Arbutus Biopharma Corporation

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

Thank you, Brianna. Good morning, everyone, and thank you for joining Arbutus' third 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, Michael McElhall, Chief Operating Officer, Dr. Mike Sophia, Chief Scientific Officer, and Dr. Karen Sims, Chief Medical Officer. Bill will begin with a corporate update, followed by Dave Hastings, who will provide a review of the company's third quarter 2023 financial results. After our prepared remarks, we will open the call for Q&A. Before we begin, I'd like to remind you that some of the statements made during the call today are forward-looking statements, which are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our most recent annual report on 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 FEC. With that, I'll turn the call over to Bill Collier. Bill?

Good morning, everyone, and thank you very much for joining us today. As you likely saw, in addition to reporting our third quarter results earlier this morning, we also announced that I will be retiring at the end of the year. I'll speak more about that shortly, but first, let's discuss our results. At Arbutus, we remain committed to our goal of developing a functional cure for patients with chronic hepatitis B virus by advancing the development of our clinical assets that can be combined to create a curative treatment regimen. Over the last few months, we've optimized our pipeline, including the discontinuation of our coronavirus research programs and our oral RNA destabilizer. This allows us to sharpen our focus and resources on our most promising clinical programs, Mduciran and AB101, both of which are expected to have data readouts next year. As a result of this pipeline prioritization, we are also announcing today the difficult decision to streamline our organization by reducing our workforce by 24%. We want to underscore how grateful we are to all of our employees, especially those departing the organization, for their dedication and passion in developing novel therapeutics for viral diseases at Arbutus. And while these changes primarily impact our research research function, we have maintained a group of research scientists as we remain committed to continuing discovery research in chronic HPV. Now, we know that changes that impact our people are not easy, and we're committed to providing those employees with support as they transition to their next roles. At the same time, we're confident that Arbutus remains positively positioned for the future. Now I'd like to provide some updates on the continued progress that we're making across our pipeline. With more than 290 million people worldwide chronically infected with HPV, and with current lifelong treatment options resulting in less than a 5% cure rate, there remains a large unmet medical need for a functional cure for chronic HPV. We believe we're well-suited to address this need with our team's extensive expertise in virology and with IMDUCIRAN, which is one of the most advanced RNAi therapeutics in development. Based on data generated to date, IMDUCIRAN has shown to impact all three components needed for a functional cure for patients with chronic HPV. Those are reducing HPV DNA, suppressing surface antigen, and reawakening the HPV-specific immune response. Our strategy to develop a functional cure for HPV involves exploring Induceran in combination with other investigational and approved products that can further stimulate the immune system to induce functional cure in chronic HPV patients. Induceran is our lead asset and later this week at a prestigious liver-focused medical conference, AASLD's The Liver Meeting, We will be presenting a late-breaking poster with preliminary data from our Phase IIa clinical trial that we're conducting with Berynthus Biotherapeutics, formerly known as Vaxotec. Through this clinical trial, we're testing whether the combination of imduceran, nuketherapy, and Berynthus' HPV antigen-specific immunotherapeutic, VTP300, can lower surface antigen and stimulate the host immune system to fully suppress the virus. As I've mentioned previously, this is an early look at data, as not all patients have received the full VTP300 or placebo dosing regimen. In addition to safety data, from an efficacy standpoint, we're hoping to see a reduction in surface antigen within 24 weeks of, sorry, We're hoping to see a reduction in surface antigen with 24 weeks of imducerin treatment that is similar to what we've seen in our other clinical trials to date, and further impact on HBS-NG and HPV-specific immune activation with the addition of VTP300. We look forward to reporting these data at ASLD. Now, you may recall that we've expanded this trial to the addition of a low dose of the anti-PD-1 monoclonal antibody inhibitor nivolumab to the combination treatment regimen. We believe NEVO may further boost the host immune response. The data that we're reporting at ASLD will not include any data from this expanded arm, as we're in the early stages of this trial. We will have more to report on this portion of the clinical trial next year. We also have a second phase IIa clinical trial that is evaluating imduceran in combination with ongoing nuke therapy and interferon in patients with chronic HPV. Earlier this year, we reported preliminary data that continues to reinforce our confidence in imduceran's ability to effectively lower surface antigen. We're continuing to follow these patients and expect to provide updates from this clinical trial in 2024. Our second HPV asset is AB101, our oral PD-L1 inhibitor that is currently in a phase 1A, 1B clinical trial. Immune checkpoints have been shown to play an important role in HPV-specific immune tolerance and in T-cell activation. This double-blind, randomized, placebo-controlled clinical trial is designed to investigate the safety, tolerability, pharmacokinetics, and pharmacodynamics of AB101. The trial will be conducted in three parts, starting with single and multiple ascending doses in healthy subjects and culminating with multiple doses in patients with chronic HPV. In September, we announced that we dosed the first patient in the single ascending dose group of the trial and expect initial data from that group in the first half of 2024. Finally, let me spend a moment talking about my decision to retire as CEO at the end of this year. As many of you know, I've had the privilege to lead Arbutus since June 2019, and since then we've accomplished so much. This was a particularly challenging decision for me to make personally, and one that is completely unrelated to recent activities at Arbutus. I remain confident in Indusiran and AB101, and the ability of this team to develop these compounds to possibly provide a functional cure for patients with chronic HPV. My four-year plus tenure at Arbutus is one of the most rewarding positions I've had in my career. The opportunity to lead a group of talented and passionate researchers, clinicians, and professionals with a drive to serve the HPV patient community has been a true privilege. We've achieved many successes and key milestones And as I look to my future retirement, I'm confident in the future of Arbutus. Now, Mike McElhall will succeed me as interim CEO effective January the 1st. As many of you know, Mike is a co-founder of Arbutus and serves as our chief operating officer. He has more than 20 years of scientific, strategic, transactional, and commercial experience spanning various operating roles within Bristol-Myers Squibb, Pharmacet, Merck, and ViroPharma. The board and I have the utmost confidence in Mike's ability to be successful in leading Arbutus and to continue to create value for our shareholders. Mike has worked very closely with me over the last four plus years, and I'm confident that there will be a smooth transition. And I will also continue to be a resource for Mike as he becomes acclimated to his new role. In closing, I'm confident in Mike's leadership as he leads Arbutus into its next chapter. Inducerin and AB101 are well positioned to deliver on our goal of developing a functional cure for HPV and driving value for our company as we advance these HPV assets. With that, I'll hand the call over to Dave Hastings for a brief financial update.

