Earnings Call Transcript - VIR Q2 2023

Operator, Operator

Hello. Welcome to Vir Biotechnology Second Quarter 2023 Financial Results and Business Update Call. As a reminder, this conference call is being recorded. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I will now turn the call over to Sasha Damouni Ellis, Executive Vice President, Chief Corporate Affairs Officer. You may begin Ms. Damouni Ellis.

Sasha Damouni Ellis, Chief Corporate Affairs Officer

Thank you and good afternoon. With me today are Marianne De Backer, Chief Executive Officer; Dr. Phil Pang, Chief Medical Officer; and Sung Lee, Chief Financial Officer. Before we begin, I would like to remind everyone that some of the statements we are making today are forward-looking statements under the securities laws. These forward-looking statements involve substantial risks and uncertainties that could cause our clinical development programs, future results, performance, or achievements to differ significantly from those expressed or implied by such forward-looking statements. These risks and uncertainties and risks associated with our business are described in the company's reports filed with the Securities and Exchange Commission, including Forms 10-K, 10-Q, and 8-K. I will now turn the call over to our CEO, Marianne De Backer.

Marianne De Backer, CEO

Thank you, Sasha. Good afternoon and welcome to Vir Biotechnology's first earnings call. I'm Marianne De Backer, CEO of Vir, and I'm pleased to welcome you all here today. I joined Vir four months ago, and every day since I'm reminded of how well Vir aligns with my commitment over the past 30 plus years to bring new medicines to patients. Vir is one of those unique companies that uses ingenuity in the discovery of neutralizing antibodies in the fight against COVID-19, and this during the very worst times of the pandemic. This was achieved in just 15 months and brought to nearly 2 million people around the world. Before that, the Vir discovery engine had already yielded an antibody to treat Ebola, now recognized by the World Health Organization for its impact. After four months of learning about Vir's differentiating capabilities, platforms, pipelines, and strong partnerships, I could not be more enthusiastic to lead this team of passionate, driven professionals who always have the end goal in mind, serving patients. Today, and over the next few quarters, I will share more about our focused efforts to drive our pipeline and our science forward. We hope you take away an understanding of our strategy, our development programs, and the ability to execute. Infectious diseases continue to pose a major threat to global health, economic security, and to society as a whole. Just last month, in talking to a patient living with chronic hepatitis B, I was reminded of the deep personal impact such a disease has on not just the individual but also on their families and their communities. We aim here at Vir to address these needs with a broad range of drug candidates and additional data to come this year. First, I want to touch on our recently announced Phase 2 PENINSULA trial evaluating VIR-2482 for flu prophylaxis, which missed its primary endpoint. Phil will share more details momentarily. It is important to remember that in the world of drug development and clinical trials, unexpected outcomes are not uncommon. That is exactly why we take multiple approaches and have a broad pipeline. Seasonal flu affects about 1 billion people around the world and claims up to 650,000 lives each year. It is a significant unmet need that warrants our attention and we will follow the data in guiding our next steps. We do remain interested in this area, and we have VIR-2981 as a preclinical candidate which has a differentiated mechanism of action to VIR-2482, covering both influenza A and B, and may be a more efficacious alternative to vaccines. Second, Vir is working on a potential functional cure for the more than 300 million people living with chronic hepatitis B worldwide. Current standard-of-care is lifelong therapy, which decreases but does not eliminate the risk of cirrhosis or liver cancer. At Vir, we aim to achieve a functional cure, meaning allowing control of the virus without such chronic medical therapy. This is akin to remission and further reduces the risk of debilitating disease progression. Vir is focused on regimens, such as combining an antibody within an siRNA designed to stop the virus and clear the infection. We expect a data readout from Part B of our ongoing March Phase 2 trial in the fourth quarter, which we hope will get us again one step closer to a functional cure for chronic hepatitis B. Third, I want to highlight what Vir is working on to address chronic hepatitis delta, which affects more than 12 million people worldwide and imposes a four times greater risk of liver cancer compared to chronic hepatitis B alone. We know that around 5% to 15% of patients with chronic hepatitis B are co-infected with the hepatitis delta virus and the World Health Organization considers chronic hepatitis delta to be one of the most severe forms of viral hepatitis. Our goal is convenience, with once or twice monthly injections with transformative efficacy. Initial data from our clinical trial are expected in the fourth quarter. We also expect to report significant progress in the discovery of new drug candidates using our proprietary antibody and T-cell platforms, which are yielding a robust pipeline that is optimized through AI and our unique data science capabilities. Currently, about 90% of our pipeline leverages data science tools, which enable us to discover, select, and develop drug candidates with the highest chance of success of becoming medicines that could benefit patients in need. Going forward, all our antibodies will be optimized using this approach. Still, we'll touch on the preclinical programs that have the potential for IND filings within the next 24 months. Lastly, we have a strong balance sheet that allows us the financial flexibility to fuel our program and grow our antibody platform. We are taking measures to continuously evaluate and judiciously allocate this capital to maximize value for our shareholders. As part of this process and under my leadership, we made the decision to phase out our small molecule platform. This is the first step as we continue to advance our core capabilities and scientific priorities. The combination of all the strengths we have here at Vir makes this a very exciting time. I am confident in our ability to advance our development program and potentially impact the lives of many patients. I'll now turn the call over to Chief Medical Officer, Phil Pang, to provide more details on our pipeline.

