Arbutus Biopharma Corporation

Good day, and thank you for standing by. Welcome to the Arbutus Biopharma Q2 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 will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lisa Caporelli, please go ahead.

Thanks, Jada. Good morning, everyone, and thank you for joining Arbutus' second 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 Sophia, Chief Scientific Officer, and Dr. Karen Sims, Chief Medical Officer. Bill will begin with a corporate update, followed by Dr. Sims, who will review recent data shared at a medical congress. Dave Hastings will then provide a review of the company's second quarter 2023 financial results. After our prepared remarks, we will open the call for Q&A. Dr. Sophia will be joining us at that time to address 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 turn the call over to Bill Collier. Bill?

Thank you, Lisa, and good morning, everyone, and thank you for joining us today. Our goal at Arbutus has always been to develop a combination of therapeutic agents that will lead to a functional cure of chronic hepatitis B. And today, we are excited to share with you the continued progress that we've made in advancing this effort. We believe that AB729, which we will now refer to by its generic name, Imduciran, has the potential to be a cornerstone therapy to functionally cure chronic HPV. To date, we've generated meaningful inpatient data showing that Imdusiran appears to be the only RNAi to impact both surface antigen and the reawakening of the HPV-specific immune response. And the effects of Imdusiran are sustained in some patients even after all therapy is discontinued. We remain impressed with the compelling safety and efficacy profile of Induceran and look forward to evaluating Induceran in combination not only with other available compounds, but ultimately with our early stage HPV assets that are concurrently progressing. We expect additional combination data from our ongoing Phase IIa clinical trial with our partner, Vaxitec, in the second half of this year. And with this, we continue to be well-positioned to advance our goal of developing a functional cure for HPV and driving value for our company as we advance our broad pipeline of HPV assets. Now, with respect to our early-stage HPV assets, this morning we announced our CTA has been approved for us to initiate a Phase I clinical trial with AB101, our oral PD-L1 inhibitor, in New Zealand. As you may recall, the FDA placed the IND application for AB101 on clinical hold before we had initiated a trial or dosed any patients. To get AB101 into a clinical trial as quickly as possible, we made the strategic decision to work with New Zealand to advance AB101 while, in parallel, working to address the FDA concerns. We continue to believe that AB101 as an oral and thus more rapidly titratable checkpoint inhibitor compared to an antibody approach has the potential to be an important component of a combination therapy that could be combined with imduceram to provide a functional cure for HPV. Now the phase one clinical trial for our RNA destabilizer AB161 is ongoing. 161 is our next generation oral HPV-specific RNA destabilizer, which is being developed as part of a potential all-oral treatment regimen to functionally cure HPV. We expect to have initial data from the single ascending dose portion of this trial in the second half of the year. Now, beyond our HBV assets, we remain committed to identifying and developing new antiviral small molecules to treat COVID-19 and future coronavirus outbreaks. Our strategy is to target the two essential enzymes for the coronavirus lifecycle, SARS-CoV-2 NSP5 main protease, also known as MPRO, and NSP12 viral polymerase. These enzymes are critical for viral replication and are highly conserved across all known coronaviruses. AB343 is our lead oral mPro inhibitor designed to address the urgent need for oral antiviral therapies that are both potent and active against circulating SARS-CoV-2 variants and that do not require ritonavir boosting. The preclinical profile of AB343 is impressive, and we're currently in IND-enabling studies with plans to complete those studies in the second half of this year. Ultimately, we believe that the optimal treatment regimen will consist of both an MPRO inhibitor and an NSP12 inhibitor, differentiating this therapy from other strategies. 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. And we'll be sharing more updates on these two programs as we progress through the year. Before turning the call over to our new Chief Medical Officer, Dr. Karen Sims, to review the IMDUCIRAN data, I'd like first to congratulate Karen on her appointment as CMO at Arbutus. Karen has been with the company since 2017 and has played a crucial role in the clinical development of Indusiran. And I'm very happy that Karen has assumed this role and confident that she and her team will continue to effectively execute our mission. So over to you, Karen.