Thanks, Bill, and good morning, everybody. We ended the third quarter of 2023 with approximately $145 million of cash, cash equivalents of investments, compared to approximately 184 million as of December 31st, 2022. During the nine months ended September 30th, 2023, we received approximately 26 million of net proceeds from the issuance of common shares under our business at the market offering program. These cash inflows were offset by approximately 69 million of cash used in operations. As Bill mentioned, Today, we announced that we reduced our workforce by 24%. Importantly, we have maintained a discovery research capability in HPV and continue to believe we have the people necessary to advance our clinical stage HPV pipeline. With this reduction in workforce, we will incur a one-time restructuring charge of approximately $1.1 million that will be recorded in the fourth quarter of 2023. We expect our 2023 net cash burn to range between $90 to $95 million, excluding any proceeds received from our at-the-market offering program. Importantly, we believe our cash runway will be sufficient to now fund our operations into the first quarter of 2026. In closing, we have a strong financial position to advance our mission, and we remain committed to developing our HPV assets to provide a functional cure for chronic HPV. With that, I will now turn the call back to Bill.

Thanks, Dave. As I mentioned earlier, we're looking forward to reporting preliminary data from the AB729202 Phase IIa study combining inducer and nuke therapy and VTP300 at the AASLD liver meeting in the coming weeks. Immediately following that medical congress, we'll be attending the Jefferies Healthcare Conference in London. So please reach out to Lisa if you want to schedule time to meet with the team to review that data. In closing, I wish the best to our departing employees and again thank them for their dedication and many contributions to the company as we continue to pursue our goal of developing a functional cure for patients with chronic HPV. Operator, we're now ready to open the call for any Q&As.

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 1-1 on your telephone and wait for your name to be announced. To withdraw, please press star 1-1 again.

Please stand by while we compile the Q&A roster. Our first question comes from Roy Buchanan for J&P.

Your line is now open.

I agree. So congrats to Bill for the retirement, just as things are getting exciting over there, and congrats to Mike for the promotion. I guess maybe a few, let's start with AB 101, just the results in the first half of next year. Are you going to have, sounds like maybe not, but the complete SAD results and maybe just give us some patient number details if you can. And then are you going to share the data regularly with the FDA or are you going to wait to complete the whole phase one? And then just remind us what other activities like preclinical studies are underway with 101.

Okay, Roy, thank you. Thank you for your well wishes. I'll turn it over to Karen in a moment. Maybe the best thing we could do to answer your question is just to describe the structure of the 101 Phase 1A study. I think I misspoke earlier on when I said it was a double-blind randomized study. So, Karen, perhaps you could clarify that and answer Roy's question.

