This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk08: Good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Arbutus Biopharma 2022 Second Quarter Financial Results and Corporate Update. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star and the number one on your telephone keypad. Thank you. Ms. Lisa Caporelli, Vice President of Investor Relations, you may begin your conference.
spk10: Thank you, Abby. Good morning, everyone, and thank you for joining our second quarter 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, Dr. Ghassan Pikio, Chief Development Officer, and Dr. Mike Sofia, Chief Scientific Officer. Bill will begin with a corporate update, followed by Dave Hastings, who will provide a review of the company's second quarter 2022 financial results. After opening remarks, we will open the call up for Q&A. Gaston Piccio and Mike Sophia will be available to address clinical and development-related 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 10-K, quarterly report on Form 10-Q 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?
spk12: Thank you, Lisa, and good morning, everyone. Thank you for joining us today. We appreciate your continued interest and support for Arbutus Biopharma. Now, with the first half of this year behind us, we've made significant progress in advancing our preclinical and clinical programs in support of our mission to develop a functional cure for hepatitis B virus and to treat COVID-19 and future coronavirus outbreaks. Furthermore, we're on track to deliver on multiple key milestones across these programs in the remainder of this year. And equally important in this volatile capital markets environment, we're well positioned financially to fund our current programs and provide runway into the second quarter of 2024. Now, Dave will discuss the financial aspects during the financial position summary shortly. Now, we are making excellent progress with our two key HPV preclinical programs. That's AB101, our oral PD-L1 inhibitor, and AB161, our oral RNA destabilizer. Now, rather than elaborate on these programs here, I'll refer you to today's press release for those updates and use the time on this call to briefly highlight the rather impressive data on our lead HPV clinical assets AB729, that's our RNAi therapeutic. This data was reported last month at the Easel International Liver Congress. Now, as you know, patients with chronic HPV infection receive nuke therapy as standard of care. And while that therapy is generally safe and effective at reducing viral load, less than 5% of patients are functionally cured and usually only after many, many years of therapy. In our clinical trial, AB729001, we wanted to see how treatment with various doses and dosing schedules of our RNAi therapeutic, in addition to nuke therapy, was handled by patients with chronic HPV who had different baseline characteristics. If patients met certain predefined criteria and consented, we discontinued first their treatment with AB729 and later their lifelong standard of care nuke therapy to see if their undetectable HPV DNA status was maintained and if their S antigen reduction was sustained, which could be a sign of virologic control and potential subsequent functional cure. Now, three major findings were disclosed from this clinical trial at the EASL conference. First of all, we saw a robust reduction in surface antigen between 1.8 to 2.1 log reduction. And that was with 48 weeks of treatment. And the reduction occurred regardless of dose, dosing schedule, or baseline characteristics. Second, in addition to the meaningful and consistent surface antigen decline, we saw an increase in HPV-specific T cells and a decrease in exhausted T cells in patients treated with 729. And third, and what we believe to be of significant importance, When we stopped treatment with AB729 and stopped nuke therapy in the first five eligible patients that consented, their surface antigen and their HBV DNA responses were sustained at low levels while they were off treatment for at least eight to 24 weeks. Now, in addition, none of these patients showed evidence of virologic nor clinical relapse, and so they did not need to restart their nuke therapy. We believe this data is most impressive as it shows that we were able to take patients off of their lifelong treatment of standard of care nuke therapies and still maintain reduced surface antigen and reduced HPV DNA, a potential early indicator of functional cure. We are continuing to follow these patients as well as other patients that have consented to stop all therapy. And we anticipate reporting more data in the second half of this year. Now, 729 is one of the most advanced RNAi therapeutics for HPV. And based on the availability of public data, it's differentiated from other RNAis based on its more convenient dosing schedule and immune activation capacity. We're also encouraged by the safety that we see in this and other ongoing trials. And it's for these reasons that we continue to view AB729 as a cornerstone agent in a potential curative combination treatment for chronic HPV, either with our own proprietary compounds