Phil Pang, Chief Medical Officer

Thank you, Marianne. Before speaking to our future research and ongoing development efforts, I want to address the topline data from our influenza Phase 2 clinical trial. This trial failed to demonstrate a statistically significant difference between those who received VIR-2482 and placebo. Specifically, at 1200 milligrams, which was the highest dose of VIR-2482 tested, there was a non-statistically significant reduction in influenza illness of approximately 16%. Interestingly, in this same group, an approximate 57% reduction in influenza A illness was observed when illness was defined according to CDC criteria. More analysis is going to be needed to address why this study was unsuccessful. We are looking at the data from the perspective of how different symptoms, their duration, and severity might influence outcomes. Understanding drug concentrations, time to infection, and the sequence of the actual viruses that the participants were exposed to will also be important. As for next steps, any significant development of VIR-2482 will be guided by these analyses. To be clear, however, we will not be initiating a Phase 3 trial. In the influenza space, as Marianne noted, we are continuing our efforts on VIR-2981, an investigational monoclonal antibody that covers not just flu A, but also flu B. In some animal models, it has shown markedly greater potency. The characteristics of VIR-2981 parent antibody were recently published in Nature. Because VIR-2981 has a different mechanism of action, targeting the enzymatic activity of the neuraminidase, not the stem of hemagglutinin, we believe in its potential to prevent influenza illness. As we learn more from the PENINSULA trial, we will certainly apply relevant findings to the ongoing development of VIR-2981. More broadly, as Marianne noted earlier, the antibody platform in Vir has already resulted in a medicine for COVID-19 in just 15 months, and the only single antibody capable of treating Ebola. So, while the setback for VIR-2482 is unfortunate, it doesn't change our perspective on our platform's ability to identify potentially best-in-class antibodies and to then leverage data science and AI to further engineer them. Specifically, we can enhance antibody binding, potency, vector function, half-life, developability, and stability. Even more broadly, we recognize the importance of a fully integrated data strategy from research all the way through product development, and believe that this ability will continue to be differentiated here at Vir. We have 24 publications and numerous patents and awards related to our data science achievements. Now, let's turn to chronic hepatitis B. Unlike the current standard-of-care, which requires taking antiviral medicines for the rest of one's life and does not eliminate the risk of cirrhosis or liver cancer, our goal is a functional cure. After completing a functional cure therapy, there should be no need for further treatment and there should also be a further reduction in the risk of liver complications. Our functional cure hypothesis is based on a novel widely accepted belief that chronic hepatitis B is an immunologic disease caused by a virus. As such, we believe that combinations of antivirals alone are not enough. Instead, we believe functional cure requires a combination of antivirals with immunologic agents. We call our approach stop and clear. We stop the virus from replicating and clear already infected cells through immune-stimulation. This is the fundamentally different hypothesis we seek to prove in our clinical trials. Our clinical development pathway has been as follows: we began with Phase 1 and Phase 2a studies that are exploring different combinations of antivirals and immunomodulators. By specifically using small cohorts in these studies, we are able to explore a broad space of possibilities to help identify the right combination, dose, duration, frequency, and population. In the studies, we have made two major advances towards a functional cure for chronic hepatitis B that highlight why we believe we can succeed. One, at the June 11 meeting, we showed that we could achieve a durable off-treatment response in 16% of participants who received VIR-2218 and pegylated interferon alpha for 48 weeks. While the sample size was small and the confidence interval is large, it's worth noting that interferon alpha alone is generally thought to result in an off-treatment response only 3% to 7% of the time. Two, at the AASLD Conference in 2022, we showed that a short course of VIR-2218 with VIR-3434 resulted in nearly a three-log knockdown in hepatitis B surface antigen. This is a viral protein that is a measure of virus activity. Notably, antiviral activity was additive, and no new safety signals were observed. Our next development step has been to build upon these observations. Last summer, we started Part B of our Phase 2 March study, which is exploring the combination of VIR-2218 and VIR-3434 with and without pegylated interferon alpha for durations of 24 and 48 weeks. We expect to present end of treatment data for the 24-week cohorts in the fourth quarter.

