Earnings Call Transcript - ABUS Q1 2021

Operator, Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Arbutus Biopharma Corporation 2021 First 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 host today, Pam Murphy. Please go ahead.

Pam Murphy, Speaker Host

Thank you, and good morning. On the call from 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 first quarter's accomplishments, clinical development and remaining 2021 corporate objectives; followed by Dave Hastings, who will provide a review of the company's first quarter financial results. We'll then open up the call for Q&A. Mike and Gaston will be available to address any 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 pan-coronavirus discovery program, including potential clinical results and timelines for AB-729 and AB-836 and any future compound; our expected cash use and cash runway and the potential for our drug candidates to improve upon 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 our most recent Annual Report on 10-K, Quarterly Report on Form 10-Q and other periodic reports filed with the SEC. Bill?

Bill Collier, CEO

Thank you, Pam, and good morning everybody. Thank you for joining us today. We really do appreciate your interest in Arbutus Biopharma. I'm pleased to report on our progress thus far this year, and to outline our objectives for the rest of 2021. As we've stated in the past, our goal at Arbutus is to focus on developing a portfolio of products with different mechanisms of action that when used in combination could result in a functional cure for people living with chronic HBV. During the first quarter, we took another significant step towards that goal, when AB-836, our proprietary oral capsid inhibitor, began a Phase 1a/1b clinical trial. 836 is from a novel chemical series, differentiated from competitive compounds, with potential for increased efficacy and an enhanced resistance profile. And we look forward to having initial data readouts from this trial in the second half of this year. In addition, AB-729, our proprietary subcutaneously delivered RNAi agent continues to demonstrate robust and continuous declines in hepatitis B surface antigen in subjects with chronic HBV, with a favorable safety profile in our ongoing Phase 1a/1b clinical trial. We expect to provide additional data from ongoing cohorts from this Phase 1a trial in the second quarter of this year, including 60-milligram multi-dose data, with dosing every four and eight weeks, and 90-milligram multi-dose data, with dosing interval every eight weeks.

Dave Hastings, CFO

Thanks, Bill, and good morning, everybody. As I've mentioned in the past, our key financial metric is cash and financial runway. Our ending cash, cash equivalents and short-term investments was $132 million as of March 31, 2021, as compared to approximately $123 million as of December 31, 2020. Our cash used from operations for the first quarter of 2021 was approximately $18 million, which was offset by approximately $26 million of net proceeds from the issuance of common shares under Arbutus's ATM program. For 2021, we expect our cash use to range from $70 million to $75 million. And therefore, we expect our current cash runway to be sufficient to fund operations through the third quarter of 2022. So with that operator, would you please open the call for Q&A.

Operator, Operator

Our first question coming from the line Ed Arce with H.C. Wainwright. Your line is open.

Ed Arce, Analyst

Hi, everyone. Good morning and thanks for taking my questions. Just a couple for me. As most investors are eager to find out additional data on your next cohorts in the ongoing Phase 1a/1b study of 729, I'm wondering if you can tell us for the multi-dose data on the 60 and 90 that you're expecting, how many doses or number of weeks we can expect given the cohorts both include patients that would be on every eight-week dosing. I was hoping to see at least 24 weeks out if not more. Just wondering what we can expect later this quarter.

Bill Collier, CEO

Yes. Good morning, Ed, it’s Bill. Thank you very much for that great question. Yes. I think as we've outlined in the past, we've been operating these cohorts very diligently during the COVID situation and really trying to make sure that we can work in areas where we can select patients and move them forward with full follow-up. So we're pleased with the progress that we've made. And I think we've also been cognizant that when we're looking at dose intervals of either four or eight or 12 weeks we really do need to have a reasonable timeframe in terms of weeks and months to actually make sense of all the data. So we're closing in on that right now with some of the cohorts where we expect data later on this quarter. But just with those comments, Gaston, if there's anything else that you would like to add?