or with those in development by other companies or with therapies that are already approved for the treatment of HPV. Now, also at Eazl, we, along with many of our peer companies, reported data on the use of capsid inhibitors alone or in combination in the HPV treatment regimen. And while much of this data is early and inconclusive, our strategy is as follows. First of all, based on data from our ongoing phase 1A, 1B trial, some of which was presented at Eazl, we're planning to conduct a longer duration phase one study in healthy volunteers with our oral capsid inhibitor AB836. As you will recall, we reported that AB836 showed robust antiviral activity with greater than 3.5 log reduction in HBV DNA. Along with this impressive efficacy, however, we saw an increase in ALTs in some patients on the last day of treatment. And so the goal of the longer duration healthy volunteer study is to further characterize the safety of 836 by determining whether the ALT flares we saw were beneficial or not before resuming dosing in HPV patients. A second part of our strategy is that we are continuing, in collaboration with Assembly, the Phase 2A proof-of-concept clinical trial, evaluating the triple combination of 729 and Assembly's core inhibitor, VEBICORVIR, and NUC therapy, even though Assembly has announced its plans to discontinue the development of VEBICORVIR. At Arbutus, we believe it's important to continue the conduct of this trial in order to fully and accurately assess the results. By continuing this Phase II triple combination combination trial and also evaluating AB836 in healthy volunteers in our Phase I study, we believe we will obtain data that will inform our use of capsids in a go-forward combination strategy in the development of chronic HPV treatments, as well as help to address open questions in the field. Now, finally, we were gratified to see positive top-line results announced by Alnylin for the Phase III study of Onpatro in patients with ATTR amyloidosis with cardiomyopathy. As you may recall, we're entitled to tiered royalty payments on global net sales of Onpatro, ranging from 1% to 2.33% after offsets. with the highest tier applicable to annual net sales above $500 million. Now, this royalty interest was sold to OMERS effective as of January the 1st, 2019 for $20 million in gross proceeds before advisory fees. And OMERS will retain this entitlement until they have received $30 million in royalties at which point 100% of the royalty interest on future global net sales of En Patro, which could include additional sales for the expanded indication if it's approved, will revert back to Arbutus. Now, to date, OMAS has received approximately $14 million. In addition, we retained a second lower royalty interest ranging from 0.75% to 1.125% on global net sales among Patro, with the 0.75% applying to sales greater than $500 million. And that royalty stream was not part of the OMAS transactions. So as I wrap up my opening remarks this morning, I'd like to remind you of the key milestones we anticipate in the second half of this year. There are four. First, AB729 follow-up data, which could include long-term on and off treatment data from our Phase 1A, 1B clinical trial. Second, initial data from both the Phase 2A combination trial of 729 interferon and nuke therapy, and the triple combination trial with assemblies vebicorvir. Third, we expect to complete the IND enabling studies for both AB101, our oral PD-L1 inhibitor, and AB161, our oral RNA destabilizer. And fourthly, we expect to advance into IND enabling studies a clinical candidate that inhibits the SARS-CoV-2 NSP5 main protease. I'll now turn the call over to Dave Hastings for a brief financial update. Over to you, Dave.
spk04: 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 $201 million as of June 30, 2022. as compared to approximately $191 million as of December 31st, 2021. Now, during the six months ended June 30th, 2022, the company received a $40 million upfront payment from Chilu Pharmaceutical Company related to a technology transfer and license agreement for AB729 in Greater China, $15 million of gross proceeds from Chilu's equity investment in the company, and $300,000 of net proceeds from the issuance of common shares under Arbutus's at-the-market offering program. These cash inflows were partially offset by approximately $44 million of cash used in operations. Now, we still expect a net cash burn of between $90 to $95 million in 2022, not including the $55 million of proceeds received from Chilu. And we believe our cash runway will be sufficient to fund operations into the second quarter of 2024. So in closing, we are well positioned financially to advance our mission to develop a functional cure for HPV and a treatment for COVID-19 and potential future coronavirus outbreaks. With that, I will turn the call back to Bill.
spk12: Thanks very much, Dave. And our operator, Abby, perhaps you could help us now open up the lines for our question and answer session.
spk08: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Roy Buchanan from JMP Securities. Your line is open.
spk03: Good morning, Roy.