Thank you, Bill, for those kind words. I'm honored to serve as CMO at Arbutus. And like my colleagues, I believe we have a sound strategic approach to develop a functional cure for HPV and a compelling pipeline of assets to achieve that goal. With respect to our progress in HPV, we are exploring imduceran in combination with other investigational and approved products through our two ongoing phase 2a combination trials, one with interferon and one with vaxotex HPV antigen-specific immunotherapeutics. With both of these trials, our goal is to identify compounds that can be combined with imduceran to further stimulate the immune system to induce functional cure in chronic HPV patients. I'll start with our Phase IIa clinical trial that is evaluating imducerin in combination with ongoing nucleoside or nucleotide analog therapy and interferon in patients with chronic HPV. Interferon is considered a current standard of care treatment option for chronic hepatitis B that is administered weekly for a finite treatment course, but has a very low chance of achieving functional cure as a model therapy for chronic hepatitis B in most patients. Because interferon is typically poorly tolerated, we are studying only short courses in this trial. And in this trial, we intend to assess the impact of interferon on safety, tolerability, and efficacy as assessed by surface antigen decline when added to OMS going in Duceran and NUC therapy. We enrolled 43 E antigen negative patients that underwent a lead-in phase with 24 weeks of Duceran and then were randomized to one of four treatment arms to receive interferon for either 12 or 24 weeks, plus ongoing nuke therapy, plus or minus additional doses of imduceran. At the recent Easel Medical Congress, we presented preliminary data, including the first 12 patients that had completed the lead-in phase, and at least 12 weeks of interferon treatment, with or without additional doses of imduceran. Baseline characteristics were similar across all four interferon treatment cohorts. During the imduceran 24-week lead-in phase, patients experienced a mean surface antigen decline of 1.59 logs from baseline. This is comparable to what has been previously seen in other clinical trials with induced RAN. The mean surface antigen decline from baseline at week 40, which includes 12 weeks of interferon dosing, was 1.88 logs, which is promising, albeit from a small sample size. In addition, four patients, one from cohort A and one from cohort A2, both of which received interferon plus or minus-induced Duran for 24 weeks, and two from cohort B1, who received interferon plus-induced Duran for 12 weeks, reached surface antigen levels below the lower limit of quantitation during the interferon treatment period. These patients had not achieved sustained surface antigen loss, and anti-HVS antibody levels were pending as of the date the data was presented, and they continued to be followed in the trial. Three patients, one in cohort A2 and two in cohort B1, have been evaluated to stop nuke treatment, and one patient from cohort B1 has discontinued nuke treatment. Regardless of the duration of interferon treatment, 12 weeks or 24 weeks, the change in surface antigen from baseline during the interferon treatment period remained below the baseline values, although with considerable variability amongst patients. These data suggest that the addition of interferon to induced saran treatment may result in continued surface antigen declines in some patients. However, with most patients still in the interferon treatment period, we are cautious in drawing any meaningful conclusions from this preliminary data set. We are eager to continue to follow these patients through the duration of the interferon treatment period and the new only follow-up period to assess for trends in surface antigen declines and sustained surface antigen loss. As in our other trials, patients that complete the treatment period with imduceran, interferon, and nuke therapy are evaluated to stop all treatment. From a safety standpoint, imduceran with or without interferon was generally well tolerated, with most treatment emergent adverse events assessed as unrelated to imduceran. There were no serious adverse events, study discontinuations, or imduceran treatment discontinuations or modifications. and the interferon dose modifications needed were consistent with the known safety profile of interferon. These preliminary data from a larger Phase II trial continue to reinforce our confidence in Mduceran's ability to effectively lower surface antigen, and we anticipate providing updates when we have additional meaningful data to report. Regarding our second Phase IIA combination trial that we are conducting with Vaxotec, the original part of the trial designed to evaluate Mduceran, NUC therapy, and Vaxitex HBV antigen-specific immunotherapeutic, BTP300 or placebo, is fully enrolled. This trial is designed to reduce surface antigen with Induceran before the patients are randomized to one of two arms to receive ongoing nuke therapy plus BTP300 or placebo. Recently, in collaboration with Vaxitex, we have expanded the trial to include an additional treatment arm that will enroll approximately 20 patients to receive low-dose nivolumab a PD-1 monoclonal antibody inhibitor approved to treat a number of cancers under the brand name Octivo with the combination regimen. We will assess if the addition of low-dose nivolumab to the booster component of the VTP-300 combination further stimulates immune-mediated reduction of surface antigen after the initial treatment with induced Duran and the first dose of VTP-300. We reported in June that the first patient in this additional treatment arm has been dosed. We are hopeful that if we can lower surface antigen and stimulate the host HPV-specific immune system with the combination of imduceran and the first dose of VTP300, the addition of low-dose nivolumab will further enhance this stimulation, and we may therefore enhance the ability of the immune system to fully suppress the virus and in turn achieve functional cure. As Bill mentioned, we believe that chronic hepatitis B requires a combination of compounds to achieve therapeutic success. and we are encouraged by the progress we have made in these two Phase II clinical trials to further support our mission. With that, I'll turn the call over to Dave Hastings for a brief financial update. Dave?

