VIR BIOTECHNOLOGY, INC. You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our unaudited condensed
consolidated financial statements and the related notes and other financial
information included elsewhere in this Quarterly Report on Form 10-Q and our
audited consolidated financial statements and notes thereto and the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations included as part of our Annual Report on Form 10-K for the year ended
Overview
We are a clinical-stage immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases. Infectious diseases are among the leading causes of death worldwide and can cause trillions of dollars of direct and indirect economic burden each year - as evidenced by the COVID-19 pandemic. We believe that now is the time to apply the recent and remarkable advances in immunology to combat infectious diseases. Our approach begins with identifying the limitations of the immune system in combating a particular pathogen, the vulnerabilities of that pathogen and the reasons why previous approaches have failed. We then bring to bear powerful technologies that we believe, individually or in combination, will lead to effective therapies.
Our current development pipeline consists of product candidates targeting COVID-19, hepatitis B virus, or HBV, influenza A virus, and human immunodeficiency virus, or HIV. We have assembled four technology platforms, focused on antibodies, T cells, innate immunity and small interfering ribonucleic acid, or siRNA, through internal development, collaborations and acquisitions. We have built an industry-leading team that has deep experience in immunology, infectious diseases and product development. Given the global impact of infectious diseases, we are committed to developing cost-effective treatments that can be delivered at scale.
COVID-19
VIR-7831 is an investigational severe acute respiratory syndrome coronavirus 2, or SARS-CoV-2, neutralizing monoclonal antibody, or mAb, and incorporates Xencor's Xtend™ technology.
• In February, we initiated COMET-PEAK (COVID-19 Monoclonal antibody
Efficacy Trial - Patient SafEty, TolerAbility, PharmacoKinetics), a
Phase 2 trial with two parts. The first part, initiated in February, is
evaluating the similarity in pharmacokinetics between VIR-7831
manufactured by different processes. The second part, which began in
April, is comparing the safety and viral kinetics of intramuscularly, or
IM, administered VIR-7831 to intravenously, or IV, administered VIR-7831
among low-risk adults with mild to moderate COVID-19. The low 500 mg
dose of VIR-7831 lends itself to administration via an IM route, and
could facilitate broader access to mAb therapy in settings where IV
administration is not feasible. Data are expected in the second half of
2021.
• In March, we announced that the VIR-7831 arm of the National Institutes
of Health's , or NIH's , ACTIV (Accelerating COVID-19 Therapeutic
Interventions and Vaccines) Program Phase 3 clinical trial met initial
pre-specified criteria, and no safety signals were reported. Based on
sensitivity analyses of the available data, the independent Data and
Safety Monitoring Board recommended the VIR-7831 arm be closed to
enrollment. We anticipate an NIH -led manuscript to be published later
this year.
• In March, we announced an Independent Data Monitoring Committee, or
IDMC, recommended the Phase 3 COMET-ICE trial evaluating VIR-7831 as
monotherapy for the early treatment of COVID-19 in adults at high risk
of hospitalization be stopped for enrollment due to evidence of profound
efficacy. The IDMC recommendation was based on an interim analysis of
data from 583 patients enrolled in the COMET-ICE trial, which
demonstrated an 85% (p=0.002) reduction in hospitalization or death in
patients receiving VIR-7831 as monotherapy compared to placebo, the
primary endpoint of the trial. VIR-7831 was well tolerated. As the trial
remains ongoing and blinded with patients continuing to be followed for
24 weeks, additional results, including epidemiology and virology data,
will be forthcoming once the trial is completed.
• In March, we announced the submission of an Emergency Use Authorization
request to the U.S. Food and Drug Administration , or FDA, for VIR-7831
for the treatment of adults and adolescents (aged 12 years and over and
weighing at least 40 kg) with mild-to-moderate COVID-19 who are at risk
for progression to hospitalization or death. The submission is based on
the interim analysis of efficacy and safety data from the Phase 3
COMET-ICE trial. These data will also form the basis for a Biologics
License Application submission to the FDA, planned in the second half of
2021.
• In March, we announced topline data from Eli Lilly and Company, or Eli
Lilly, expanded Phase 2 BLAZE-4 trial evaluating the potential benefits
of VIR-7831 together with Eli Lilly's investigational bamlanivimab
(LY-CoV555) in low-risk adult patients with mild to moderate COVID-19.