spk06: So the phase one healthy volunteers that you're planning to study, do you need to or will you talk to the FDA in advance of starting that trial? Did you inform the agency of the recent results on the CHB patients and did they have any feedback?
spk12: Good questions. Thank you, Roy. Gaston is on the line with us this morning, so Gaston, perhaps you'd like to answer that question.
spk11: Sure. Hi, Roy. Good morning. No, we haven't talked to the FDA about this study. I remind everyone that 836 does not have an IND with the FDA, so it was not necessary. Actually, this is going to be done through an amendment to the existing study, Phase 1A1B study that What we're conducting, we're conducting.
spk06: Okay, great. That makes sense. And then for 729, the triple combo phase twos interferon and vebacorvir later this year, can you just help us understand the key data points we should be looking for and which results from those trials are you going to view as a success? Thanks.
spk12: Yep, thanks, Roy. I mean, what we've said is it's going to be initial data from those two studies, So I think that's important just to kind of set expectations. Gaston, is there anything else you'd like to add?
spk03: No. I think that really summarizes it. Okay. I'll jump back in queue. Thanks. Thanks, Roy.
spk08: Your next question comes from the line of Dennis Sting from Jefferies. Your line is open.
spk03: Hi, good morning.
spk09: Thanks so much for taking the questions. Two for me. Can you please remind us again your licensing agreement with Alnylam around Patissierin? I think ConsenSys is modeling about a billion dollars in peak sales for Alnylam on PATRO, and based on some of your Your commentary seems like you'd be getting a 2% to 3% net royalty. So this could potentially be a $20 million to $30 million annual royalty at peak. So can you confirm if that math is roughly in line with how you guys are thinking about it? And then my second question is around hepatitis B. Assembly discontinued the Corvier because there wasn't really meaningful efficacy delta versus the doublet. So can you go into a little bit more detail there and your decision to keep the trial going? And perhaps how should this read through to your PEC interferon study? Thank you.
spk12: Yeah, thank you, Dennis. Great questions. I'll let Dave comment in a moment on the mechanics of the license agreement. What we are trying to do is make clear, you know, the specific percentages in our licensing agreements And also, as I summarized this morning, the details of the sale of that royalty stream, the first award royalty stream to OMAS and when it reverts back to us. You know, we're not making any projections about what Alnylam sales might be or could be. I think that is something that, you know, we would refer you back to Alnylam for in terms of what those sales expectations are. But we are being very clear this morning in what our percentages are and how those royalty streams work. So, Dave, anything else you want to add before I turn to the other question?
spk04: No, no. Dennis's math is correct. Once the royalty reverts back to us after OMERS receives $30 billion. Thank you.
spk12: And just remember, there are the two royalty streams. There's the one that we sold to OMERS, and then there's the second one, which is a slightly lower rate. Your question around the Phase IIa studies, you know, I'm not going to comment on anything that Assembly has or hasn't said about vebicorvia. Our view at Arbutus is it's important, once you've started a clinical trial, to finish the clinical trial. You know, when you get to the end of the study, that's the best opportunity to make an assessment of the actual results. So that's what we included in our press release back then, that the study continues with the collaboration in exactly the same way in which it was originally set up. And, you know, we look forward to presenting those results when it comes through. So I don't know that we can project anything either about the study or what it means for our own interferon study. But I'll hand it over to Gaston to see if there's any additional comments you want to make, Gaston.
spk11: Yeah, thank you. No, I'll just make one comment, which is I think there's basically three types of data in clinical studies related to HIV disease. One is on treatment response. The other one is endotherapy. And the other one is a follow-up. So as Bill was explaining, we think it's important we get to the end of the study. When we said the end of the study, we're referred to even the follow-up period. And I think we can make a good case for that based on our own 729-001 phase 1A, 1B study, where I think we're starting to appreciate really the value of 729 after these continued patients and, you know, If you look at the on-treatment data in that study, as many people have pointed out, the S-antigen declines are very comparable across some of the other molecules in the field. However, when it comes to the discontinuation data, we're seeing really 709 performing very well. You know, albite, you know, the data is still limited and the follow-up hasn't been extensive. But I just remind everyone that We don't stop patients as they have been stopping other studies, such as in the Janssen one, where they stopped the two drugs at the same time. We stopped first seven to nine, then we waited six months, and then we stopped the NUC. So when we say, for example, in our follow-up, 24 weeks after discontinuing the NUC, it's really 48 weeks, almost a year, after discontinuing seven to nine, and still, you know, the DNA and the sanguine is holding. So going back to your question, what I'm trying to say here is that I think, you know, there's ways of evaluating the efficacy in a study. One aspect is on treatment. The other one is what happens at the very end of therapy, so week 48. And the other one is the follow-up.