Thanks, Karen. 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 $164 million as of June 30, 2023, compared to approximately 184 million as of December 31st, 2022. During the six-month end of June 30th, 2023, we received approximately 25 million of net proceeds from the issuance of common shares under Arbutus's at-the-market offering program. These cash inflows were offset by approximately 47 million of cash used in operations. We expect our 2023 net cash burn to range from between 90 to $95 million, excluding any proceeds received from our at-the-market offering program. And 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 HPV and a treatment for COVID-19 and potential future coronavirus outbreaks. So with that, I'll turn the call back to Bill. Bill?

Thank you, Dave. So just to wrap up, I'd like to remind everyone of our upcoming key milestones for 2023. First of all, we plan to initiate the Phase 1 clinical trial with AB101 this quarter. Secondly, we plan to report initial data from the AB729202 Phase 2A clinical trial, combining imducerin, muke therapy, and VTP300, And we expect to report that data in the second half of 2023. We plan to report initial data from the healthy subject single ascending dose portion of our phase one clinical trial for AB161 in the second half of 2023. And fourthly, we plan to complete IND enabling studies for AB343, our MPRO coronavirus clinical candidate, and also nominate a candidate to commence IND enabling studies in our NSP12 program, both in the second half of 2023. I'd like to take this opportunity 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 that we have the right team and the right strategy in place to deliver on our mission. So operator, we are now ready to open the call for a Q&A session.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To draw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Your first question comes from Dennis Deng of Jefferies. Please go ahead.

Hi, good morning. Thanks for taking my question. Just one for me. From a big picture perspective around hepatitis B, I mean, how should investors think about this space given that it's been challenging and a lot of these studies take very long and, you know, you're hearing some pharma companies actually discontinue development here. You know, how and when do you think you could change that narrative? Thank you.

Thank you, Dennis. This is Bill. Good question. And yes, you're right. Some observations that you've made around, you know, J&J, for example, stopping their development program. And yes, some of the clinical trials do have some lengthy timelines attached to them. However, there are still several companies that are in this field, both big pharma and small biotech. And I, as I said in my comments, I'm confident that the strategy that we have, which is to reduce HPV DNA, suppress surface antigen, and boost the immune system, is the correct scientific strategy. And we're developing assets in those three arenas and testing out different combinations in these trials to find the functional cure. Ultimately, I think there will be some kind of data in this field that reaches some kind of level of functional cure. I think that will establish a benchmark, and then other companies will continue to iterate, including ourselves, and try and continue to improve that functional curing.

