Arbutus Biopharma Corporation

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 speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would like to hand the conference over to your speaker today. Lisa Capparelli, 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 Sophia, Chief Scientific Officer. Bill will begin with a corporate update, followed by Dr. Sophia, who will provide an overview of our newly nominated coronavirus compound, AB343. 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 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 HPV, as well as a novel and superior treatment for coronavirus. We also highlighted our anticipated milestones for 2023, which include announcing AB729 data from our two ongoing Phase 2A combination trials and additional off-treatment data from our Phase 1B clinical trials. We also intend to initiate in 2023 three Phase 1 clinical trials with our early stage compounds, namely AB101, our oral PD-L1 inhibitor, AB161, our oral RNA destabilizer, and AB343, 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 HPV, we believe it's necessary to suppress HPV DNA, reduce surface antigen, and boost the immune system. And data that we generated last year from our Phase 1B clinical trial tells us that AB729 can potentially achieve all three of these goals. This sets AB729 apart from other RNAi therapeutics in development. First, AB729 has shown reawakening of HPV-specific immunity, as well as a decrease in exhausted T cells in some patients. In addition, a small subset of patients who met eligibility requirements to discontinue all HPV therapies following AB729 treatment were able to control their HPV biomarkers while off treatment. Surface antigen levels in those patients remained well below pretrial levels. Furthermore, their HPV DNA remains low, suggesting establishment of host immune control. Now, these data reinforce our belief that AB729 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 HPV, which leads me to our two ongoing Phase IIa clinical trials with AB729, one in combination with interferon and one in combination with Vaxitex therapeutic vaccine VTP300. At the end of 2022, we complete an enrollment and announce preliminary data from the lead-in phase of AB729201. The phase 2A clinical trial was 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 AB729 on day 1 and week 8 plus nuke 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 1b clinical trial. These preliminary data further validate AB729's capacity to reduce surface antigen. As patients complete the lead-in phase, they are being randomized to receive interferon plus nuke 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 2A clinical trial, AB729202, which is evaluating 729, NUC therapy, and VTP300 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 Optivo. We are adding nivolumab, more commonly known as Nevo, to determine if the addition of Nevo to the VTP300 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 enroll 20 patients on ongoing muke therapy who will receive 60 milligrams of 729 every eight weeks for 24 weeks, followed by VTP300 plus a low dose of nolumab. The NEVO dose that we will use is one-tenth the dose approved for oncology indications, which we believe to be a safe yet efficacious dose. Patients will remain on their NUKE therapy during the 48 weeks of dosing with 729, VTP300, and NEVO. 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 receive 729, NUKE, and VTP300 or placebo, is expected in the second half of 2023. To round out our HBV assets, last year we nominated and conducted IMD enabling studies with AB101 as our oral PD-L1 inhibitor and with AB161 as our oral RNA destabilizer. Both of these programs could play a role in developing a proprietary all-oral combination therapy to provide a functional cure for patients with chronic HPV. We are on track to initiate phase one 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 Sophia to review our progress in the coronavirus.

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 bioreplication and that are highly conserved across all known coronaviruses. These two targets are the SARS-CoV-2 NSP5 main protease also known as MPRO, 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 AB343, an MPRO inhibitor. as our lead oral coronavirus drug candidate. We selected AB343 based on its preclinical activity, safety profile, and the potential for convenient dosing. From an activity standpoint, AB343 is highly potent with an IC50 against the enzyme in single-digit nanomolar. It has equal potency against all known SARS-CoV-2 variants and robust activity against known MPRO-resistant variants. With respect to safety, AB343 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, AB343 does not require enhancing with ritonavir boosting. This could lead to decreased pill burden and reduced potential for drug-drug interactions seen with ritonavir boosted regimens. I'm impressed with AB343'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 the 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. 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 Shilu Pharmaceutical Company related to a technology transfer and license agreement for AB729 in Greater China, 15 million of gross proceeds from Shilu's equity investment in the company, and approximately 20 million 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 79 million of cash used in operations. The company expects a net cash burn of between $95 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 OnPatro to, now has earned $18.9 million in cumulative royalties. Now, as a reminder, once OMERS collects $30 million in OnPatro 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 and 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 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 2A clinical trial combining 729, NUCC therapy, and VTP300 in the second half of 2023. and to dose the first patient with NEVO in the clinical trial amendment that combines AB729, PTP300 plus NEVO. We also plan to announce preliminary interferon data from patients in the AB729201 clinical trial who received AB729 plus interferon. We plan to announce additional off-treatment data from our AB729 Phase 1B trial, We plan on reporting initial data from the healthy volunteer single-dose portions of our Phase I clinical trials for AB101 and AB161. And finally, we plan to initiate a Phase I clinical trial for AB343, 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.

Ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1-1 again.

One moment for our first question. Our first question comes from Dennis Ding with Jefferies. Your line is open.

Hi. Thanks for the question. 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, you know, finding some BD opportunities with your broad pipeline. And then my second question is just around, you know, when you talk with potential partners in the space for FB, 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 Mack 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 HPV and coronavirus. And that, indeed, 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 HPV portfolio. And as Mike just described, you know, 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 HPV and 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? Yes. Yeah, so Dennis, thanks for the question. As we've discussed in the past, we have conversations with everybody in the field frequently at 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, you know, is sort of their guideline? You know, 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, you know, I think, you know, 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. Thank you, Dennis. One moment for our next question. Our next question comes from Bryce Gordon with Baird. Your line is open.

Hey, 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 therapy. We're just curious, you know, what kind of proportion would you be looking here for the remaining patients in terms of defining success for you guys? Thank you.

Yeah, okay, good question. Maybe, Mike or Sophia, would you like to talk about 161 and 101? I'll come back on that.

Sure. Thanks, Raleigh, for the question. So when we look at the oral PD-L1 inhibitor, AB101, obviously, you know, we're looking at safety as our first readout in the Phase 1A studies, but we can also actually gain some insight on how this molecule is working and whether we anticipate efficacy when we're looking at, 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'll give us some early hints on you know, whether this molecule, you know, has the potential to show HPV clinical efficacy as we progress in the Phase 1B studies. So we'll get that in the SADMAD portion of the study pretty early. And so we'll be able to say something about that, you know, by the end of the year. When you look at AB161, our RNA destabilizer oral compound, you know, there clearly this field has struggled with with safety. So safety is going to be a big part of, you know, how we assess this very early on. You know, as I've always mentioned, we've done a very extensive preclinical safety assessment based on, you know, our previous knowledge we gained on AB452 and the peripheral neuropathy studies. And so, you know, we've done 60-day two-species toxicology studies, I mean, excuse me, 90-day two-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, you know, obviously phase one studies where we'll be looking at safety pretty clearly and, you know, paying clear attention to some of the signals for the peripheral neuropathy are going to be important to us. You know, once that's done, then obviously we'll run right into a phase 1B study where we'll be capturing the efficacy aspect of it, you know, the biomarkers, and specifically looking there at antigen reduction and HPV DNA reduction in those parts of the 1B study. Bill?

All right, Mike. And then on the 729 follow-up of these nine patients who are now off of all therapy, I just want to clarify, we now have seven patients remaining for follow-up. But I want to just clarify that 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 HPV DNA. But 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 well worthwhile following up. We have some interest, obviously, from physicians and KOLs in continuing to track these patients. You 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. Wonderful.

Thank you. One moment for our next question. Our next question comes from Thomas Yip with H.V. Wainwright. Your line is open.

Hi. 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?

Yeah, so on the updates, 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 is here. I'm also just looking back on the deck here.

Yeah, give me just one second, Bill. So let's see. 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 20, call it roughly 20 weeks to 44 weeks or more. That's right. So as of the last data update, remember. So patients, obviously you can continue to track that forward and get a sense for where patients are going.

Yeah, so 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's 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.

Thank you, Thomas. Right, yeah. Yeah, as you alluded to, that's seven patients among the nine. So it's been a couple of months. So it's expecting more than 44 weeks, I suppose. And then as you, as we continue to see this treatment data with more patients, what do you expect some findings that you continue to collect that could impact the ongoing phase two 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 two combination studies that are either ongoing or new cohorts?

