosting. The preclinical profile of AB-343 is impressive and we're currently in IND enabling studies with plans to complete those studies in the second half of this year. Ultimately we believe that the optimal treatment regimen will consist of both an MPRO inhibitor and an nsp12 inhibitor differentiating this therapy from other strategies. To that end, our goal is to identify and nominate an nsp12 inhibitor which we can then take into IND enabling studies in the second half of this year and we'll be sharing more updates on these two programs as we progress through the year. Before turning the call over to our new Chief Medical Officer Dr. Karen Sims to review the imdusiran data, I'd like first to congratulate Karen on her appointment as CMO at Arbutus. Karen has been with the company since 2017 and has played a crucial role in the clinical development of imdusiran, and I'm very happy that Karen has assumed this role. I'm confident that she and her team will continue to effectively execute our mission. So over to you, Karen.

Karen Sims, CMO

Thank you, Bill, for those kind words. I'm honored to serve as CMO at Arbutus and like my colleagues I believe we have a sound strategic approach to develop a functional cure for HBV and a compelling pipeline of assets to achieve that goal. With respect to our progress in HBV, we are exploring imdusiran in combination with other investigational and approved products through our few ongoing Phase 2A combination trials. One with imdusiran and one with Vaccitech's HBV antigen specific immunotherapeutics. With both of these trials our goal is to identify compounds that can be combined with imdusiran to further stimulate the immune system to induce functional cure in chronic HBV patients. I'll start with our Phase 2A clinical trial that is evaluating imdusiran in combination with ongoing nucleoside or nucleotide analog therapy and imdusiran in patients with chronic HBV. Imdusiran is considered a current standard of care treatment option for chronic Hepatitis B that is administered weekly for a finite treatment course but has a very low chance of achieving functional cure as a monotherapy for chronic Hepatitis B in most patients. Because imdusiran is typically poorly tolerated, we are studying only short courses in this trial, and we intend to assess the impact of imdusiran on safety, tolerability, and efficacy as assessed by surface antigen decline when added to imdusiran and NUC therapy. We enrolled 43 HBeG negative patients that underwent a lead-in phase with 24 weeks of imdusiran and then were randomized to one of four treatment arms to receive imdusiran for either 12 or 24 weeks plus ongoing NUC therapy plus or minus additional doses of imdusiran. At the recent EASL medical congress, we presented preliminary data including the first 12 patients that have completed the lead-in phase and at least 12 weeks of imdusiran treatment with or without additional doses of imdusiran. Baseline characteristics were similar across all four imdusiran treatment cohorts. During the imdusiran 24-week lead-in phase patients experienced a mean surface antigen decline of 1.59 logs from baseline. This is comparable to what has been previously seen in other clinical trials with imdusiran. The mean surface antigen decline from baseline at week 40, which includes 12 weeks of imdusiran dosing was 1.88 logs, which is promising albeit from a small sample size. In addition, four patients, one from cohort A and one from cohort A2, both of which received imdusiran plus or minus additional doses for 24 weeks and two from cohort B1 who received imdusiran plus induced doses for 12 weeks, reached surface antigen levels below the lower limit of quantitation during the imdusiran treatment period. These patients had not achieved sustained surface antigen loss and anti-HBS antibody levels were pending as of the date the data was presented, and they continued to be followed in the trial. Three patients, one in cohort A2 and two in cohort B1, have been evaluated to stop NUC treatment, and one patient from cohort B1 has discontinued NUC treatment. Regardless of the duration of imdusiran treatment, whether 12 weeks or 24 weeks, the change in surface antigen from baseline during the imdusiran treatment period remains below the baseline values although with considerable variability amongst patients. These data suggest that the addition of imdusiran to NUC therapy may result in continued surface antigen declines in some patients. However, with most patients still in the imdusiran treatment period, we are cautious in drawing any meaningful conclusions from this preliminary dataset. We are eager to continue to follow these patients through the duration of the imdusiran treatment period and the NUC only follow-up period to assess for trends in surface antigen declines and sustained surface antigen loss. From a safety standpoint, imdusiran with or without additional doses was generally well tolerated with most treatment-emergent adverse events assessed as unrelated to imdusiran. There were no serious adverse events, study discontinuations, or imdusiran treatment discontinuations or modifications, and the imdusiran dose modifications needed were consistent with the known safety profile of imdusiran. These preliminary data from a larger Phase 2 trial continue to reinforce our confidence in imdusiran's ability to effectively lower surface antigen, and we anticipate providing updates when we have additional meaningful data to report. Regarding our second Phase 2A combination trial that we are conducting with Vaccitech, the original part of the trial designed to evaluate imdusiran, NUC therapy, and Vaccitech's HPV antigen-specific immunotherapeutic, VTP-300, or placebo, is fully enrolled. This trial is designed to reduce surface antigen with imdusiran before the patients are randomized to one of two arms to receive ongoing NUC therapy plus VTP-300 or placebo. Recently, in collaboration with Vaccitech, we have expanded the trial to include an additional treatment arm that will enroll approximately 20 patients to receive low-dose nivolumab, a PD-1 monoclonal antibody inhibitor approved to treat a number of cancers under the brand name Opdivo with the combination regimen. We will assess if the addition of low-dose nivolumab to the booster component of the VTP-300 combination further stimulates immune-mediated reduction of surface antigen after the initial treatment with imdusiran and the first dose of VTP-300. We reported in June that the first patient in this additional treatment arm has been dosed. We are hopeful that if we can lower surface antigen and stimulate the host HBV-specific immune system with the combination of imdusiran and the first dose of VTP-300, the addition of low-dose nivolumab will further enhance this stimulation and we may therefore enhance the immune system's ability to fully suppress the virus and ultimately achieve functional cure. As Bill mentioned, we believe that chronic Hepatitis B requires a combination of compounds to achieve therapeutic success, and we are encouraged by the progress we have made in these two Phase 2 clinical trials to further support our mission. With that, I'll turn the call over to Dave Hastings for a brief financial update. Dave?