And maybe as a follow-up, one of the really interesting things about Arbutus is, the platform is the SRNA. And a few years ago, Roche did acquire Dicerna for around $1.7 billion, again, for the platform. So I'm just wondering, how else can you leverage that platform? And given your current cash position, is that something that you could do more work on in the near term? Or maybe some color there would be helpful. Thank you.

Yeah. As Dave mentioned, we're well capitalized at the moment with a decent cash runway. And I think we've shown in the past that we've been able to raise money through different mechanisms. So some of the royalty monetization, the China rights deal that we did with Qilu being a couple of examples. I think we're also quite judicious in the way that we do our combination clinical trials. You know, we try and keep those relatively simple with 50-50 cost sharing between ourselves and our partners, which reduces some of the costs of the clinical trials. And, you know, Dave and the whole exec team, you know, we're pretty cautious on what we spend and where we spend it. You know, beyond that, Mike Mack is here in the room with us. And, you know, maybe you want to comment on some of the conversations that we continue to have with different BD partners.

Sure, Bill. I'm happy to do that. Dennis, as we've mentioned in the past, you know, we have conversations with all players in the field all the time. You know, any opportunity we have, we take advantage of that. And there's certainly continued interest in the field. There are still lots of key players, as Bill mentioned, working diligently in hepatitis B, and we do expect that we're going to be able to drive functional cure rates higher as we continue to iterate with our pipeline. So, you know, as things evolve, we'll continue to have those conversations, and, you know, we'll see how they progress. We obviously can't say much more than that, but, you know, we're always open to thinking about potential opportunities for the future. So, leave it at that.

Thank you.

Thank you. One moment for our next question, please. Our next question comes from Ed Arce of HC Wainwright. Please go ahead.

Hi, good morning, everyone. This is Thomas. You're asking a couple questions for Ed. Thank you for taking our questions. Perhaps first, we've seen a very encouraging data set from the 201 phase 2A study at ESO. Can you tell us when can we expect the next data set? Would it be later this year? And also looking further at which point can investors expect to have an early idea of what a phase 2B will look like?

Yeah, so good question. You know, our goal was to do an update from this study in the first half of the year, which we delivered at ESOL. And as Karen said in her comments, we now have to let this study run a little bit further. I think Karen and I both agree that doing too many, you know, small updates is maybe not helpful. We should probably wait until we have, you know, some more meaningful, more complete data sets. So, I think what we're going to do is wait until January when we typically release our expectations and guidance for the 2024 year, and I think we'll put something in there about when we expect a further update from this study.

Great. So, I assume that's it. that will include, you know, what are the professional next steps for the 201 study as well?

Well, yes. I mean, as always with clinical trials, you have to wait to read out what the data says, and then we'll be guided by that as to how we determine next steps. I see.

Okay. And then moving on, the other triple combination study, the 202 study in combination with the BTP-300. What type of data can we expect in terms of endpoint measurements? Would that be comparable to the 201 study?

Karen, do you want to take that?

Yeah, sure. Thanks for the question. So, as we've alluded, we plan to report some preliminary data from that study before the end of the year. And typically, you know, certainly surface antigen is a very important endpoint, you know, for us in all of our clinical trials with induced uran as the foundation of many of these combination studies. So certainly data around surface antigen, you know, we would expect to present at that time. You know, beyond that, you know, as with most of our trials, we really just need to see where we are, you know, with the number of subjects reaching certain milestones by the time, you know, we're ready to report that data. And, you know, the completeness of the data sets we have at that time will really dictate what we're able to share. So, certainly surface angina beyond that, you know, it's too early to comment.

Okay. Understood. And then switching gears, one question about 161, as we expect single ascending dose data later this year. So, clearly, safety data are very important, but what type of, should we expect to see some type of efficacy data, specifically F antigen or RNA data, and what would be the next step for 161 if these data are positive?