Sung Lee, Chief Financial Officer

Thank you, Phil. We're pleased to share our financial results for the second quarter of 2023. Total revenues were $3.8 million compared to a negative $40.6 million for the same period a year ago. Recall that in 2022, the company recorded a revenue constraint related to sotrovimab in the amount of $397.4 million, which caused the total revenues and collaboration revenue in the second quarter of 2022 to be negative. Specific to sotrovimab in the second quarter of 2023, collaboration revenue was negative $13.8 million, mainly due to sotrovimab sales being more than offset by manufacturing costs and expenses to support activities in countries where sotrovimab continues to have a marketing authorization. Going forward and barring a reauthorization of sotrovimab in the US, we believe collaboration revenues will be at minimal levels and potentially make a negative contribution to our topline due to the ongoing required investments to support the marketing authorization, which our partner GSK leads in the upper 10%. Turning to operating expenses. R&D expenses in the second quarter of 2023 were $171.9 million compared to $115.1 million in the same period in 2022. Included in the 2023 amount is a non-cash charge of $10.7 million related to the impairment of legacy in-process R&D and consolidation of our labs. The year-over-year growth in R&D expenses was primarily driven by investments in the Phase 2 study PENINSULA for VIR-2482 and manufacturing activities in anticipation of initiating a Phase 3 study. While the costs associated with the PENINSULA study will ramp down in the next few quarters, we are currently evaluating the impact of the manufacturing capacity and supply for VIR-2482. We expect to communicate more on this with our third-quarter results. SG&A expenses in the second quarter of 2023 were $47.1 million compared to $41.6 million for the same period in 2022. The year-over-year growth was primarily driven by higher personnel costs to support the overall growth of the business. For the second quarter of 2023, we reported a consolidated net loss of $194.8 million compared to a net loss of $76.5 million for the same period in 2022. Turning to the balance sheet, we ended the second quarter of 2023 with cash and investments of $1.9 billion compared to $2.4 billion at the end of 2022. As communicated previously, we made a payment of $273.6 million in the second quarter to our collaborator GSK, which comprised the majority of cash utilization during the quarter. This payment primarily relates to the amount reserved in 2022 for excess sotrovimab supply and manufacturing capacity due to reduced demand expectations for sotrovimab. There remains a balance of $69.7 million related to this reserve, which we expect a payment of approximately $41.8 million to GSK in the third quarter of 2023. As I conclude, I would like to make a few comments about our financial position and capital allocation. As Marianne stated earlier in the call, we are making decisions and taking actions to become more focused, which has resulted in the discontinuation of our small molecule platform. We're well-capitalized to see our current Phase 2 programs in hepatitis B and hepatitis delta through the end of Phase 2 and beyond. We also have the balance sheet strength to pursue further innovation by investing in our core antibody platform. And finally, you can expect us to be strong stewards of capital and have a disciplined approach to capital allocation and expense management.

Sasha Damouni Ellis, Chief Corporate Affairs Officer

Thank you, Sung. We will now start the Q&A section. Please limit questions to two per person so that we are able to get to all of our covering analysts. Operator, please open up the lines.

Operator, Operator

Okay. Our first question comes from Gena Wang from Barclays. Your line is open.