spk03: So I think we need to wait for the end of the study. Got it. Thank you, guys.
spk08: Your next question comes from Brian Scorny from Baird. Your line is open.
spk07: Hey, good morning, guys. Thanks for taking my questions. I guess to start, I have a question on sort of conceptually the oral PD-L1 program. I know there are a range of commercial PD-1 and PD-L1 inhibitors available that are therapeutic antibodies. Just wondering your thoughts on exploring sort of proof of concept studies with any of those to evaluate 729 plus PD-L1 as a mechanism. before progression neuronal PD-L1 inhibitors get a feel of what the combination could yield. And then also on the OnPatro questions, I was just wondering if you could review with us what the duration of the IP around the LNPs and the deal with Alnylam is. Do the royalties last as long as OnPatro is exclusive, or is there a specific IP expiration date when that royalty payment stops? Thanks.
spk12: All right. Thanks, Brian. so i'll get mike sophia and gaston just to comment on pdr1s and whether or not we can do it for like a precursor study with a commercially available pdl1 but i think the point i'd make uh before we get into that is what we're aiming for here pdl pdl1 which is hbv specific which is oral And therefore, which, you know, might potentially be efficacious without some of the systemic side effects that you get from some of the others. So with that, maybe Mike Sophia first and then Gaston.
spk03: Are you there, Mike? I think you might be on mute. Can you hear me? Yes. Hello? Okay.
spk01: Yeah. Hi, Brian. So, for the PD-1, PD-L1 access, I think there's clearly mounting evidence supporting, you know, the role of checkpoint, you know, access in HBV, right? I think, you know, you had that early Gilead study that, you know, was tantalizing about the role of, you know, the checkpoint access PD-1, PD-L1, and showing one functional cure and a number of S-antigen reductions in patients. And then more recently, you see sort of the Asclita study where, you know, they took a checkpoint blockade agent and again showed some very interesting and tantalizing data there. So I think there's clearly mounting evidence to support that this axis is going to be important in immune or is important in immune control for hepatitis B. As far as, you know, why we're doing small molecules, clearly, as Bill mentioned, is several-fold, right? We have the belief that, you know, we're going to be able to target the liver and therefore reduce, you know, potential systemic activation of that checkpoint access because of the concerns of the sort of on-target safety issues that one always sees in the oncology space. And And so, you know, we believe that we're going to be able to circumvent those concerns and those issues with the approach that we're taking in a small molecule. And preclinically, we've also reported on and have more studies that we will report on in the future that clearly support the combination of an RNAi plus a checkpoint blockade at immune activation and reduction in antigen load. So, there's substantial evidence to support, I think, the approach that we're taking. As far as approval concept study, we've been discussing that potential internally. Haven't really decided on whether, you know, a strategy of, you know, that would include an existing checkpoint blockade agent with 729. you know, would provide, you know, the, and the timing of it would provide substantial data to help us further develop, you know, our current agent going forward.
spk03: Thank you, Mike. Gaston, anything you want to add?
spk11: No, no, nothing from my end, no, thank you.
spk12: Okay, thank you. Now, on your second question around the duration of the patents, on PATRA and whether or not the royalties extend beyond expiry dates. I don't immediately have an answer to that question unless Dave does. I think we may have to get back to you on that one, Brian. Dave?
spk04: No, I don't have any clarification, but it's a typical agreement that would run through the patent life. But we'll confirm that with you, Brian.
spk03: Okay, thanks.
spk08: Your next question comes from Kay Nickay from Chardon. Your line is open.
spk13: Yes, thank you. Question about 729. When you provide us the next data update, can you tell us how many patients that you're following who've stopped AB729 and have stopped nukes that you might report on in the next data update.
