ABUS - NASDAQ

Good day, and thank you for standing by. Welcome to the Arbutus Biopharma 2023 First Quarter Financial Results and Corporate Update Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, VP of Investor Relations, Lisa Caperelli. Please go ahead.

Thank you, Elenor. Good morning, everyone, and thank you for joining Arbutus' first quarter 2023 financial results and corporate update call. Joining me today from the Arbutus executive team are Bill Collier, President and Chief Executive Officer; David Hastings, Chief Financial Officer; Dr. Mike Sofia, Chief Scientific Officer; and Dr. Karen Sims, VP of Clinical Development. Bill will begin with a corporate update, followed by Dave Hastings who will then provide a review of the company's first quarter 2023 financial results. After our prepared remarks, we will open the call for Q&A. Doctors Sofia and Sims will be available to address your clinical and scientific questions. Before we begin, I'd like to remind you that some of the statements made during the call today are forward-looking statements, which are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our most recent annual report on Form 10-K, our quarterly report on Form 10-Q, which will be filed later today and from time to time in our other documents filed with the SEC. With that, I'll now turn the call over to Bill Collier. Bill?

Thank you, Lisa, and good morning, everyone, and thank you very much for joining us today. Now Arbutus was founded with the goal of developing a functional cure for patients with chronic hepatitis B virus by advancing the development of our clinical and preclinical assets that could be combined to create a treatment regimen. At the onset of the COVID-19 pandemic in 2020, we made the strategic decision to leverage our team of virologists and their expertise in discovering, developing and commercializing antiviral compounds to expand our core focus to include developing treatment options for COVID-19 as well as future coronavirus outbreaks. With our expanded focus on pipeline, our Arbutus today is actively advancing a broad portfolio of innovative clinical candidates that address large market opportunities. We believe that both chronic HBV and coronavirus require a combination of compounds to achieve therapeutic success, and we are encouraged by the advances we've made in both our HBV and coronavirus franchises. There are over 290 million people worldwide who are chronically infected with HBV. And with current lifelong treatment options resulting in less than a 5% effective cure rate, there remains a large unmet medical need for a functional cure for chronic HBV. We believe we are well suited to address this need, beginning with AB-729, which is one of the most advanced RNAi therapeutics in development. Based on data generated to date, AB-729 is the only RNAi shown to impact all 3 components needed for a functional cure for patients with chronic HBV, namely reducing HBV DNA, suppressing surface antigen and reawakening the HBV-specific immune response. Given its compelling data thus far, we believe that AB-729 has the potential to be a cornerstone therapy to provide a functional cure for patients with chronic HBV. We're exploring 729 in combination with other investigational and approved products through our 2 ongoing Phase 2a combination trials, one with interferon and one with Vaccitech's HPV antigen-specific immunotherapeutic. Both of these combination trials are expected to have preliminary data this year that potentially will help inform the combination strategy that we expect to evaluate in later stage clinical trials. Before I discuss these combination trials though, I'd first like to take a moment to provide data from our ongoing Phase 1 clinical trial. Now as we recently reported at the Global Hepatitis Summit last week, 7 of 9 patients treated with 729 from our Phase 1 clinical trial show low levels of HBV DNA and surface antigen persisting for at least 1.5 years after their last dose of 729. Furthermore, data from that same trial showed that 729 treatment produces robust and comparable declines in surface antigen, regardless of dose, dosing interval examined or baseline characteristics. Now going back to the ongoing combination trials. We look forward to reporting additional 729 combination data in the first half of this year from our Phase 2a clinical trial evaluating 729 in combination with ongoing new therapy and short courses of interferon. The trial is AB-729-201. We shared preliminary data from the lead-in phase of this trial late last year, which further validated 729's capacity to