Absolutely. So, I should note, Bill, you were correct. It is a double-blind randomized clinical trial. Okay. It is what we call an umbrella trial. So there are healthy subject portions of the trial and chronic hepatitis B patient portions of the trial. So we begin in single ascending dose and healthy subjects and then move to multiple dose and healthy subjects and then on to chronic hepatitis B patients. So the way these trials run, you obviously need data from each part of the trial to advance to the next part of the trial. So right now, as Bill said, we're in the single ascending dose portion of the trial. We do expect to have data next year. It really depends on the cadence of the trial. If things continue to move smoothly, we recruit our subjects in a timely manner. So we should have some safety data, some PK data, some preliminary pharmacodynamic data in the first half of the year for the single-dose portion of the trial in healthy subjects. Beyond that, it really just depends, again, on the cadence of the trial, the recruitment, and we will disclose data once we have a meaningful data package to report.

Okay, great. And maybe what other activities are you doing, some preclinical studies or anything that's underway with 101?

Mike, do you want to take that one?

Well, you know, the standard non-clinical safety studies continue to move forward with 101. You know, I think we've established a pretty solid package of data, preclinical data, data that supports the mechanism, which is novel, which supports efficacy in animal models. And obviously, ideal PK profile, which was liver targeting for this agent. But really, right now, the only activities is all the non-clinical toxicology assessments that are required to support further progression of the drug.

Okay, great. One more detail question. Just in the inducer end studies, how frequently do you check for seroconversion of S antigen? And then on the really crystal ball or speculative question, have you guys ever considered hepatitis delta? You know, some of your competitors are using the same agents for hepatitis B and potentially hepatitis delta. Have you considered that indication? Just what are your thoughts around that? Thanks.

So Karen, do you want to take the first part and then Mike the second?

Absolutely. So we are checking frequently in all of our clinical trials for surface antigen loss and seroconversion. The timing really depends on how the clinic visits were set up for subjects. So typically whenever there's a clinic visit for a subject, we do collect those parameters just for monitoring. So it can vary anywhere from every month to every eight weeks, depending on where the subject is in the clinical trial, whether they're in the dosing phase and the follow-up phase. So we do collect those parameters at pretty much every study visit, and I would say ballpark every month, if not more frequent.

Yeah, Roy, on the Delta's question, Yeah, look, we've looked at a lot of targets, and, you know, Delta was clearly one of them. You know, the idea initially was that potentially one could use AD729 as an siRNA to knock down antigen lobe or, you know, that's required for Delta to exist. Recent clinical data certainly has, you know, the generated data that's not supportive of that. There seems to be some liver safety issues associated with potentially the accumulation of delta-related antigens in the cell, and therefore some significant ALT elevation. So our assessment is that an siRNA developed for hepatitis B is probably not an option for delta. So also, Bill had mentioned that the focus, our efforts, With our reduced headcount on hepatitis B, we still think that's a significant challenge that needs to be overcome. And we believe in our strategy, so that's where we're focusing our efforts.

Got it. Thank you.

Thank you, Roy.

Thank you. And one moment for our next question. Our next question comes from Dennis Ding of Jefferies. Your line is now open.

Hi, good morning. This is Anthea on for Dennis. Two questions from us. What are your thoughts on GSK in licensing the J&J SRNA and what does that mean for the HEP-B space? Was Arbutus also in discussions with GSK? And then second, could you comment on the LNP litigation and what we should expect heading into the joint construction brief in December? Thank you.

Yeah, so let me take the second part first, and then maybe Mike Mack can talk about our business development efforts. So on the litigation front, As I think we put in the press release, there's no new news to announce. We continue to remain passionate about defending our patents. In the Moderna case, there is a claims construction meeting scheduled for February 7th, right? So that's the next kind of data point in the Moderna trial. In the Pfizer case, there is not yet a date set for claims construction. I think that's about all we can say at this stage. So, Mike, do you want to take the GSK news?

Sure. Development question? Yeah. So, I think the way we look at the GSK news is that any consolidation in the field, any licenses that happen in the hepatitis B space are good for the field generally. And of course, we want to see success in the hepatitis B space with people getting to functional cure. That's opportunity for everybody. So as you know, it's a very, very large market and can certainly support multiple competitors. With regards to conversations with any particular company, we can't comment on that, obviously, but I think it's fair to say that we stay closely in touch with everyone in the field and we continue those conversations whenever appropriate.

Great. Thank you so much.

Thank you. And one moment for our next question. Our next question comes from Brian Scorney of Baird.

Your line is now open.

Hey, guys. This is Charlie on for Brian. Thanks for taking our question. One is, you know, you mentioned that with the reduction force, the cash runway is extended through 2026. And I was just hoping you could contextualize this for us with your kind of ideal clinical development timeline and possibly, you know, other scenarios just to kind of get a better grasp on what this cash runway means for you and your development efforts, as well as could you do based on your research, just a little bit of comparing and contrasting, following up on the recent question about the GSK deal with the asset that they just in-licensed compared to Induceron. Thanks.