Gena Wang, Analyst

Thank you. I have two questions about the flu 2482 program. First, regarding the PENINSULA study, why wasn't the design set with a lower bound of 30%, similar to the studies by Pfizer and Moderna? If we used a 30% lower bound, the study might appear underpowered. Could that be a factor in the failure? My second question is about the negative topline results and whether there is any impact on the flu work or connections to other programs or the antibody platform.

Phil Pang, Chief Medical Officer

Thank you, Gina. I really appreciate that chance to answer your questions. Let me begin with your first question regarding the design of the trial. The short answer is that it was a well-powered study, and we need to think of it in the context of the fact that our desire was to show efficacy beyond that of traditional vaccines. So when you think about how to power a study, it's not just about demonstrating statistical significance but to demonstrate clinical significance in context of that. For example, we could have powered a study to demonstrate that a 10% effect size was statistically significant, but that wouldn't have been clinically meaningful considering the vaccines that are currently out there. This is in contrast to vaccine flu trials, which do have a desire to power their study for both clinical significance and statistical significance to a lower bound confidence interval of 30%. But I would remind you that monoclonal antibodies, both RSV and COVID, have not used such flu vaccine-specific endpoints. So, we were definitely well powered to ask the question and answer the question, could we achieve transformative efficacy? Unfortunately, we did not. Regarding the other aspects of 2482, I want to point to the fact that we are undergoing more analysis right now as to why this study was unsuccessful. We're looking at it from many different angles, including different symptoms, the pharmacokinetics, time to infection, and a number of factors I talked about earlier. We need to be guided by those results and that analysis and that data to really decide what next to do. But clearly, we won't be embarking on a Phase 3. Finally, regarding your question about read-through, as Marianne said best, we’ve already had two successes with our antibody platform: the Ebola antibody, the only single antibody to treat and cure Ebola, as well as the COVID-19 antibody, which was brought to market in less than 15 months. So, I don't think there's any read-through on our ability to design and identify successful medicines using this antibody platform.

Marianne De Backer, CEO

Thank you, Phil. I would just add, Gina, that we obviously want to be very strategic about how we allocate our capital, and Phil pointed out, we are not going to rush into any next steps. We really want to do a thorough analysis of the data and be guided by that outcome concerning what we will be doing there.

Gena Wang, Analyst

Thank you.

Operator, Operator

All right. Our next question is from Paul Choi from Goldman Sachs. Your line is open.

Paul Choi, Analyst

Hi, thank you. Good afternoon, everyone. My first question is if we think about stripping out the one-time true-up for the excess sotrovimab supply and manufacturing to GSK. And I know there's a couple of moving parts there still. If we look at the year-ago OpEx, is that sort of the normalized rate that you would think would be normal here going forward? And what does that imply for your cash runway? And then secondly, on hep B for the 2218 3434, plus or minus peg data set that will be coming up later this year, can you level set patients on how we should think about potential efficacy there? Is there potential for synergy, or should we think about it largely as additive? And also, what can you say on potential tolerability of the regimen given historical challenges with interferon?

Sung Lee, Chief Financial Officer

Yes, Paul, thanks for your question. So, I think you had a couple of questions there on operating expense levels and the implications for our cash runway going forward. When you think about our operating expense, specifically R&D expenses for the last several quarters, it's been heavily driven by the investment in the flu Phase 2 study, the PENINSULA study. In addition, we have also invested in manufacturing activities for an anticipated Phase 3 study in flu. These have been the primary drivers of our R&D operating expense for the last several quarters. Now, going forward, as I go back to the prepared comments I made on the ramping down of the PENINSULA study in the next few quarters, there are some variables here with ongoing Phase 2 studies in hepatitis B and delta, and we’re going to get to some important data readouts in Quarter 4 this year. Depending on those readouts, that could be a significant swing factor for our OpEx trajectory in the future, which has implications for our cash utilization as well. But I just want to clarify here: the cash utilization when you go from Q1 to Q2 is not indicative of a run rate. As I mentioned in my prepared comments, the $273.6 million payment to GSK was related to a liability booked last year. So, you have to cancel that noise out to understand our true cash utilization, which has been averaging close to $120 million per quarter. Going forward, with $1.9 billion in cash and investments, we're in a strong position to fund not only the end of phase two for those programs but also continue into Phase 3.