reduce surface antigen. Patients are now being randomized to receive interferon plus ongoing NUC therapy plus or minus additional 729 doses for either 12 or 24 weeks. The preliminary data that we plan to report in the first half of 2023 will include some of these patients who have received interferon. In the second half of 2023, we expect to report preliminary data from our Phase 2a clinical trial, AB-729-202, which is evaluating 729 NUC therapy and Vaccitech's HBV-specific immunotherapeutic VTP-300 or placebo. Vaccitech has recently reported data from a Phase 1b/2a trial showing that VTP-300 induced meaningful sustained reductions of surface antigen in some chronic HBV patients. Through this combination trial, we are testing whether the combination of 729 and VTP-300 can lower the surface antigen enough for the host immune system to fully suppress the virus. As a reminder, we're preparing to expand the latter trial to include an additional arm with low-dose nivolumab which is a PD-1 monoclonal antibody inhibitor approved to treat a number of cancers 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 of 729 and the first dose of VTP-300. And we'll provide an update when we begin enrollment in this new arm of the trial. In addition, consistent with our strategy of developing a proprietary combination for the treatment of chronic HBV, we dosed the first healthy subject in our Phase 1 clinical trial with AB-161 in March. AB-161 is our next-generation oral HBV-specific RNA destabilizer, which is being developed as part of a potential oral treatment regimen to functionally cure HBV. We expect to have initial data from the single ascending dose portion of this trial in the second half of this year. Notably, at the Global Hepatitis Summit this past April, we presented preclinical data showing that 161 provides robust anti-HBV activity, including suppression of HBV RNA and surface antigen in vitro and in vivo. The differentiated anti-HBV mode of action of 161 compared to other classes of HBV inhibitors suggest that 161 may be an important component in combination to provide a functional cure for chronic HBV. Now last week, we received the disappointing news that the FDA placed the IND application for our oral PD-L1 inhibitor, AB-101, on clinical hold. Just to be clear, the Phase 1 clinical trial had not been initiated, and we had not dosed any patients with AB-101. Therefore, we do not expect to initiate the Phase 1 clinical trial with 101 in the first half of this year, and we will not have initial data from this trial in the second half of 2023. We will, however, continue to work with regulatory authorities to move AB-101 forward as we believe it will be an important component in our combination therapy designed to cure HBV. Now we also continue to build on our significant momentum with our talented team that is focused on identifying and developing new antiviral small molecules to treat COVID-19 and future coronavirus outbreaks. We are actively advancing our strategy to identify and develop compounds that target the 2 essential enzymes for the coronavirus life cycle, SARS-CoV-2 nsp5 main protease, also known as Mpro and the nsp12 viral polymerase. These enzymes are critical for viral replication and are highly conserved across all known coronaviruses. We've recently selected AB-343 as our lead oral Mpro inhibitor compound to address the urgent need for oral antiviral therapies that are both potent and active against circulating SARS-CoV-2 variants and do not require ritonavir boosting. Recently, at 2 prestigious antiviral congresses, ICAR and IS IRV, we shared data from several in vitro preclinical studies, showing the favorable details of our Mpro inhibitor, AB-343, namely its potent pan-coronavirus activity, activity against SARS-CoV-2 variants, resistance profile and favorable PK supporting a ritonavir-free oral treatment. Preclinical profile of AB-343 is impressive, and we're currently in IND-enabling studies and plan to initiate a Phase 1 clinical trial in the second half of this year. AB-343 is just one piece of our coronavirus development strategy. We believe the optimal treatment regimen will consist of both an Mpro inhibitor and an nsp12 inhibitor and that such a therapy will be differentiated from other products in development. So to that end, our goal is to identify and nominate an nsp12 inhibitor, which we can then take into IND-enabling studies in the second half of this year. We'll be sharing more updates on these 2 programs as we progress throughout the year. I'll now turn the call over to Dave Hastings for a brief financial update.

