Earnings Call Transcript - ABUS Q4 2022

Operator, Operator

Good morning, everyone, and thank you for joining Arbutus' Fourth Quarter and Year-end 2022 Financial Results and Corporate Update Call. Joining me today from the Arbutus Executive team are Bill Collier, President and Chief Executive Officer; David Hastings, Chief Financial Officer; and Dr. Mike Sofia, Chief Scientific Officer. Bill will begin with a corporate update, followed by Dr. Sofia who will provide an overview of our newly nominated coronavirus compound AB-343. Dave Hastings will then provide a review of the company's fourth quarter and year-end 2022 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 to be filed later today and from time to time in our other documents filed with the SEC. With that, I'll turn the call over to Bill Collier. Bill?

William Collier, CEO

Thank you, Lisa. Good morning, everyone, and thank you for joining us today. We appreciate your continued interest and support of Arbutus Biopharma. This morning, we issued a press release with our fourth quarter and year-end 2022 financials, as well as an update on the significant progress we made last year in advancing our proprietary compounds, moving us closer to our goals of potentially achieving a functional cure for chronic HBV as well as a novel and superior treatment for coronavirus. We also highlighted our anticipated milestones for 2023, which include: Announcing AB-729 data from our two ongoing Phase IIa combination trials; and additional off-treatment data from our Phase Ib clinical trial. We also intend to initiate in 2023 three Phase I clinical trials with our early-stage compounds, namely: AB-101, our oral PD-L1 inhibitor; AB-161, our oral RNA destabilizer; and AB-343, our newly nominated nsp5 main protease inhibitor in development for coronavirus infection. Suffice it to say, 2023 will be a busy year for us with potentially four compounds in the clinic by the end of the year. With respect to our mission to achieve a functional cure for patients with chronic HBV, we believe it's necessary to suppress HBV DNA, reduce surface antigen and boost the immune system. And data that we generated last year from our Phase Ib clinical trial tells us that AB-729 can potentially achieve all three of these goals. This sets AB-729 apart from other RNAi therapeutics in development. First, AB-729 has shown reawakening of HBV-specific immunity as well as a decrease in exhausted T-cells in some patients. In addition, a small subset of patients who met eligibility requirements to discontinue all HBV therapies following AB-729 treatment were able to control their HBV biomarkers while off treatment. Surface antigen levels in those patients remained well below pre-trial levels. Furthermore, their HBV DNA remains low, suggesting establishment of host immune control. Now these data reinforce our belief that AB-729 is one of the most advanced RNAi therapeutics in development and that it has the potential to be a cornerstone therapeutic in the treatment regimen for chronic HBV. Which leads me to our two ongoing Phase IIa clinical trials with AB-729, one in combination with Interferon and one in combination with Vaccitech's therapeutic vaccine, VTP-300. At the end of 2022, we completed enrolment and announced preliminary data from the lead-in phase of AB-729-201, the Phase IIa clinical trial with 729 in combination with ongoing nucleoside analog therapy and short courses of interferon. The first 15 patients who reached week 16 of treatment after receiving two doses of AB-729 on day 1 and week 8, plus NUC therapy, showed a mean surface antigen decline of 1.5 logs, which is comparable to the decline observed at the same time point in our Phase Ib clinical trial. These preliminary data further validate AB-729's capacity to reduce surface antigen. As patients complete the lead-in study, they are being randomized to receive interferon plus NUC therapy, plus or minus additional 729 doses for either 12 or 24 weeks. And we expect to have preliminary data from some of these patients who have received interferon in the first half of 2023. Our second Phase IIa clinical trial, AB-729-202, which is evaluating 729 NUC therapy and VTP-300 or placebo, is being expanded to include an additional arm with low-dose nivolumab, which is a PD-1 monoclonal antibody inhibitor that's approved for a number of types of cancer under the brand name Opdivo. We are adding nivolumab, more commonly known as Nivo, to determine if the addition of Nivo to the VTP-300 combination will further stimulate immune-mediated reduction of surface antigen after the initial treatment with 729. This amendment is currently under regulatory review. On regulatory approval, we intend to enrol 20 patients on ongoing NUC therapy who will receive 60 milligrams of 729 every 8 weeks for 24 weeks, followed by VTP-300 plus a low dose of nivolumab. The Nivo dose that we will use is 1/10 the dose approved for oncology indications, which we believe to be safe, yet efficacious. Patients will remain on their NUC therapy during the 48 weeks of dosing with 729, VTP-300 and Nivo. Like all our trials, we will follow patients for 24 to 48 weeks after completion of the treatment period. As a reminder, dosing in this amended portion of the trial is expected to commence in the first half of 2023, and preliminary data from the original portion of the clinical trial, that is those patients who received 729, NUC and VTP-300 or placebo, is expected in the second half of 2023. To round out our HBV assets, last year we nominated and conducted IND-enabling studies with AB-101 as our oral PD-L1 inhibitor and with AB-161 as our oral RNA destabilizer. Both of these programs could play a role in developing a proprietary oral combination therapy to provide a functional cure for patients with chronic HBV. We are on track to initiate Phase I clinical trials with each of these compounds, and we expect to report initial data this year. We'll share more details when each of these trials commences. Finally, as Dave will reiterate in a moment, we are in a strong financial position, with cash runway into Q4 of 2024. I'll now ask Mike Sofia to review our progress.