Yeah, I can address that as well. So, you know, as we've mentioned, we are on a phase one clinical trial with AB161, meaning that we are on healthy subjects at this point with that trial. So early data sharing would certainly be, as you alluded to, mostly around safety. In order to get into the pharmacodynamic responses of AB161, we need to be in the hepatitis B patient population, which, you know, we wouldn't be ready to share any data from, you know, by the end of this year. So for this particular trial, just safety data would be what we would be sharing.

Great. Got it. Thank you so much for taking our questions, and looking forward to the data later this year.

Thank you, Thomas.

Thank you.

One moment for our next question, please. Our next question comes from Roy Buchanan of JMP.

Please go ahead.

Hey, great. Thanks for taking the questions. I guess the first one on AB101, pretty quick getting the clinical trial set up, XUS there, so nicely done on that. details you can give us around the phase one, what it's going to look like. I assume it's not exotic, just that. And then what's the path look like with the FDA from here on? What do you do? What are the next steps there, I guess, and what's the conversation look like with the FDA? Thanks.

Yeah, thank you, Roy. So, you know, as we revealed today, you know, and previously, actually, the FDA provided their comments and concerns, you know, in their clinical hold letter. And they predominantly focused on certain aspects of clinical trial design and some preclinical data. But we were able to switch to New Zealand and submit the CTA. Importantly, we did attach the clinical hold letter from the FDA in our CTA application to New Zealand. So we're encouraged that we'll be able to start that study this quarter in New Zealand. And as that data emerges, we'll have the ability to continue conversations with the FDA and chart a path forward. Beyond that, Karen, anything you want to say about the design of the study or?

No, not in particular. You know, Roy, as you alluded to, nothing surprising, you know, at this point in the study in terms of, you know, initiating in healthy subjects and then moving into, you know, chronic hepatitis B patients. So, yeah, from that standpoint, yeah, nothing terribly exotic, as you mentioned, our typical study. But, yeah, we are very much looking forward to getting this initiated, you know, as soon as possible. We're very excited that we have a path forward.

Okay, great. But you would expect to include CHB patients in this same trial?

No, actually we are. So it is an umbrella study, which is similar to our other small molecule studies that we've worked in the hepatitis B space. So it is a similar trial design initiating in healthy subjects and then moving on to chronic hepatitis B subjects within the same trial.

Okay, great. And then just a quick one on Qi Lu. Just any updates you can give us on the progress There, I mean, I know it's in their hands, probably can't say much, but any sense of what to expect and maybe timing for the next update for that collaboration? Thanks.

Yeah, Roy, this is Mike. Good question. Yeah, we continue to work with our partners at Shilu to move that program forward as quickly as possible. There's not much more we can say beyond that. It's a bit of a slow process in China, as I'm sure you're aware, but we're moving as diligently as we can.

Okay, can you just remind me where it's at at this point, like in development, or is that not public?

Where is it? In development in China?

Yes.

We're still working towards submitting an IMD to the Chinese regulatory authorities.

Okay, great. That's it. Thank you.

Sure. Thank you, Roy.

Thank you. One moment for our last question. Our last question comes from Brian Scorney of BARD. Please go ahead.

Hey, good morning. Thanks for taking our questions. This is Charlie on for Brian. Just a couple from us. So I was just kind of curious what your interpretation of the combination data with imducerin and peganirferon is, given that in the A1 and B1 cohorts it looks like you know, in one or two patients, there's a sharp drop in surface antigen and then a bit of a rebound. Secondly, we'd be curious if any of the kind of investment calculus has changed for you guys with regards to the coronavirus antivirals, given how the disease landscape has evolved over the past year and a half. And also just kind of, did you set the table with expectations for you know, when the VTP300 combination might have an incremental effect from the use of that vaccine and kind of like what you're thinking about in terms of how that combination might be synergistic. Thank you.

Okay. Great. Thanks. So, let's chunk this up, maybe the interferon question first with Karen, and then we'll go across to Mike Sophia for a comment on coronavirus.