Thanks, Bill, 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 $179 million as of March 31, 2023 as compared to approximately $184 million as of December 31, 2022. During the quarter ended March 31, 2023, we received approximately $20 million of net proceeds from the issuance of common shares under our at-the-market offering program. These cash inflows were offset by approximately $27 million of cash used in operations. Now based on AB-101's IND being placed on clinical hold by the FDA and a resulting shift in timing of our AB-101 Phase 1 clinical trial, we are reducing our 2023 cash burn guidance from between USD95 million to USD100 million to between USD90 million to USD95 million. And with that, we believe our cash runway will be sufficient to fund our operations into the first quarter of 2025. So in closing, we have a strong financial position to advance our mission and develop a functional cure for HBV and a treatment for COVID-19 and potential future coronavirus outbreaks. With that, I'll turn the call back to Bill.

Thank you, Dave. I'd now like to remind everyone of our upcoming key milestones for 2023. So first of all, we plan to report initial data from the AB-729-202 Phase 2a clinical trial combining 729 NUC therapy and VTP-300 in the second half of 2023. And we also expect to dose the first patient in the trial amendment that combines 729, VTP-300 plus nivo in the first half of 2023. Secondly, we plan to announce preliminary data from patients in the AB-729-201 Phase 2a clinical trial who will receive 729 plus NUC therapy and interferon, and we expect that data in the first half of 2023. Thirdly, we plan to report initial data from the healthy volunteer single ascending dose portion of our Phase 1 clinical trial for AB-161. And fourthly, we plan to initiate a Phase 1 clinical trial for AB-343, our Mpro coronavirus clinical candidate and nominate the candidate to commence IND-enabling studies in our nsp12 program, all in the second half of 2023. I'd like to take a moment to recognize and thank all the Arbutus employees for their hard work and dedication. We've made significant progress in advancing our pipeline, and I look forward to sharing more details as we reach our clinical milestones and data readouts later this year. I'm confident we have the right team and the right strategy in place to deliver on our mission. Before opening the call for questions, I'd like to briefly mention our ongoing litigation efforts. We remain committed to protecting and defending our intellectual property to ensure that we are compensated appropriately for the time and resources we invested to develop our proprietary LNP delivery technology. We are advancing our suit against Moderna. And in April, we announced that we have filed a similar suit against Pfizer and BioNTech. That said, similar to prior quarters, we will not be commenting further on the ongoing litigations. Operator, we are now ready to open the call for Q&A.

At this time, we will conduct the question-and-answer session. [Operator Instructions] Our first question comes from the line of Ed Arce of H.C. Wainwright.

This is Thomas Yip asking a couple of questions for Ed. So first, regarding the Phase 2a 729 triple combination study or the 201 study, that's the data readout in the second quarter and additional S-antigen data, what are the assessments should investors focus on as well?

Thomas, thank you for the question. I mean, I think that is the prime endpoint that we're looking at this point in the clinical trial. I mean the trial eventually will get to a point where we stop treatment and do some follow-up in which case, we'll be looking at lots of different parameters and functional cure potentially. But for the moment, the interim data will be looking at surface antigen. You agree, Karen?

I agree. And obviously, safety and tolerability as always with these trials.

Got it. So speaking of off-treatment data, when should we expect the first patient in that study to reach that period?

Yes. We do get that question quite a lot. At the moment, we've only guided to the availability of some of this preliminary information from kind of the middle part of the study. And we've not said specifically when we're going to get into that follow-up period. The challenge with a lot of clinical trials is that all the patients are not necessarily recruited at the same time. They come in at different time points. So you kind of get the staggered start and then the staggered finish. And we want to be sure that we have sufficient patient numbers before we provide those types of updates. So at the moment, it's just the preliminary data that's on the cards for this year.

Got it. Thank you for explaining the time line. So speaking about the off-treatment data, we all saw the [001] study off-treatment data very impressive. When should we expect the next set of off-treatment data from that study?

Again, thank you very much. We were pleased to present that data, and we are going to continue to follow those patients for 3 years, Karen?

Correct.

So this one has a long tail, so to speak, so that we can continue to track how these patients fare whilst they're off therapy. So at the moment, I think we guided this year to having some preliminary further updates in the first half, which we've just delivered, and we'll continue to track these patients going forward.

Okay. And then perhaps one last question, switching gears to 161, so since we're expecting the single ascending dose data second half this year, what's the next step for 161? And when should we expect, is the plan to evaluate 161 in combinations?

Yes. So I'll hand this one over to Mike Sofia first for a comment on some of the data that we presented, and then Karen, you can talk about the trial. Mike?

Thomas. So yes, we presented data at the Global Hepatitis Summit just showing the impressive efficacy of 161 and demonstrates sort of the mechanism of action, et cetera. So when we've also sort of commented that we have solved this or we believe we have solved based on all our preclinical assessments this peripheral neuropathy associated with the earlier generation agents in the field. So we're excited to have moved this forward into the clinic and now into the Phase 1 assessment in healthy volunteers. I'll turn it over to Karen to talk about the timing of data.

Right. Thanks, Mike. So as Bill alluded to earlier, it's difficult to predict timing of data with a trial that's in progress. But to your question, certainly, as is our strategy overall with hepatitis B, we do look forward to putting this in combination with other assets ideally to create a proprietary all-oral combination to promote the functional cure of hepatitis B, certainly Phase 1 data is always necessary before you progress into these combination studies. So the time line for those combinations will be dependent on when we receive the full data set from the Phase 1 study. So as alluded to, the guidance is single ascending dose data later this year. And then certainly, we'll provide updates as to the progression of the trial when we have more information that we can share.