spk12: Right, so we have five so far, which is what we've spoken about, and there are more that have consented. I don't know that we have revealed the exact number. Gaston, anything you can add?
spk11: Yeah, I can add a little bit more color there. If you look at the poster from ESEL, the discontinuation poster this year, You may see, and we actually purposely included those subjects there. So we reported on the five for which we had follow-up after discontinuing the NUCCA, but at minimum eight weeks, as much as 24. But we also included four additional subjects who had discontinued, but we didn't have meaningful follow-up. What we consider meaningful follow-up would be more than eight weeks. So for sure, those additional four subjects will be included in the next update. So at the minimum, there will be a follow-up on nine subjects.
spk13: Okay. And there's some others beyond that who aren't that far along?
spk11: Yeah, I can't comment about others at this point in time, but for sure we will have nine.
spk13: Okay. And then just back to the combo study with interferon, I know you're saying initial data, but, you know, what might that consist of?
spk11: So that will consist, again, on treatment data, basically. That's all we can say will be on treatment data, you know, preliminary on treatment data.
spk13: Okay.
spk03: That's all here. Thanks. Thank you, Kay.
spk08: Your next question. is from Ed Aker from HC Wainwright. Your line is open.
spk05: Hi, good morning, everyone. It's Thomas Yip asking a couple of questions for Ed. Thank you for taking our questions. So first, echoing 729 here with seeing a substantial amount of data at ESO and expecting a few more of new treatment here. And then with the combination study data in the second half, at which point should we expect the next company-sponsored trial to begin, and what does that look like?
spk12: Sorry, Thomas, you broke up there a little bit just at the end. I didn't catch the full question. Sorry.
spk05: So the last part of my question is what would the next measure company responses study look like considering the phase 2a looks like it's near completion and data has been positive so far?
spk12: Oh, I see. Right. I got you. All right. Well, look, we've made no secret of the fact that it's our ambition to combine 729 with other agents. We would like that to be our own proprietary agents, whether it's our capsid inhibitor, potentially our destabilizer or our PD-L1, you know, with the overall strategy of being to suppress HPV DNA, reduce surface antigen and boost the immune system. But I think we've also shown with our kind of creative 2A combination strategies that that we're open to appropriate combination programs with other companies' assets as we move forward. It is still our belief, and I'll let Mike and Gaston comment on this in a moment, that we will need combination therapies for HPV with the continued goal of suppressing HPV DNA surface antigen and then ultimately boosting the immune system. So the exact combination study, I don't know that we can specify right now, but we do see 729 being a cornerstone agent in that particular therapy going forward. So Mike or Gaston, anything you'd like to add?
spk03: Maybe Mike first. Not from me, Bill.
spk06: Okay. Gaston?
spk11: No, nothing from me. Thanks. I think you summarized it well. I think we need to wait to see a little bit how the phase 2A studies evolve.
spk03: All right. Do you have any other questions? Yes.
spk05: Just one more from us, and I should point out. key component there and so let's be the space the phase one how we want to study your other than ALT can you highlight some other design elements what else will you be looking at okay and so Gaston do you want to take that one so healthy volunteers remember so there's no HPV parameters to look at Gaston
spk11: yeah i couldn't really uh there's a lot of echo uh there but so there was a question whether we will be evaluating other biomarkers this is as bill pointed out this is a healthy volunteer so it's it's primarily safety that we're going to be evaluating in the healthy volunteer subjects there will be no hpv biomarkers was that a question
spk03: Yes, that's right.
spk05: Yeah, that's pretty much, you know, other than ALP, what else you'd be looking at, and I should point out safety.
spk03: Okay, thank you very much for the kind of questions, and we're looking forward to the data readouts and the second half. Thank you.
spk02: There are no further questions at this time.
spk08: I would like to turn the call back over to the presenters.
spk12: Thank you very much, Abby. And thank you all for your questions. Thanks for joining us this morning. We do really appreciate your interest, continued interest in Arbutus and look forward to sharing additional updates on both our HPV and coronavirus assets in the second half of this year. So thank you very much. That concludes our call for this morning.
Disclaimer