David Hastings, CFO

Thanks, Karen. 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 164 million as of June 30, 2023, compared to approximately 184 million as of December 31, 2022. During the six months ended June 30, 2023, we received approximately 25 million net proceeds from the issuance of common shares under our At-the-Market Offering Program. These cash inflows were offset by approximately $47 million of cash used in operations. We expect our 2023 net cash burn to range from between $90 million to $95 million, excluding any proceeds received from our At-the-Market Offering Program, and we believe our cash runway will be sufficient to fund our operations into the first quarter of 2025. So in closing, we have a strong financial position to advance our mission and develop a functional cure for HBV and a treatment for COVID-19 and potential future coronavirus outbreaks. So with that, I'll turn the call back to Bill. Bill?

Bill Collier, CEO

Thank you, Dave. So just to wrap up, I'd like to remind everyone of our upcoming key milestones for 2023. First of all, we plan to initiate the Phase 1 clinical trial with AB-101 this quarter. Secondly, we plan to report initial data from the AB-729 Phase 2A clinical trial combining imdusiran, NUC therapy, and VTP-300, and we expect to report that data in the second half of 2023. We plan to report initial data from the Healthy Subject Single Ascending Dose portion of our Phase 1 clinical trial for AB-161 in the second half of 2023. Lastly, we plan to complete IND enabling studies for AB-343, our MPRO coronavirus clinical candidate, and also nominate a candidate to commence IND enabling studies in our nsp12 program, both in the second half of 2023. I'd like to take this opportunity to recognize and thank all the Arbutus employees for their hard work and dedication. We've made significant progress in advancing our pipeline, and I look forward to sharing more details as we reach our clinical milestones and data readouts later this year. I'm confident that we have the right team and the right strategy in place to deliver on our mission. So, operator, we are now ready to open the call for a Q&A session.

Operator, Operator

Thank you. At this time, we will conduct the question-and-answer session. The first question comes from Dennis Ding of Jefferies. Please go ahead.