Gaston Picchio, Chief Development Officer

Yes, good morning, Ed. As Bill mentioned, we will be sharing data on three cohorts. To answer your question, the range of weeks we will present is likely between 24 weeks and 48 weeks, depending on Bill's remarks, so we will confirm that closer to the time.

Ed Arce, Analyst

Excellent. Okay. And then, I guess, the follow-up to this. And I know Gaston, you mentioned this numerous times in the past, the importance of having sufficient data to fund or at least to predict a level of plateauing on the different doses. Is this something that you're hoping to determine with this next data set?

Gaston Picchio, Chief Development Officer

Well, I mean, I will be able to tell you that once we see the final data. But, yes, we were hoping that with at least 48 weeks of dosing we will be able to get a better sense of how S-antigen and other HBV antigens are progressing over time.

Ed Arce, Analyst

Okay. Good. Thanks a lot.

Bill Collier, CEO

Thank you, Ed. Thank you so much.

Operator, Operator

Our next question coming from the line of Kelechi Chikere with Jefferies. Your line is open.

Kelechi Chikere, Analyst

Yes. Good morning and thank you for taking my questions. Just a couple on my end. I was hoping can you speak to the preliminary data you'll have for 836 in the second half? What will that be? And I guess in the big picture on what metrics are you hoping to see differentiation compared to the other capsid and core inhibitors in development? And I have a follow-up question after that.

Bill Collier, CEO

Okay. Good morning, Kelechi. Yes, I think, in our corporate update we've got the structure of the 836 Phase 1a/1b study so it's I think a fairly usual clinical structure with healthy volunteers and then single doses in HBV patients and then multiple doses. We are unlikely to get all of that data by the end of the year, but we do expect to have enough to give us confidence to move forward with 836. So again, I'll let Gaston add if you've got any further comments to make.

Gaston Picchio, Chief Development Officer

Yes. Hi. Good morning. So as it can be seen in the corporate deck, I believe it's slide 23 in the corporate deck you can see the structure the design of the 836-001 study that has three parts: single ascending, multiple sending and chronic hepatitis B subjects. The study has initiated as we've stated before. And in the second half, I think we'll have sufficient data already in chronic hepatitis B subjects provided everything continues as planned to be able to move 836 forward in combinations.

Kelechi Chikere, Analyst

Thank you. That's very helpful, and that's a great segue to my next question. Just wondering, if you can speak to enrollment in your various trials, the 836 study as well as the combo study with 729 and Assembly's core inhibitor. I guess, how is enrollment been going? What steps have you implemented to ensure you're able to enroll patients in those studies given everything that's going on?

Bill Collier, CEO

Yeah. Gaston, do you want to handle that one?

Gaston Picchio, Chief Development Officer

Yeah. Sorry, can you repeat the first part? I missed – were you talking about specifically about the 836 study, or you were talking about AB-729 by itself or the combo study? I missed that part.

Kelechi Chikere, Analyst

Yeah, so both studies – both studies. So, the 729 combo study that was recently initiated with Assembly as well as the 836 study that was just initiated, how is enrollment going there?

Gaston Picchio, Chief Development Officer

Well, we haven't commented. And obviously, we're not comment – we can't comment on that without our partners at this point in time. But we can – I mean, our partner Assembly in the combo study has done everything possible to really accelerate enrollment and ensure the timelines are met. So, so far, I mean, we haven't provided any additional guidance on enrollment other than I can reassure that every step has been taken to accelerate enrollment. And as I said before, the 836 study it's on track and the 729-001 study actually is fully enrolled we're following the subjects now.

Kelechi Chikere, Analyst

Okay. Thank you very much.

Bill Collier, CEO

Thank you Kelechi.

Operator, Operator

And our next question coming from the line of Brian Skorney with Baird. Your line is open.

Brian Skorney, Analyst

Hey, good morning, everyone. Thank you for taking the question. On 729 you've seen some really good reductions in S-antigen levels below thresholds that at least in some Asian countries, it wouldn't be unusual to stop NUC therapy. And we sort of discussed the potential for evaluating what it would look like to take patients off all NUC therapy here. Could you just speak to your current thinking there? Is that still something on the potential near or medium term horizon? And do you sort of have stopping criteria in mind to look at a value of eight patients off therapy?