Understood. Looking forward to the multiple data readouts this year.

Our next question comes from the line of Roy Buchanan of JMP.

So the first one, sorry, maybe I missed it, but for 101, any details you can give us if it's an AB-101 specific concern or maybe something more broad. And I'm thinking about Gilead pulling nivolumab from one of their Hep-B trials. It doesn't look like it had any effect on your plans with nivolumab, but wondering if that's a concern at the FDA?

Yes, Roy, thanks for the question. I mean I think we're still at the early stage of fully understanding the FDA's concerns. We did attend or at least certain members on this call attended a telephone call with the FDA a couple of weeks back where they expressed their wish to put this program on clinical hold. That was a surprise to us because we've not detected or heard or predicted any type of intervention like that in all of our prior discussions and submissions. We are also still awaiting the letter that the FDA indicated they would send within 30 days of that meeting. And I think you'll understand, Roy, that we can't really or probably shouldn't say too much more until we see the full entirety of that letter so that we can fully understand the FDA's position and then continue to either work with the FDA or other regulatory bodies around the world to see how we can continue to advance 101.

Okay. Great. That makes sense. And then the 729 off-treatment data, we start to see S-antigen creeping back up in most patients, not surprising, right? The [indiscernible] does the same thing, but GSK is the one to Phase 3. I just wonder if you could talk a bit about any differences in strategy between yourselves and GSK. And any potential you see the maybe go to Phase 3 with 729 alone and NUC.

Yes, Roy, that's a question we do discuss. And I think where we net out is back to our 3 pillars of wanting to suppress HBV DNA, suppress surface antigen and boost the immune system and both kind of scientifically and from a pipeline development perspective, that's where we think we will find success. Now having said that, 729 looks like it's going to be a really good cornerstone either to combine with our assets or potentially assets from other companies. And we do have those conversations. And I think this profile of 729 in being able to tackle those 3 components is quite impressive. But our current view is that to fully have an impact on the marketplace, we would need a combination of assets.

Our next question comes from the line of Dennis Ding of Jefferies.

Maybe to follow up on Roy's question. In terms of your Phase 3, it sounds like you wanted to take it, you want to move 729 forward in Phase 3 in combo with other different assets, which is kind of consistent with the company's messaging over the last couple of years. But what additional data do you need to see from your own compounds for you to be confident that you could combine it with 729 in Phase 3. What additional data do you need from your compounds and/or other companies' compounds for you to move forward?

Thank you, Dennis. Although we are very encouraged with our Phase 1 patients who are now off-treatment in the sense that they've got a prolonged reduction in HBV DNA and surface antigen and they're off treatment. They've not yet met the definition of functional cure, which is undetectable HBV DNA, undetectable surface antigen for 6 months post treatment with or without the immune response. And so to answer your question, from our Phase 2a studies, I think we'd like to see some further incremental surface antigen reduction. And then ultimately, when we get into the follow-up period of those 2 Phase 2a studies where we're able to stop treatment, we want to see whether or not we can have patients maintain low levels of viremia, low levels of S-antigen in the absence of clinical therapy.

Got it. And as a follow-up, if I may. So it sounds like you're going to want to see more robust data from our Phase 2a studies with your other 3 combinations, including potential off-treatment data as well. Is there a way to accelerate the Phase 3? Or are we just sort of waiting for those data from those Phase 3 studies to read out, which could be a while, it could be '24, '25. So maybe comment on that.

Yes. So we do have those conversations internally about how we can accelerate and get into Phase 3 and move forward. We explore different ideas, different options, but I think we do have to be driven by data. And before we make a big bet, a big financial bet on a Phase 3 study, we need to be pretty sure that we've got something that's going to work. So yes, we're going to have to be patient for a little while. But like I said earlier on, we believe that 729 has got a really good profile to be a cornerstone agent in a combination either with our assets or with assets from other companies. And that I think we have shown flexibility in the way we've done our Phase 2a studies to demonstrate that we're prepared to work both internally but also in partnership with others.

[Operator Instructions] At this time, I would like to turn it back to Bill Collier for closing remarks.

Thank you, everyone, for joining us this morning. We do appreciate your continued interest and questions and your support for Arbutus. And we all look forward to providing you with updates as we progress the development of our HBV and coronavirus assets. So thank you very much, operator. That concludes our call for this morning.