Marianne De Backer, CEO

Thank you, Sung. And regarding your question on our chronic hepatitis B functional cure program, as you rightly pointed out, we will be reporting data in the fourth quarter of this year on combining 2218, our siRNA, with 3434, our antibody plus or minus interferon alpha for 24 weeks at end of treatment. We have promising data that we have seen and announced at previous conferences, so I invite Phil to share more about what we have seen regarding signals of efficacy and also additivity.

Phil Pang, Chief Medical Officer

Thank you, Marianne. So, Paul, great to talk to you again. Before we discuss what's coming, I just wanted to reiterate what we've seen most recently at the last two liver conferences. As Marianne mentioned, at AASLD last year, we showed that a short course of the siRNA 2218 and 3434 was additive, but that duration was only four and 13 weeks. What we're looking for new at AASLD in the fourth quarter is 24 weeks of data combining these two drugs together, along with the addition of interferon alpha. I think all of that together is what will be new, along with, of course, new data from hepatitis delta.

Sasha Damouni Ellis, Chief Corporate Affairs Officer

Operator, can you go to the next question?

Operator, Operator

Okay, our next question comes from Roanna Ruiz from Leerink Partners.

Roanna Ruiz, Analyst

Great, thanks. Hello, everyone. So maybe first question on the Delta virus, what specific measures could you disclose in the Phase 2 SOLSTICE trial and what's the efficacy bar that you're looking for?

Marianne De Backer, CEO

Thank you for that question, Roanna. I will ask Phil to give you some more details on that.

Phil Pang, Chief Medical Officer

Thank you, Marianne, and thank you Roanna. Regarding our Delta trial, remember at EASL this last year, we showed that in preclinical models, 3434, our FC enhanced monoclonal antibody, was able to knock down the hepatitis delta virus RNA. We also demonstrated that 2218, our siRNA could do the same and that when combined in animals, they were additive in their behavior. Now we are looking at SOLSTICE, which also began in the early part of spring. We are asking ourselves, can 3434 alone, 2218 alone, and the combination of the two improve our ability to knock down hepatitis delta RNA virus? We are looking forward to seeing that data in the fourth quarter. The efficacy bar to get approval is based on a two-log reduction in hepatitis delta RNA and normalization of ALT, only seen 45% of the time with the currently available drug. We're hoping for transformative efficacy, perhaps reducing the treatment burden to once or twice a month. That can be differentiating for us. As for what we will actually see, we project data from monotherapy and combination treatment in a small cohort.

Marianne De Backer, CEO

Yes, there are exciting days ahead for us next year.

Roanna Ruiz, Analyst

Okay, great. I have a quick follow-up. Yes, bigger picture. Could you give us a sense of what your strategic priorities for the company will be in 2024? Thinking about flu, Delta virus, HPV, and all the programs you have going on, are some of them going to shift to higher focus next year? And what should we be following more closely along those lines?

Marianne De Backer, CEO

Yes, thank you for that question. As mentioned, regarding our flu program, what next steps will depend on further analysis of the data. But our near and intermediate focus is on our clinical programs. So chronic hepatitis B and chronic hepatitis delta are our top priorities. We will also be bringing the HIV program into the clinic this quarter. Our capital allocation will focus on rapidly and efficiently progressing those programs towards data.

Operator, Operator

Our next question comes from Eric Joseph from JPMorgan.

Eric Joseph, Analyst

Hi. Good afternoon. Thanks for taking the questions. Just one or two on HBV, just trying to get a better sense of the update we might see from March Part B in the fourth quarter, whether we should expect, well, really the types of patient numbers, I guess we should anticipate, and whether we should expect readouts across the four different treatment regimens. And then I'm also curious to get a sense from you guys of what level of S-antigen clearance would support the addition of 3434 being additive to what you've reported so far from the Yuan trial of 2218 plus PEG, the doublet alone. Thanks.