Yeah, sure. Thanks, Bill. So, just back to the 201 interferon data that was released. So, you know, as we mentioned earlier, I will remind you that this is very preliminary data and that the majority of the subjects had not completed the interferon treatment period when we reported this data. So, you know, as we alluded to, I think it's still too early to draw specific conclusions from the data set that we shared, but, you know, we were encouraged by the performance of induced saran in the lead-in period, doing exactly what it's supposed to be doing in terms of lowering surface antigen. and then, you know, the initial data with interferon. To your point, it's a little variable. You know, looking at those plots in the poster, perhaps I can refer you back there. The F-antigen data was presented in a log scale. So while some of those changes look rather dramatic at the low end, these are subjects that are moving from surface antigen values, for example, less than, you know, 5 to less than low in the quantitation, and then back to less than 5 or less than 10. So the bottom of that scale there is actually a very... a very small window of surface antigen changes, you know, less than 10 IUs per ml, you know, to undetectable where these subjects are moving around. And I don't think that's surprising, you know, given the close follow-up, you know, with these subjects. We don't necessarily expect someone to hit lower limit of quantitation necessarily stay there. They may bounce around a little bit before they, you know, settle out into, you know, whichever direction they may go, whether they remain undetectable or have a little bit of surface antigen rebound, you know, to your point. So, you know, I think the big picture here is we need to keep watching these subjects and let them complete, you know, the full interferon treatment period, let them complete the follow-up period. You know, as you know, with interferon monotherapy data, there are at times, you know, very interesting outcomes in patients after they've completed their interferon therapy. So I think we just need to be patient as the data emerges. And then, you know, as alluded to, we'll be providing updates on this study when we have, you know, additional meaningful data to share.

All right. And then do you just want to talk about the second part, the potential impact of VTP300 in the other study? And then we'll go across to coronavirus.

So in terms of VTP300 in the 202 study, so certainly, as we alluded to, we'll be sharing some data from that study towards the end of the year. We've been following back-to-text data very closely with their VTP300 studies, their 002 study. and are, you know, encouraged by their results in terms of surface antigen declines, especially in patients who have low surface antigen at the beginning of the study. So keeping that in mind, you know, we're very hopeful that M.Ducerin will continue to, you know, lower surface antigen in this subject in that study to a point where VTP300 will hopefully have a similar effect of additional surface antigen decline and then ideally additional immunomodulatory activities that will promote functional cure in those patients.

Thanks, Karen.

So, Mike, on the coronavirus approach. Sure. So, hi, Charlie. So, I think, you know, when you look at the coronavirus space, you know, when you talk to sort of KOLs, there's still a significant medical need for effective therapies, which, you know, to a large extent are lacking out there. As you probably heard, we're potentially seeing a surge here and, you know, a surge in coronavirus SARS-CoV-2 diagnosis in the recent news. So obviously pointing to the need still for therapeutics. You know, and our strategy, you know, has always been, I think, differentiated from others with the idea of a combination of two direct-acting antivirals, you know, the MPRO as well as the MSP12 polymerase inhibitor. provide really a significantly potent therapeutic regimen that we believe could have impact on not only, you know, existing infection in the patient, but also maybe in pre and post exposure prophylaxis. And finally, this whole issue of long COVID. That's still a concern out there. And how do you treat long COVID? And some of the theories are that there's some kind of reservoir virus out there. And if you can hit the virus very hard with effective therapeutics, you could possibly address long COVID. So still, we believe that there's a value in a COVID program. Right now, there are a number of key important medical needs in the space that we think we can address with the strategy that we've implemented.

Great. Thank you so much for giving that additional color, and I appreciate your time today.

Thank you.

Thank you. I will now turn it back over to management for closing remarks.

All right. And I'd just like to take a moment to thank everyone for joining us this morning. We do appreciate your continued interest and support of Arbutus. And we look forward to providing you the updates as we progress the development of our HPV and coronavirus assets this year. So thank you, everybody. Operator, that concludes our call. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.