Michael Sofia, CSO

Thanks, Bill. Good morning, everyone. For the past year, the Arbutus research team has relentlessly focused on identifying and developing new antiviral small molecules to treat COVID-19 and future coronavirus outbreaks. Many question whether there would be a need for new or more therapeutics for coronaviruses, and I believe we can all say that the need exists as the virus continues to mutate, spread and reinfect. Our strategy focuses on targeting two essential enzymes critical for bio-replication and that are highly conserved across all known coronaviruses. These two targets are the SARS-CoV-2 nsp5 main proteases, also known as EMPro; and the nsp12 viral polymerase. We plan to identify compounds that target each of these essential enzymes, develop those compounds and ultimately combine them to pursue an optimized treatment regimen that is safe, effective, convenient and able to address current and future coronavirus strains. Through our research efforts, we have discovered and nominated AB-343, an mPRO inhibitor, as our lead oral coronavirus drug candidate. We selected AB-343 based on its preclinical activity, safety profile and the potential for convenient dosing. From an activity standpoint, AB-343 is highly potent, with an IC50 against the enzyme in the single-digit nanomolar range and has equal potency against all known SARS-CoV-2 variants and robust activity against known mPRO-resistant variants. With respect to safety, AB-343 is highly selective for coronavirus mPRO versus human proteases. It also has a clean, broad cellular toxicity profile and off-target assessment profile. These characteristics support the reduced potential for unwanted side effects, thus further supporting candidate nomination and justification for progression into development. Equally important to developing a drug that is safe and efficacious is to ensure that the drug is convenient for patients and physicians. Based on the preclinical PK data, AB-343 does not require enhancement with ritonavir boosting. This could lead to decreased pill burden and reduce the potential for drug-drug interactions seen with ritonavir-boosted regimens. I'm impressed with AB-343's preclinical profile and excited to move it forward into IND-enabling studies with the intent of initiating a Phase I clinical trial in the second half of this year. As I mentioned in my opening remarks, we are targeting two essential enzymes, the second one being nsp12 viral polymerase. Our research team is closing in on its efforts to identify a lead candidate we can then take into IND-enabling studies in the second half of this year. We will provide an update when that compound has been identified and nominated. I will now turn the call over to Dave Hastings for a brief financial update.

David Hastings, CFO

Thanks, Mike, and good morning, everybody. As I've mentioned in the past, our key financial metrics are cash and financial runway. Our cash, cash equivalents and investments were approximately $184 million as of December 31, 2022, as compared to approximately $191 million as of December 31, 2021. During the year ended December 31, 2022, the company received a $40 million upfront payment from Qilu Pharmaceutical Company related to a technology transfer and license agreement for AB-729 in Greater China; $15 million of gross proceeds from Qilu's equity investment in the company; and approximately $20 million of net proceeds from the issuance of common shares under Arbutus' at-the-market offering program. These cash inflows were partially offset by approximately $79 million of cash used in operations. The company expects a net cash burn of between $95 million to $100 million in 2023, and believes its cash runway will be sufficient to fund operations into the fourth quarter of 2024. Additionally, we were pleased to see that OMERS, from whom we sold our primary royalty interest in ONPATTRO, has now earned $18.9 million in cumulative royalties. Now as a reminder, once OMERS collects $30 million in ONPATTRO royalties, that entitlement will revert back to us. After that reversion, our royalty rate is tiered, with the top tier being slightly over 3% for annual net sales greater than $500 million. So in closing, we are well positioned financially to advance our mission to develop a functional cure for HBV and a treatment for COVID-19 in potential future coronavirus outbreaks.