Phil Pang, Chief Medical Officer

All right. So, Eric, thanks for the question. To level set, at EASL, we showed that 48 weeks of 2218 with interferon alpha resulted in an off-treatment response in about 16% of patients six months after the end of treatment. That was preceded by an on-treatment seroclearance of around 30%. What we'll be seeing in the fourth quarter is the 24-week on-treatment data from both the triplet and doublet. We're looking for 2218 plus 3434 to yield a higher rate of seroclearance. We also expect to see if we can match or exceed the 30% we observed with 48 weeks of the previous doublet. Additionally, it's important to consider the combination with interferon to see how we can enhance this further. Interferon alpha does have some tolerability issues in the long-term context; however, if we can achieve functional cure rates greater than 30% or 40%, patients will be more inclined to accept it given their chronic condition.

Marianne De Backer, CEO

Yes, and I'd add we're on track with our expectations regarding enrollment and timing.

Eric Joseph, Analyst

Okay. Would it be premature in the fourth quarter to see any post-treatment follow-up or off-treatment follow-up for patients that only received the 20 or 24-week regimen?

Phil Pang, Chief Medical Officer

At this time, we've only guided to the on-treatment data from the 24-week subjects. We are looking forward to sharing that information alongside the chronic hepatitis delta updates in the fourth quarter.

Operator, Operator

Our next question comes from Eva Privitera from TD Cowen.

Eva Privitera, Analyst

Hi. Good afternoon, and thanks for taking our questions. To just follow up on the prior question, for the triple combination with data in the second half, what rate of on-treatment seroclearance would get you excited or be indicative of the off-treatment clearance?

Phil Pang, Chief Medical Officer

To answer that question, context is key. For VIR-2218 plus interferon alone, at 24 weeks, we saw only a 5% rate of seroclearance on treatment. Anything beyond that would be a biological proof of principle that 3434, when added, is moving the needle. If we can achieve higher rates without interferon using 2218 and 3434, that would also be impressive. Therefore, the higher the on-treatment response rate, the more optimistic we will be about its impact on patients.

Eva Privitera, Analyst

But what delta between, what delta would you anticipate between the on-treatment and off-treatment? Is there any way to know?

Phil Pang, Chief Medical Officer

One exciting aspect we observed at EASL was the first indication of a predictor for off-treatment response. Admittedly, it was from a small cohort, but we demonstrated that patients who seroconverted to anti-S antibodies at high levels had a greater chance of off-treatment response. We will be monitoring this metric closely in our studies to understand future off-treatment response rates.

Eva Privitera, Analyst

Great, thank you very much.

Operator, Operator

Our next question comes from Mike Ulz with Morgan Stanley.

Mike Ulz, Analyst

Hey guys, thanks for taking the question. Maybe just another follow-up on the March Part B data expected later this year. Just based on what you've seen so far, do you think 24 weeks will be enough, or may you have to go to 48 weeks? Is this a situation where longer-term treatment tends to be better, or could there be a reason why longer would not be better for some reason? And then maybe your thoughts on the need for PEG interferon or not?

Phil Pang, Chief Medical Officer

Sure, that sounds like a three-part question, Mike. Long-term, biologically, the precedent is clear: retrospectively, when giving PEG interferon alpha for longer periods, the response rates improve, but so do side effects. Balancing these two perspectives is crucial, as ultimately, efficacy and safety are the focus. Should we demonstrate a 24-week course that parallels the 48-week course in efficacy, that shorter-term treatment would be our preference. A noteworthy advantage would be the reduced tedium of treatment for patients. If we find our longer course provides a meaningful efficacy advantage, then we'll need to reconsider based on patient feedback.

Mike Ulz, Analyst

That's helpful. Thank you.

Operator, Operator

Our next question comes from Joseph Stringer from Needham & Company.

Joseph Stringer, Analyst

Hi. Thanks for taking our questions. Two from us. First on the HIV program: you were previously evaluating your 1111 in Phase 1 trials. What's different about 1388 and what gives you confidence that this T cell vaccine is the right approach and what are the timelines around initial data? And then secondly, given the current cash balance, what are your thoughts on external BD? What's your appetite for bringing in external assets, whether they be early or late stage? Thanks.

Marianne De Backer, CEO

Thank you, Joe. I'll start with the last question first. We have a strong balance sheet that allows us to fund our critical Phase 2 and Phase 1 assets for the next inflection points. It also allows us to remain opportunistic. If we find assets or opportunities that can strengthen our pipeline in biotechnology, we will take advantage of those. Regarding your first question on the differentiation of VIR-1111 versus VIR-1388, perhaps Phil you can take that one.

