ABUS - NASDAQ

Good day, and thank you for standing by. Welcome to the Arbutus Biopharma Corporation Fourth Quarter and Year-End 2022 Financial Results and Corporate Update Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there’ll be a question-and-answer session. [Operator Instructions]. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lisa Caperelli. Please go ahead.

Thank you, Kevin. 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?

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 corona. 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 up from other RNAi therapeutics in development. First, AB-729 has shown reawakening of HBV-specific community 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 validates AB-729's capacity to reduce surface antigen. As patients complete the lead insight, 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 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 a safe, yet efficacious. Patients who 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 care 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 in the [multiple speakers]. Over to you, Mike.

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 single-digit nanomolar 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 enhancing with ritonavir boosting. This could lead to decreased pill burden and reduce 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. Dave?

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, who we sold our primary royalty interest in ONPATTRO to, now has 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. With that, I'll turn the call back to Bill.

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

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 Hep B, 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.

Thank you, Dennis. Let me take the first part of the question, and then I think Mike Mc 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 in on HBV and coronavirus. And that indeed makes -- that 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?

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

Yes.

Correct, Bill?

[Multiple speakers].

Yes. So Dennis, thanks for the question. As we've discussed in the past, we have conversations with everybody in the field frequently, at all the -- any conference that we're at, where there's people. I reach out to people all the time in regards to the BD work that needs to be done. So I'm always having conversations with people. As far as what level of clinical risk is sort of their guideline, they don't really tell me that. I think it's variable depending on who you're speaking to, whether you're speaking to a large company or a small company. And I think we just have to let the data evolve and see how those conversations progress. But we'll continue to have those conversations.

Got it. Thank you.

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

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.

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

Sure. Thanks, Charlie, for the question. So when we look at our oral PD-L1 inhibitor AB-101, obviously we're looking at safety as our first readout in the Phase Ia study. But we can also actually gain some insight on how this molecule is working and whether we anticipate efficacy when we're looking at, so we have several abilities to look at target engagement and target occupancy. So from those studies, we'll be able to see whether this molecule is actually engaging the target and producing some kind of target relevant biological readout from the immunology side. So that will give us some early hints on whether this molecule, it has the potential to show HBV clinical efficacy as we progress in the Phase Ib studies. So we'll get that in the SAD-MAD portion of the study pretty early. And so we'll be able to say something about that by the end of the year. When you look at AB-161, our RNA stabilizer oral compound there, clearly this field has struggled with safety. So safety is going to be a big part of how we assess this very early on. Now as I've always mentioned, we've done in a very extensive preclinical safety assessment based on our previous knowledge that we gained on AB-452 and the peripheral neuropathy studies. And so we've done 60-day, 2 species toxicology studies -- I mean 2 90-day, 2 species toxicology studies, to reaffirm our belief that this molecule has a safety profile that we feel confident in going forward in the clinic. But that early -- obviously, Phase I studies where we'll be looking at safety pretty clearly and paying clear attention to some of the signals for the peripheral neuropathy are going to be important to us. Once that's done, then obviously, we'll run right into a Phase Ib study where we'll be capturing the efficacy aspect of it, the biomarkers and specifically looking there at the antigen reduction in HBV DNA reduction in those parts of the Phase Ib study.

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, but 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. So we remain really intrigued and interested in this data. We think it is a well worthwhile following 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.

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

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?

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.

Yes, give me one second, Bill. So patients have been off therapy -- as of the last data update at least, patients have been off therapy anywhere from sort of, let's see, to call it, roughly 20 weeks to 44 weeks or more. So as of the last data update, remember. So patients, obviously, can continue to track that forward and get a sense for where patients are.

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.

Right. Yes, yes. As you alluded to, seven patients a month in mind. So it's been a couple of months, so expecting more than 44 weeks as opposed. And then as you -- as we continue to see this off treatment data with more patients, what do you expect some findings that you continue to collect that could impact the ongoing Phase II combination studies?

You mean what data could we expect from these remaining seven patients?

More specifically, what kind of findings do you expect from these patients that could potentially change or alter any of the Phase II combination studies that are either ongoing or new cohorts?

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.

Got it. Thank you so much. Perhaps one final question from us. Speaking of the VTP-300 combination study, what type of preliminary data should we expect to be announced in the second half of this year from this study?

Yes. I think the best way to think about that. And in our corporate deck, we've kind of laid out the trial designs for both the interferon and the VTP-300 studies. So we're going to be in the phase where some of the patients have received VTP-300 or the placebo. And therefore, that's the type of data that we will be sharing later this year. We won't be able, just because of the length of the study, report end of treatment data or follow-up data. So it's going to be somewhere -- if you look at Slide 18, somewhere in that kind of dark red phase where patients are receiving VTP-300 or placebo.

Got it. Thank you so much again, for taking my questions.

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

Yes, couple of questions. [indiscernible].

Keay, we are unable to hear you.

Yes, sorry. Can you hear me now?

Yes, little better.

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?

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

Bill, I have that available if you'd like.

You do, Okay. Go ahead.

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

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

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, like a [indiscernible]? Maybe give us some thoughts about that.

Yes. Thanks again, Keay. So I think the -- we haven't really sort of communicated what our clinical development plan is going to be. But you can imagine based on what some of our competitors have done in the field. We would be looking at potentially readouts that would look at viral load decline. They could look at reduced hospitalization. One of the things that we're really quite interested in as we go forward is, does this molecule or ultimately, our combinations produce any effect on reduction in symptomology or potentially pre-exposure prophylaxis. So those are the kinds of things that we're targeting in sort of mapping our clinical development plan. And eager to get those started as soon as possible.

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?

Well, I mean, we could do some preclinical assessments and look at combination safety. And we do a lot of that, sort of in, let's say, in the preclinical environment. Once we get our second molecule nominated and move through IND-enabling studies, we'll do our Phase I compound with a single agent, and we have to certainly based on previous developments in [indiscernible], we'll have to show that it works and is safe by itself. And then as rapidly as we possibly can, assuming we -- all those DUCs line up, we'll get it into combination. But right now, we're looking at, hopefully, a fairly short, early clinical development program because of the short duration of therapy that you need to show some kind of antiviral effect. And that hopefully will accelerate our ability to get into combinations.

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?

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 twist 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.

Okay, well, very good. Thanks.

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

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?

Mike?

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 have 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.

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

I can say our PK looks very good. We -- in multiple species, we'll just have to see once we get in the clinic, what the dosing frequency needs to be. But right now, we're pretty optimistic.

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?

Good question.

I can follow up later if it's not.

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

Okay. Great. And then I had -- so it looks like GSK is limiting in the Phase III, the primary endpoint baseline s-antigen below 1,000. Looks like maybe that's 15% to 20% of the population in their Phase IIb. Is that consistent with kind of your view of the overall CHB population? And then it looks like pretty much all the patients that you have off therapy, except maybe 1, were above 1,000. Is that -- do I -- am I looking at that correctly? Thanks.

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.

Right. I was just looking at the AASLD presentation, it looks like maybe one is below 1,000, but the rest looks like they're above. Okay. And then I guess just for the interferon combo readout this half, I know you guys have been asked this before. Just what are we -- key points that we should be looking out for, for that data? Thanks.

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.

Okay, great. Thank you.

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.

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.