William Collier, CEO

Thanks, Dave. Before our Q&A session, I want to just to quickly remind everyone of the key milestones that we anticipate for 2023, and they are as follows. We plan to report initial data from the Phase IIa clinical trial combining 729 NUC therapy and VTP-300 in the second half of 2023, and to dose the first patient with Nivo in the clinical trial amendment that combines AB-729, VTP-300 plus Nivo. We also plan to announce preliminary interferon data from patients in the AB-729-201 clinical trial who received 729 plus therapy plus interferon. We plan to announce additional off-treatment data from our AB-729 Phase Ib trial. We plan on reporting initial data from the healthy volunteer single-dose portions of our Phase I clinical trials for AB-101 and AB-161. And finally, we plan to initiate a Phase I clinical trial for AB-343, our mPRO coronavirus clinical candidate. And we look forward to providing you with updates as we progress our clinical development and achieve these milestones. So operator, we're now ready for our Q&A session. Over to you.

Operator, Operator

Our first question comes from Dennis Ding with Jefferies. Your line is open.

Dennis Ding, Analyst

Thanks for taking the questions. Two for me. In terms of your corporate strategy this year, maybe comment on what your priorities are and how to balance your pipeline versus finding some BD opportunities with your broad pipeline? And then my second question is just around when you talk with potential partners in this space for HBV, generally speaking, what level of clinical risk do you think partners would be comfortable with? And what do you think they would want to see before potentially advancing discussions with you? Thank you.

William Collier, CEO

Thank you, Dennis. Let me take the first part of the question, and then I think Mike McElhaugh is on the line and he can take the second piece. So we believe, actually, we've made a number of adjustments in our strategy in the last year or so in order to focus on HBV and coronavirus. And that indeed includes making some pretty tough decisions. So you'll notice today, we've said nothing about capsid inhibitors going forward. So that's an illustration that we believe we have a very good compound in 729, we're confident in moving 161 and 101 into the clinic, which could round out a very nice HBV portfolio. And as Mike just described, spending some of our resources on coronavirus, we believe, is still very relevant given the ongoing epidemic and pandemic around the world. And we've been able to do all of that whilst extending our cash runway out to the end of 2024. So we feel like we have made some tough choices and prioritized appropriately, but still maintaining a real tight focus on our vision in trying to find a functional cure for HBV and an effective treatment for coronavirus. Mike, are you okay taking the second part of the question?

Michael McElhaugh, Executive

I am. So this was the one that is related to what level of clinical risk is relevant?

Dennis Ding, Analyst

Got it. Thank you.

Operator, Operator

Our next question comes from Brian Skorney with Baird. Your line is open.

Charles Moore, Analyst

Good morning, guys. This is Charlie on for Brian. So I was curious if there's anything we can look for beyond safety to get a good grasp on potential activity for either the oral PD-L1 or the RNA destabilizer? As well as looking at 729 with one of the patients becoming eligible to restart new therapies. We're just curious what kind of proportion would you be looking here for the remaining patients in terms of defining success for you guys? Thank you.

William Collier, CEO

Yes. Okay. Good question. Maybe Mike Sofia, would you like to talk about 161 and 101, and I'll come back with 729.

Michael Sofia, CSO

Thanks for the question, Charlie. When we evaluate our oral PD-L1 inhibitor AB-101, safety is our primary concern in the Phase Ia study. However, we can also gain insights into the molecule's activity and potential efficacy. We have various methods to assess target engagement and occupancy, which will help us determine if the molecule is effectively interacting with its target and producing relevant biological responses from an immunological perspective. This information will provide early indications of whether this molecule may demonstrate HBV clinical efficacy as we move into Phase Ib studies. We expect to gather this data in the SAD-MAD portion of the study quite early, allowing us to share findings by the end of the year. Regarding AB-161, our RNA stabilizer oral compound, the field has faced challenges with safety, making it a critical focus for us from the start. We've conducted an extensive preclinical safety review based on our past experience with AB-452 and its peripheral neuropathy studies. We have performed 60-day as well as two 90-day toxicology studies in two species, reinforcing our confidence in this molecule's safety profile as we proceed with clinical trials. In the early Phase I studies, we will closely monitor safety signals, particularly for peripheral neuropathy. After these initial assessments, we will transition to a Phase Ib study, where we will focus on efficacy aspects, biomarkers, and specifically analyze antigen reduction and HBV DNA reduction.