Yeah, 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 HPV 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 nuke does actually get these patients to a position where they're able to come off therapy. Now, it might also indicate that you know, the ultimate combination for functional cure would be, you know, 729 and nuke and then a third agent designed to, you know, further boost the immune system, which is why our PD-L1 program comes in. So that I think would be, you know, interesting information. And then obviously we're looking for the same thing in our phase 2A studies, whether or not the addition of interferon and or VTP 300 plus or minus NEVO 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're 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?

Yeah, I think the best way to think about that, and, you know, in our corporate deck, we've kind of laid out the trial designs for both the interferon and the VTP300 study. So we're going to be in the phase where some of the patients have received VTP300 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, to report, you know, 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 VTP300 or placebo.

Got it. Thank you so much again for taking the questions.

Thank you, Thomas. One moment for our next question. Our next question comes from Kay . Your line is open.

Yes, a couple questions. For the one patient .

Kay, we aren't able to hear you.

Yes. Sorry. Can you hear me now?

Yeah. A 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, Kay? I don't know that I have that information immediately at my fingertips.

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

Oh, you do?

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

Yeah, thanks, Mike. Okay. That's also on slide 13 in the deck. There's a little asterisk at the bottom. Thank you.

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? You know, is it going to be like a five-day, like a PAX event? Or maybe give us some thoughts about that.

Yeah, thanks, Kay. So I think that the, you know, 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 potential pre-exposure prophylaxis. So those are the kinds of things that we're targeting and sort of mapping out 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... how soon would you evaluate it as a combo therapy, at least in terms of safety?

Well, I mean, you know, we could do some preclinical assessments to look at combination safety. And we do a lot of that sort of in, let's say, in the preclinical environment. Once we get, you know, our second molecule tested, you know, nominated and moved through IND enabling studies, we'll do our, you know, phase one compound with the single agent, and we have to certainly, based on, you know, previous developments in the NIV-RFO, we'll have to show that it works and is safe by itself. And then as rapidly as we possibly can, assuming all those ducts line up, we'll get it into combination. But, you know, right now, you know, 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 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?

Thank you, Kay. Unfortunately, not. We're going to stick to our policy that we've had since we filed that case last year. We just don't comment on the ongoing twists and turns of the case. So, you know, 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's a no comment.

Okay. Well, very good. Thanks. Thank you so much.

One moment for our next question. Our last question comes from Roy Buchanan with JMP Securities.

Your line is open.

Hey, thanks for taking the 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? Thanks.

Well, yeah, our PK. So we have one presentation that's going to be at ICAR this year in a couple weeks that will highlight sort of the entire in vitro profile of the molecule itself. We anticipate submitting a couple of abstracts at other meetings coming up in the very near future to also share preclinical data that we have on the molecule. So hopefully some of that will be rolling out shortly for everyone to see and and see what an exciting molecule we have in AB343. Okay, great.

Any comments on the once-daily dosing?

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

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

Good question. I can follow up later if it's not... Yeah, no, I think that one is not on the slide. That's what I was looking at. So we'll follow up with you.

Okay. Okay, great. And then I had... So it looks like GSK is limiting in the BEPI phase 3s, the primary endpoints baseline SN engine below 1,000. Looks like maybe that's 15% to 20% of the population in their phase 2B. 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 one, were above 1,000. 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 discontinue, I think, had all sorts of historic starting S antigen levels. We can get that information, though, for you, Roy.

Right, yeah, I was just looking at the ASLD presentation. It looks like maybe one's below 1,000, but the rest look 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 the key points that we should be looking out for for that data? Thanks.

Yeah, 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 there's, you know, potentially after you add in these other agents, a further reduction in S-antigen, you know, which could be reflective of, you know, immune response. But I will add the caveat that, you know, we've seen in other studies that that doesn't necessarily happen immediately with interferon. Sometimes it takes a while. Sometimes it's after the interferon therapy has 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, let's conclude the Q&A portion of today's call. I 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 HPV and coronavirus assets. So thanks again for joining, and operator, that concludes our call.

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