Dennis Ding, Analyst

Hi. Good morning. Thanks for taking my question. Just one for me. From a big picture perspective around Hepatitis B, how should investors think about this space given it's been challenging, and a lot of these studies take a very long time? You're hearing some pharma companies actually discontinue development here. How and when do you think you could change that narrative significantly? Thank you.

Bill Collier, CEO

Thank you, Dennis. This is Bill. Good question. Yes, you're right. Some observations that you've made around J&J, for example, stopping their development program. Yes, some of the clinical trials do have some lengthy timelines attached to them. However, there are still several companies that are in this field, both big pharma and small biotech. I, as I said in my comments, am confident that the strategy we have, which is to reduce HBV DNA, suppress surface antigen, and boost the immune system, is the correct scientific strategy. We're developing assets in those three arenas and testing out different combinations in these trials to find a functional cure. Ultimately, I think there will be some kind of data in this field that reaches a level of functional cure. I think that will establish a benchmark, and then other companies will continue to iterate, including ourselves, and try to continue to improve that functional cure rate.

Dennis Ding, Analyst

And maybe as a follow-up, one of the really interesting things about Arbutus is the platform, the SRNA. A few years ago, Roche did acquire Dicerna for around $1.7 billion, again, for the platform. So, I'm just wondering how else can you leverage that platform, and given your current cash position, is that something that you could do more work on in the near term or maybe some color there would be helpful? Thank you.

Bill Collier, CEO

Yes. I mean, as Dave mentioned, we're well-capitalized at the moment with a decent cash runway. We've shown in the past that we've been able to raise money through different mechanisms, such as some of the royalty monetization, the China rights deal that we did being a couple of examples. I think we're also quite judicious in the way that we conduct our combination clinical trials; we try to keep those relatively simple with 50:50 cost sharing between ourselves and our partners, which reduces some of the costs of the clinical trials. Dave and the whole executive team are very cautious about what we spend and where we spend it. Beyond that, Mike Mack is here in the room with us, and maybe you want to comment on some of the conversations that we continue to have with different business development partners.

David Hastings, CFO

Sure, Bill. I'm happy to do that, Dennis. As we've mentioned in the past, we have conversations with all players in the field all the time. Any opportunity we have, we take advantage of that. There's certainly continued interest in the field. There are still lots of key players, as Bill mentioned, working diligently in Hepatitis B, and we do expect that we're going to be able to drive functional cure rates higher as we continue to iterate with our pipeline. So as things evolve, we'll continue to have those conversations and we'll see how they progress. We obviously can't say much more than that, but we're always open to thinking about potential opportunities for the future. So, I'll leave it at that.

Operator, Operator

Thank you. One moment for our next question, please. Our next question comes from an unidentified analyst of H.C. Wainwright. Please go ahead.

Unidentified Analyst, Analyst

Hi, good morning, everyone. This is Thomas, and I have a couple of questions for Ed. Thank you for taking my questions. Perhaps first, we've seen a very encouraging data set from the 201 Phase 2A study at EASL. Can you tell us when we can expect the next data set? Would it be later this year? Also, looking further, when can investors expect to have an early idea of what a Phase 2B will look like?

Bill Collier, CEO

Yes, good question. Our goal was to do an update from this study in the first half of the year, which we delivered at EASL. As Karen said in her comments, we now have to let this study run a little bit further. I think Karen and I both agree that doing too many small updates may not be helpful. We should probably wait until we have more meaningful, more complete data sets. I think what we're going to do is wait until January when we typically release our expectations and guidance for the 2024 year, and I think we'll put something in there about when we expect a further update from this study.

Unidentified Analyst, Analyst

Great. So I assume that that will include what are the professional steps to a Phase 2B as well?

Bill Collier, CEO

Well, yes. I mean, as always, with clinical trials, you have to wait to read out what the data says, and then we'll be guided by that as to how we determine next steps.

Unidentified Analyst, Analyst

Okay. And then moving on, the other triple-combination study, the 2002 study. Can you expect in terms of endpoint measurements, would that be comparable to the 201 study?

Bill Collier, CEO

Karen, do you want to take that?