William Collier, CEO

And then on the 729 follow-up of these nine patients who are now off therapy. I just want to clarify, we now have seven patients remaining for follow-up. But I want to just clarify, actually, so far, only one patient has met the clinical criteria to restart therapy. There was one other patient who experienced what looked like some kind of increase in HBV DNA. So before that patient met any restart criteria, the physician and the patient decided to restart therapy. So out of the nine, we only have one that's met the predefined protocol criteria for restarting therapy. We remain really intrigued and interested in this data. We think it is worthwhile to follow up. We have some interest, obviously, from physicians and KOLs in continuing to track these patients. We should point out that many of these patients now are multiple weeks into being off of therapy. And so I think as we've alluded to, we'll track these patients and continue to report data as we progress through 2023.

Operator, Operator

Our next question comes from Thomas Yip with H.C. Wainright. Your line is open.

Thomas Yip, Analyst

Good morning, everyone. Thomas asking a couple of questions for Ed. So first, a follow-up on the tale of the seven patients that remain off treatment in the 001 study. Can you tell us what is the range of how many weeks these patients have gone off treatment? And how frequently should we expect updates this year from these patients?

William Collier, CEO

Yes. So on the update, we've said we'll provide an update in the first half of the year. And obviously, as we continue to progress during the year, if there's further news, then we'll provide further updates. I am actually having to work from home today. You can tell I have a pretty horrendous head cold. I actually don't have the data for the number of weeks of therapy in front of me. So I just wonder if there's anyone else on the call who has that information. I don't know whether Mike or Mike Sofia. I'm also just looking back on the deck here.

Michael Sofia, CSO

Yes, give me one second, Bill. Patients have been off therapy, at least according to the last data update, for anywhere from approximately 20 weeks to 44 weeks or more. So based on the last update, patients can continue to track their progress and understand where they stand.

William Collier, CEO

Yes. That is Slide 13, actually in the corporate deck, which you can see the data for the nine patients. And this was what we reported in December last year. So Mike has given you the range of weeks there. And then we can add on, I guess, a few more weeks since the December update last year.

Thomas Yip, Analyst

Yes, as you mentioned, there are seven patients remaining in the study. It's been a couple of months, so we're looking at data extending beyond 44 weeks. As we continue to gather off-treatment data from more patients, what insights do you anticipate could influence the ongoing Phase II combination studies?

William Collier, CEO

Yes. Okay, understood. Well, I mean, obviously, we want to continue to track them. I hope that there are not too many more that meet the criteria to restart treatment, but that's one potential outcome. Another potential outcome is we potentially get a few who do actually go undetectable. We just have to track. And obviously, we'll report if that does happen. And then the other outcome is that actually they kind of continue to stay as they are, which is low levels of HBV DNA, low levels of surface antigen, not meeting the criteria to restart treatment. But not undetectable, which I think would be a demonstration that actually treatment with 729 and the NUC does actually get these patients to a position where they're able to come off therapy. Now it might also indicate that the ultimate combination, the functional cure would be 729 and NUC, and then a third agent designed to further boost the immune system, which is why our PD-L1 program comes in. So that, I think, would be the interesting information. And then obviously, we're looking for the same thing in our Phase IIa studies, whether or not the addition of interferon and/or VTP-300 plus or minus Nivo results in further s-antigen reductions than 729 alone. And then obviously, in the follow-up period, we'll be looking to see how these patients respond when they are off treatment.

Operator, Operator

Our next question comes from Keay Nakae with Chardan. Your line is open.

Keay Nakae, Analyst

Yes, a couple of questions. Can you hear me now?

Operator, Operator

Yes, a little better.

Keay Nakae, Analyst

Okay. For the one patient who was off treatment and then met the criteria to restart, how long were they able to stay off treatment?

William Collier, CEO

Can I get back to you on that, Keay? I don't know that I have that information immediately at my fingertips.

Michael McElhaugh, Executive

I have that available if you'd like.

William Collier, CEO

You do? Okay. Go ahead.

Michael McElhaugh, Executive

Yes. So the one patient that required restart because of the protocol-defined criteria, discontinued follow-up week 36 after they stopped all therapy.

William Collier, CEO

Yes, yes. Thanks, Mike. Slide 13 in the deck. So there's a little asterisk at the bottom.

Keay Nakae, Analyst

Okay. And then for Mike, for mPRO, as you take that into the clinic, once you get beyond safety and want to evaluate it in patients who may have the virus, what might that study look like? What would be maybe a targeted course of therapy daily like a 5-day treatment? Maybe give us some thoughts about that.

Michael Sofia, CSO

Thank you, Keay. We haven't shared details about our clinical development plan yet, but we can draw some insights from our competitors. We are considering readouts that focus on viral load decline and reduced hospitalization rates. We're particularly interested in whether this molecule, or our combinations, can have an impact on reducing symptoms or serve as pre-exposure prophylaxis. These are the areas we are focusing on as we outline our clinical development plan, and we are eager to initiate these efforts as soon as possible.