Bill Collier, CEO

Yeah, Brian, thank you very much. Good question. I think our belief is that we need to get multiple drugs onboard before we start reaching criteria where we can start peeling some of those drugs away, so really understand the basis for the question. Gaston, do you want to comment further on?

Gaston Picchio, Chief Development Officer

Yeah, sure. Thank you. Thanks for the question. So we continue to consider the multiple options that there are in terms of stopping criteria. Also, those need to be aligned with the recommendations from regulatory agencies around the world, including obviously the FDA. So at this point in time, we haven't stopped anyone and that it's always a possibility. But we haven't done that. Certainly, we continue to consider the 100 IU per ml threshold for surface antigen. The question, I think that remains is how long that sustained decrease in S-antigen needs to persist before you consider stopping – whether stopping the investigational drugs or stopping all therapies so that would be the NUC. So, I mean, we continue to consider multiple options. I think there's no single way of stopping patients right now. Everyone has a different opinion on how it should be done in a safe way. And obviously, safety is our driving force there, just to make sure that we don't do anything that still results in unsafe outcomes for the patients.

Brian Skorney, Analyst

Okay. Thank you.

Operator, Operator

Our next question coming from the line of Roy Buchanan with JMP Securities. Your line is open.

Roy Buchanan, Analyst

Great. Thanks for taking the question. So the first one I wanted to ask about the collaboration you guys recently announced for SARS-CoV-2 with X-Chem and Proteros. It seems like the DNA-encoded library is a burgeoning space. I just wondered if you could speak a little bit more in detail about what makes X-Chem's approach industry-leading, how it's differentiated from other libraries? And then I had a financial question for Dave.

Bill Collier, CEO

Yeah. Okay. So on the X-Chem Proteros deal, maybe Mike Sofia to take that one?

Mike Sofia, Chief Scientific Officer

Sure. So as we scour the landscape for DEL screening technology, DNA-encoded library technology companies to evaluate who we wanted to partner with. And really X-Chem stood out amongst all of them, not only because we felt that their expertise was industry leading, they clearly have demonstrated through many collaborations they've had with other pharma partners the ability to deliver using their libraries. They probably also have the largest library set out there in the DNA-encoded library arena, including multiple different kinds of libraries that would include both reversible as well as covalent attachment libraries that we were interested in. So overall we thought that from their level of expertise, their track record that they were the ideal partner to move forward with here. They also had this strategic relationship with Proteros and because Mpro is a nonstructural protein, its structure is known. It provided a real ideal target to use structured biology biophysical methods to guide subsequent structure activity relationship studies and lead optimization studies that we were going to do. So when you look at the whole package together, it brings together the three companies with really industry leading expertise and capability to tackle this target and acquire new chemical matter that we hope will ultimately lead to clinical candidates that will benefit patients.

Roy Buchanan, Analyst

Okay, great. That’s helpful. I mean, just any idea on timing from that partnership for when we could see the first results?

Bill Collier, CEO

Well, obviously, we all agree that the coronavirus issue is front and center on everyone's mind globally. We are driving this as aggressively as we possibly can. And our partners know that. They're fully committed. This is really a collaboration. It's not a typical CRO relationship. So we hope to have something sooner rather than later, but it's a little early to comment on that right now.

Roy Buchanan, Analyst

Yeah. Great. Okay. Thank you. And then just a quick one for Dave, has there been any ATM use since the end of the first quarter? Thanks.

Dave Hastings, CFO

Yes, hi Roy. So, our typical policy is to disclose ATM sales through sort of the end of the prior quarter. So, we'll update everybody on next call for the ATM activity this quarter, Roy.

Roy Buchanan, Analyst

Okay, fair enough. Thank you.

Operator, Operator

Our next question coming from line of Mayank Mamtani with B. Riley Securities. Your line is open.