Yeah. Okay. So, I mean, I think we're... pleased that we've now extended the runway into 2026. It allows us a good, clear two years' worth of funding. And as we continue to progress the Phase 2A studies, we'll get further readouts, further data readouts, and then that will inform the next phase of either Phase 2B or Phase 3 work. It's also going to allow us to continue to progress AB101 through its Phase I activity. So all of that, I think, is quite encouraging. On the GSK question, a couple of comments. I think, one, it's another recognition of the fact that combination therapy is the way to go in hepatitis B. As far as comparing Induceran with the asset that they've licensed in, I think there are a couple of key differences. As I mentioned in my comments earlier on, 729 has shown activity on all three of the components we believe are necessary for a functional cure, reducing HPV DNA, reducing surface antigen, and reawakening the immune system. And 729 is the only RNAi that's generated data showing dosage intervals of either monthly, every eight weeks, every 12 weeks. So we have, you know, built in some dosage flexibility moving forward. And then, Mike, you might want to just comment upon the single trigger aspect and any of the preclinical differences.

Yeah, so pre-clinically, if you look at Mduceran, right, it's a single trigger agent which can knock down all viral transcripts with one siRNA, including integrated transcript that comes off of the host genome. One of the challenges with the JNJ asset is that it requires two siRNAs. to be able to accomplish what we're able to accomplish with one. So I think there's a big difference in when you look at cost of goods and feasibility of commercialization of those two different assets. We're a lower dose than they are as well. So there is, I think, a differentiating profile for Indusiran versus the J&J SIRN.

Great, thank you. That's very helpful. Okay.

Thank you, and one moment for our next question. Our next question comes from Thomas Yip of HCU Wainwright. Your line is now open.

Hi, good afternoon, everyone. Good morning. Sorry about that. Thank you for taking our question. Asking a couple of questions for Ed. First of all, I just want to say, Bill, Ed and I both have the honor of working with you and best of luck in the future endeavors. And yeah, just kind of close by surprise. But first, perhaps the first question. from the extended cohort from the CO2 study, the one with low-dose nivolumab. Perhaps, can you provide more specific time frame for this preliminary readout? Should we expect something in the first half of the year? And then also, how many weeks of treatment data can we expect from this preliminary data set?

All right. Thomas, thank you very much for your well wishes. I appreciate that. Yeah, so this additional arm that we've included in the 202 study that includes NEVO, obviously we announced that a good time after we started the original study design. So it is running on a later time track. As we've announced, we have started dosing in that arm. So that arm is underway. We've not yet disclosed when we're likely to get data from that specific arm. I would point to the fact that, you know, most years we normally do a press release with our kind of expectations early in January. And that might be another time to ask you a question.

Got it. And then perhaps pertaining to this preliminary readout, can you discuss what would be, at your stake, you know, a point that you would consider to be a successful trend? Yes. Karen?

Sure. Absolutely. So, you know, as we've discussed, you know, our goal certainly is to look for functional cure in hepatitis B. You know, certainly there will be interim steps, readouts that will have to be taken before we get subjects, you know, to functional cure. So, for this particular data set, certainly we'll be looking at surface antigen decline based on the induced RAN lead-in period, which is 24 weeks of induced RAN treatment prior to randomization to receive either the VTP300 immunotherapeutic or placebo. So, you know, certainly looking for induced RAN contribution to lowering surface antigen during this lead-in period, and then certainly any impact that VTP300 has in terms of maintaining that surface antigen decline, increasing that surface antigen decline, and certainly anything related to additional immunomodulatory impacts in addition to what we've observed previously with inducerin on its own. So I think those are what we'll be looking for in this data readout that's coming up at ASLD. Unfortunately, it's still under embargo, so I can't share any of the details of that, but to be disclosed in the next few days as the conference begins.

Okay, I missed it. Perhaps just one more question from us for AB101. Can you talk about how far along the enrollment for each of the three parts and especially data for the third part in the HPV patients? Is it data positive? Any possibility to those one-on-one in combination with endocerin as we have seen in the expansion cohort?

Yes, I think what we've said so far in that study is that we'll have some initial data in the first half of next year. I think Karen also mentioned earlier on, you know, we're still somewhat dependent upon recruitment rates into each of those arms. You're right that our ultimate aim would be to combine 729 and 101 with a nuclear site, but we've not yet provided any timelines for that.

Okay, understood. Thank you again for taking our questions, and we're looking forward to the ASAP presentation.

Thank you.

Thanks, Thomas.

Thank you. And this concludes the question and answer session. I would now like to turn it back to management for closing remarks.

Okay. Well, look, thank you very much, everyone, for joining us this morning. We appreciate your continued interest in and support of Arbutus and your questions. We very much look forward to providing you updates as we progress the development of our HPV clinical stage assets over coming months. So, operator, that concludes our call for this morning.

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