Phil Pang, Chief Medical Officer

Thanks, Marianne. We are on track to dose our first patient this quarter in Q3 with VIR-1388, which as you noted is a prophylactic HIV vaccine. In terms of what's different compared to VIR-1111, while we await results in humans, we acknowledge that VIR-1111 was deliberately attenuated, rendering it less capable of replicating in tissue culture. We now have the opportunity with 1388, based on safety information from VIR-1111, to bring what we call a less attenuated virus into the clinic. This virus demonstrates improved replication in tissue culture, and we expect it to be more immunogenic in humans. That’s the key difference, along with some other minor variations we implemented.

Marianne De Backer, CEO

Thank you, Phil. Sung, could you comment more on our cash position?

Sung Lee, Chief Financial Officer

Yes, happy to do that, Joe. With $1.9 billion in cash, we possess significant financial flexibility. This capital covers not only our Phase 2 studies but also supports ongoing Phase 1 trials. We’re in a fortunate position. However, I reiterate that our large payment to GSK in Q2 should not be considered part of our normal operational run rate.

Joseph Stringer, Analyst

Great. Thank you for taking our questions.

Operator, Operator

All right. Our next question comes from Patrick Trucchio from H.C. Wainwright.

Patrick Trucchio, Analyst

Thanks, and good afternoon. I have a couple of follow-up questions on the HPV program. So first, I'm wondering if you can talk about the bar for regulatory success in HPV, specifically if you need to demonstrate a 30% sustained clearance of the HB surface antigen six months after treatment is halted to achieve approval, or if a rate below this can be sufficient for approval in the setting of HPV. And then can you talk about the potential for demonstrating a partial cure in HPV? What's the latest around how this is being defined and if it could at some point become part of the regulatory bar for approval in the setting of HPV treatments? And then separately with the preclinical pipeline candidates unveiled today, how should we think about the remaining preclinical work that remains and potential timing for filing of INDs?

Marianne De Backer, CEO

Thank you, Patrick. Phil, could you start discussing our preclinical pipeline?

Phil Pang, Chief Medical Officer

Definitely, Marianne. It’s an exciting time at Vir. In addition to what I mentioned regarding 1388, which will enter clinical testing this quarter, we have a therapeutic T cell vaccine called VIR-1949 entering the clinic in the next 24 months aimed at controlling precancerous lesions of HPV. Our respiratory franchise includes VIR-2981, a neuraminidase-targeting monoclonal antibody with activity against both influenza A and B, as well as VIR-8190, which neutralizes RSV and human metapneumovirus. Moreover, we have VIR-7229, a next generation COVID-19 monoclonal antibody with potent activity against circulating strains. We’re optimistic about the potential impact of these candidates in the clinic moving forward. Regarding the regulatory context for HPV, partial cure is an evolving area in regulatory science. The guidelines vary between the EU and U.S. The prospect of FDA acceptance of a treatment strategy that suppresses HPV viral DNA while the HB surface antigen remains could emerge as part of regulatory discussions. It's crucial that we achieve a functional cure consistently in a majority of patients. While 30% may not be a regulatory threshold, it is a practical benchmark for clinical relevance to patients. Ultimately, effectiveness must outweigh tolerability concerns, which may vary based on treatment regimens.

Marianne De Backer, CEO

Thank you for addressing those points, Phil. We’ll look for IND filings in those preclinical candidates within the next 24 months.

Patrick Trucchio, Analyst

Thank you so much.

Operator, Operator

All right, if there are no other questions, I will now turn the call back over to Dr. Marianne De Backer.

Marianne De Backer, CEO

Thank you, operator, and thank you all again for your attention today. Vir Biotechnology is a truly vibrant and dynamic company that I believe is poised for significant growth and most importantly for patient impact. I am thrilled to lead Vir into what I believe will be the next transformational trajectory, as we build on the progress that we have achieved so far. I feel confident that we have the internal scientific expertise and the passion to power our mission forward. So, thank you all for joining us today. We really appreciate your time and your interest in Vir Biotechnology. Thank you. Operator, you may end the call.

Operator, Operator

This concludes the meeting. You may now disconnect.