Keay Nakae, Analyst

Okay. And then once you have the second compound ready to go into the clinic, how soon would you evaluate it as a combo therapy, at least in terms of safety?

Michael Sofia, CSO

We can conduct preclinical assessments to evaluate combination safety, which we often do before clinical trials. Once we identify our second molecule and complete the necessary IND-enabling studies, we will initiate a Phase I trial using the compound as a single agent. Based on prior developments in the field, we will need to demonstrate its efficacy and safety on its own first. Assuming everything proceeds smoothly, we aim to quickly advance to combination therapies. Currently, we are planning for a relatively short clinical development program since a brief treatment duration is needed to demonstrate some antiviral effect, which should expedite our progression into combination therapies.

Keay Nakae, Analyst

Okay. And then just a final question on the litigation with Moderna. Is there any update you can provide as far as a next step in that process?

William Collier, CEO

Yes, thank you, Keay. Unfortunately, not. We're going to stick to our policy that we've had since we filed that case last year. We just don't comment on the ongoing twists and turns of the case. So you didn't see any updates in our press release or our prepared remarks and although frustrating for you guys, which I understand. That one is a no comment.

Operator, Operator

Our last question comes from Roy Buchanan with JMP Securities. Your line is open.

Roy Buchanan, Analyst

Thanks for taking my questions. I had a few for COVID first, I guess. So 343 looks very potent. Do you anticipate once daily oral dosing? When do you think we might see the preclinical data first presented for that? And then the IC50, presumably that's in vitro and not cell based. Can you give us any details on what system that was?

Michael Sofia, CSO

Well, yes, our PK. So we have one presentation that's going to be at ICAR this year in a couple of weeks that will highlight, sort of, the entire in vitro profile of the molecule itself. And we anticipate submitting a couple of abstracts at other meetings coming up in the very near future to also share preclinical data that we have on the molecule. So hopefully, some of that will be rolling out shortly for everyone to see and see what an exciting molecule we have in AB-343.

Roy Buchanan, Analyst

Okay. Great. And any comments on the once-daily dosing?

Michael Sofia, CSO

Our data looks very promising. In various species, we will need to determine the dosing frequency once we begin clinical trials. However, at this point, we remain quite optimistic.

Roy Buchanan, Analyst

Okay, great. And then on the 729, can you just remind us the criteria for restarting the NUCs for that patient that had to restart? What's the criteria?

Michael Sofia, CSO

Good question.

William Collier, CEO

I think that one is not on the slide. That's what I was looking at. So we'll follow up with you.

Roy Buchanan, Analyst

Okay. Great. It seems that GSK is limiting the Phase III primary endpoint baseline s-antigen to below 1,000, which might represent about 15% to 20% of the population in their Phase IIb. Does that align with your perspective on the overall CHB population? Additionally, it appears that nearly all the patients you have off therapy, except for possibly one, were above 1,000. Am I interpreting that correctly? Thanks.

William Collier, CEO

Good question. I don't know that I can comment on the GSK trial. But the nine patients that we had discontinued, I think, had all sorts of historic starting s-antigen levels. We can get that information there for you, Roy.

Roy Buchanan, Analyst

I was reviewing the AASLD presentation, and it seems that one is below 1,000, but the others appear to be above that number. For the interferon combination data this half, I know you've been asked about this previously. What are the key points we should pay attention to regarding that data? Thank you.

William Collier, CEO

Yes. So I mean, as I said in my prepared remarks, I mean, I think the key thing that we would want to see is a further reduction in s-antigen. So you treat with 729. And then potentially after you add in these other agents, a further reduction in s-antigen, which could be reflective of immune response. But I will add the caveat that we've seen in other studies that, that doesn't necessarily happen immediately with interferon. And sometimes it takes a while. Sometimes it's after the interferon therapy is stopped. So we'll have to see how our data pans out, and we'll make the appropriate commentary when we do that update.

Operator, Operator

Ladies and gentlemen, this does conclude the Q&A portion of today's call. I'd like to turn the call back over to Bill for any closing remarks.

William Collier, CEO

Well, thank you very much for joining us this morning. I'm also thankful my voice managed to hold up. We do appreciate your continued interest in Arbutus, and we especially look forward to providing you with further updates as we progress the development of our HBV and coronavirus assets. So thanks again for joining. And operator, that concludes our call.

Operator, Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.