Karen Sims, CMO

Yes, sure. Thanks for the question. As we've alluded, we plan to report some preliminary data from that study before the end of the year. Surface antigen is a very important endpoint for us. While our clinical trials are based on imdusiran as the foundation of many of these combination studies, there's certainly data around surface antigen that we would expect to present at that time. Beyond that, as with most of our trials, we need to see where we are with the number of subjects reaching certain milestones by the time we're ready to report that data. The completeness of the data sets we have at that time will really dictate what we're able to share. So, certainly surface antigen is a very important measure for us.

Unidentified Analyst, Analyst

Okay, understood. And then switching gears, one question about 161. As we expect, single ascending dose data later this year. Clearly, safety data are very important. But what type of advocacy data should we expect to see, specifically F-antigen or RNA data? And what would be the next step for 161 with these data processes?

Karen Sims, CMO

Yes, I can address that as well. As we've mentioned, we are in a Phase 1 clinical trial with AB-161, meaning that we are in healthy subjects at this point with that trial. So, early data sharing would certainly be, as you alluded to, mostly around safety. In order to get into the pharmacodynamic responses of AB-161, we need to be in the Hepatitis B patient population, which we won't be ready to share any data from by the end of this year. For this particular trial, just safety data would be what we would be sharing.

Unidentified Analyst, Analyst

Great. Got it. Thank you so much for taking our questions, and we're looking forward to data readout later this year.

Bill Collier, CEO

Thank you, Thomas.

Operator, Operator

Thank you. One moment for our next question, please. Our next question comes from Roy Buchanan of JMP. Please go ahead.

Roy Buchanan, Analyst

Hey, great. Thanks for taking the questions. I guess the first one on AB-101, pretty quick, getting the clinical trial set up ex-U.S. there. So, nicely done on that. Any details you can give us around the Phase 1, what it's going to look like? I assume it's not exotic. Just that. And then what's the path with the FDA from here on? What do you do? What are the next steps there, I guess? And what's the conversation look like with the FDA? Thanks.

Bill Collier, CEO

Yes. Thank you, Roy. As we revealed today, and previously, the FDA provided their comments and concerns in their clinical hold letter. They predominantly focused on certain aspects of clinical trial design and some preclinical data. But we were able to switch to New Zealand and submit the CTA. Importantly, we did attach the clinical hold letter from the FDA in our CTA application to New Zealand. We're encouraged that we'll be able to start that study this quarter in New Zealand. As that data emerges, we'll have the ability to continue conversations with the FDA and chart a path forward. Beyond that, Karen, anything you want to say about the design of the study?

Karen Sims, CMO

No, in particular, Roy. As you alluded to, it's nothing surprising at this point in the study in terms of initiating in healthy subjects and then moving into chronic hepatitis B patients. So, yes, from that standpoint, nothing terribly exotic as you mentioned. We're very much looking forward to getting this initiated, as soon as possible.

Roy Buchanan, Analyst

Okay, great. But you would expect to include CHB patients in this same trial?

Karen Sims, CMO

No, we actually are. So, it is an umbrella study, which is similar to our other small molecule studies that we've worked in the Hepatitis B space. It is a similar trial design, initiating in healthy subjects and then moving on to chronic Hepatitis B subjects within the same trial.

Roy Buchanan, Analyst

Okay, great. Can you provide any updates on the progress? I understand it's in their hands and you might not be able to share much, but is there any indication of what to expect and when we can anticipate the next update on that collaboration? Thanks.

Michael Sofia, CSO

Yes, Roy, this is Mike. Good question. Yes, we continue to work with our partners to move that program forward as quickly as possible. There's not much more we can say beyond that. It's a bit of a slow process in China, as I'm sure you're aware, but we're moving as diligently as we can.

Roy Buchanan, Analyst

Okay, can you just remind me where it's at at this point in development, or is that not public?

Michael Sofia, CSO

Where is it in development in China?

Bill Collier, CEO

We're still working towards submitting an IMD to the Chinese regulatory authority.

Roy Buchanan, Analyst

Okay, great. That's it. Thank you.