Mayank Mamtani, Analyst

Good morning team. Thanks for taking my questions. So, on the Assembly trial, if I could clarify, I believe you're starting with the 60 mg dose. So, could you maybe talk about the 90 mg data that you continue to generate? And what if any implications you could have to the protocol as you think about balancing S-antigen reduction and maybe safety?

Bill Collier, CEO

Thank you very much for the question. Good morning to you. The Assembly collaboration trial, we've set that dosage for 729 at 60 milligrams every eight weeks. But as you know we're continuing to look at 90 milligram eight and 12 weeks, which would potentially allow us to look at that dosage dependent upon the data in our other Phase 2 studies. But again Gaston thoughts?

Gaston Picchio, Chief Development Officer

Yes. Hi good morning Mayank. So, we felt comfortable with the 60 milligram every eight-week dosing schedule to initiate the collaboration with Assembly and that's how that study is moving forward. We don't anticipate having to make any changes to the ongoing study, but that doesn't preclude us from opening other cohorts within this collaboration at different doses or different dosing schedules. But just to be clear the ongoing study its 60 milligrams every eight weeks.

Mayank Mamtani, Analyst

Got it. Sorry if I missed this on 836. As you're considering the long-term development of this agent and how to differentiate it based on the enhanced resistance profile supported by strong preclinical data, how might this program be developed differently than current programs that focus on combination-based RNA plus core capsid? Any insights there beyond 2021?

Bill Collier, CEO

Yes, Mike Sofia, do you want to just talk briefly about what we've shared on the resistance front?

Mike Sofia, Chief Scientific Officer

Sure Bill. When you examine 836, it possesses several unique characteristics. One of these is the resistance profile that tackles various emerging resistance issues in the capsid area. Additionally, it has a second mechanism that allows us to engage it at a clinically relevant dose, which we believe 836 can achieve. With that feature, we anticipate a unique profile when it is combined with 729. However, it's important to note that our goal with this combination strategy is to accomplish three main objectives: first, to halt viral replication, which will be achieved through the combination of capsid and NUC; second, to initiate the DNA pool, which we hope will also be accomplished with the capsid in conjunction with our RNAi; and third, to use the RNAi agent to reduce the S-antigen to help revitalize the immune system. Another crucial aspect is the immune modulation, which, as Bill mentioned, we are excited about with our PD-L1 program, which is progressing well. We anticipate positive outcomes from it. Altogether, this completes the overall strategy we have been discussing for several years. Our capsid asset indeed stands out from other competitor compounds and is a vital component of the broader strategy we laid out years ago.

Mayank Mamtani, Analyst

Great. Thank you for the comprehensive answer. And maybe just if I can squeeze one in for Dave on the IP situation with Moderna. At least from public filings from Moderna, it seems like they are taking a relatively different approach from before. Anything you guys can comment from your end or from Genevant's perspective that gives any color on the lawsuit or the possibility of settlement?

Dave Hastings, CFO

No, we can't comment on that. We wouldn't be leading that effort; Genevant would. However, I want to emphasize that we take our intellectual property very seriously. Regarding the interactions between the companies, we can't provide any details.

Mayank Mamtani, Analyst

Understood. Thanks for taking that question.

Bill Collier, CEO

Thanks so much, Mayank.

Operator, Operator

I'm showing no further questions at this time. I would like to turn the call back over to Mr. Bill Collier for any closing remarks.

Bill Collier, CEO

Well, thank you very much for all of your questions and for joining us this morning. We really do appreciate your interest in the company. We look forward to a productive and value-building 2021. And I think as you've just heard, we're confident that with further data from our 729 clinical trial, progression of the 729 compound into two Phase 2 proof-of-concept clinical trials, data from our 836 Phase 1a/1b clinical trial and continued progress in our HBV discovery programs that we really have established a strong foundation on our mission to achieve a functional cure for people with chronic HBV. And also obviously, looking forward to leveraging our antiviral discovery and research efforts in progressing our pan-coronavirus discovery program. So again, thank you for your interest. And operator, that concludes our call. Thank you.

Operator, Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.