Bill Collier, CEO

Sure. Thank you, Roy.

Operator, Operator

Thank you. One moment for our last question. Our last question comes from Brian Skorney of Baird. Please go ahead.

Unidentified Analyst, Analyst

Hey, good morning. Thanks for taking our questions. This is Charlie on for Brian. Just a couple from us. I was just kind of curious what your interpretation of the combination data with imdusiran is given that in the A1 and B1 cohorts, it looks like, in one or two patients, there's a sharp drop in surface antigen and then a bit of a rebound. Secondly, we'd be curious if any of the investment calculus has changed for you guys with regards to the coronavirus antivirals, given how the disease landscape has evolved over the past year and a half. Also, did you set the table with expectations for when the VTP-300 combination might have an incremental effect from the use of that vaccine and what you're thinking about in terms of how that combination might be synergistic? Thank you.

Bill Collier, CEO

Okay, great. Let's chunk this up. Maybe the interferon question first with Karen and then we'll go across to Mike Sofia for a comment on coronavirus.

Karen Sims, CMO

Yes, sure. Thanks, Bill. Just back to the 201 interferon data that was released. As we mentioned earlier, I will remind you that this is very preliminary data, and the majority of the subjects had not completed the interferon treatment period when we reported this data. It's still too early to draw specific conclusions from the data set that we shared, but we were encouraged by the performance of imdusiran in the lead-in period, doing exactly what it's supposed to be doing in terms of lowering surface antigen. As to your point, it's a little variable. Looking at those plots in the poster, while some of those changes look rather dramatic, these are subjects that are moving from surface antigen values, for example, less than five to less than the limit of quantification and then back to less than five or less than ten. The bottom of that scale has a very small window of surface antigen change. I don't think that's surprising, given the close follow-up with these subjects. We don't necessarily expect someone to hit the lower limit of quantitation and stay there. They may bounce around a little bit before they settle out into whichever direction they may go, whether they remain undetectable or have a little bit of surface antigen rebound. We just need to be patient as the data emerges, and we'll be providing updates on this study when we have more meaningful data to share.

Bill Collier, CEO

Then you just want to talk about the second part, the potential impact of VTP-300 in the other study, and then we'll go across to coronavirus.

Karen Sims, CMO

In terms of VTP-300, with the 202 study, we plan to share some data from that towards the end of the year. We've been following VTP-300 studies very closely and are encouraged by their results in terms of surface antigen declines, especially in patients with low surface antigen at the beginning of the study. We're very hopeful that imdusiran will lower surface antigen to a point where VTP-300 will have a similar effect and additional immunomodulatory activities promoting functional cure in those patients.

Bill Collier, CEO

Okay. Thanks, Karen. So, Mike, on the coronavirus approach.

Michael Sofia, CSO

Sure. So, when you look at the coronavirus space and talk to the KOLs, there's still a significant medical need for effective therapies, which to a large extent are lacking out there. We're potentially seeing a surge in coronavirus SARS-CoV-2 diagnoses in recent news, highlighting the need still for therapeutics. Our strategy has always been to differentiate from others with the combination of two direct acting antivirals, the MPro as well as the nsp12 polymerase inhibitor, to provide a significantly potent therapeutic regimen. We believe this approach could impact existing infections in patients, as well as pre- and post-exposure prophylaxis. Additionally, addressing long COVID is still a concern, and some theories suggest there may be a viral reservoir that effective therapeutics could target. We believe there's value in a COVID program right now with important unmet needs in the space that our strategy can address.

Unidentified Analyst, Analyst

Great. Thank you so much for giving that additional color, and I appreciate your time today.

Bill Collier, CEO

Thank you.

Operator, Operator

Thank you. I will now turn it back over to management for closing remarks.

Bill Collier, CEO

I'd just like to take a moment to thank everyone for joining us this morning. We do appreciate your continued interest and support of Arbutus, and we look forward to providing you updates as we progress the development of our HBV and coronavirus assets this year. So thank you, everybody. Operator, that concludes our call.

Operator, Operator

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.