Results from the trial, which began dosing in January,
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showed that bamlanivimab 700 mg co-administered with VIR-7831 500 mg
demonstrated a 70% (p<0.001) relative reduction in persistently high
viral load (>5.27; cycle threshold value <27.5) at day 7 compared to
placebo, meeting the primary endpoint. In addition, bamlanivimab
administered with VIR-7831 demonstrated a statistically significant
reduction compared to placebo in the key virologic secondary endpoints
of mean change from baseline to days 3, 5, and 7 in SARS-CoV-2 viral
load. No serious adverse events were reported in either trial arm.
Together with Eli Lilly and GlaxoSmithKline plc, or GSK, we are engaging
with the FDA and anticipate working with other global regulators
regarding the possible co-administration of bamlanivimab and VIR-7831
for the treatment of COVID-19.
• In April, we announced that the European Medicines Agency , or EMA,
initiated a review of VIR-7831 for the treatment of adults and
adolescents with COVID-19 who do not require oxygen supplementation and
who are at high risk of progressing to severe COVID-19. The review is
being carried out by the EMA's Committee for Human Medicinal Products
and will provide European Union -wide recommendations for national
authorities who may take evidence-based decisions on the early use of
the medicine, ahead of any formal Marketing Authorization Application.
• In the second quarter of 2021, we plan to initiate two additional trials
evaluating IM administration of VIR-7831:
o COMET-TAIL (Treatment of Acute COVID-19 with Intramuscular
monocLonal antibody) - a Phase 3 trial in high-risk adults to
assess whether IM-administered VIR-7831 can reduce hospitalization
or death due to COVID-19.
o COMET-STAR (Stop Transmission of Acute SARS-CoV-2) - a Phase 3
trial in uninfected adults at high risk to determine whether
IM-administered VIR-7831 can prevent symptomatic COVID-19
infection.
VIR-7832 is an investigational vaccinal SARS-CoV-2-neutralizing mAb, and
incorporates Xencor's Xtend and other Fc technologies. In April, the first
patient was dosed in the
HBV
VIR-2218, an investigational HBV-targeting siRNA, is currently in a Phase 2
clinical trial. We also continued to progress a Phase 2 combination trial of
VIR-2218 with pegylated interferon-alpha (PEG-IFN-?) to evaluate the potential
for this combination to result in a functional cure for HBV. One year response
durability data for VIR-2218 as monotherapy and initial clinical data for the
combination of VIR-2218 with PEG-IFN-? will be presented at the
VIR-3434, an investigational HBV-neutralizing mAb and incorporates Xencor's
Xtend and other Fc technologies, is currently in a Phase 1 clinical trial. In
late January, we announced initial topline data from this ongoing Phase 1 trial
evaluating VIR-3434 for the treatment of patients with chronic HBV. The first
blinded cohort consisted of eight patients with chronic HBV who were taking
nucleoside reverse transcriptase inhibitors, or NRTIs, two of whom received
placebo, and six of whom received a single dose of 6 mg VIR-3434. Six of the
eight patients achieved a mean 1.3 log10 IU/mL reduction in serum HBV surface
antigen by day eight, the day when nadir was achieved in most patients.
Additional safety and efficacy data will be presented at the
Influenza A virus
VIR-2482, an investigational mAb designed for the prevention of influenza A and
incorporates Xencor's Xtend technology, is currently in a Phase 1/2 clinical
trial and has been generally well-tolerated. In February, we signed a binding
preliminary collaboration agreement, or the 2021 Preliminary Agreement, with GSK
to expand our existing collaboration to include the research and development of
new therapies for influenza and other respiratory viruses. The expanded
collaboration, which builds on the agreement signed in 2020 to research and
develop therapies for coronaviruses, provides GSK exclusive rights to
collaborate with us on the development of potential best-in-class mAbs for the
prevention or treatment of influenza. As part of the agreement, we and GSK will
also engage in two additional research programs: 1) an expansion of the current
functional genomics collaboration to include other respiratory virus targets;
and 2) the development of up to three neutralizing mAbs identified using our
antibody technology platform to target non-influenza pathogens during a
three-year research period. Given the relatively low incidence of flu during the
COVID-19 pandemic, we and GSK are currently evaluating the potential timelines
for advancing influenza therapies, including VIR-2482 and other therapies
covered under the expanded agreement. Under the terms of the agreement, GSK will
pay
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HIV
VIR-1111, an investigational HIV T cell vaccine based on human cytomegalovirus, or HCMV, is currently in a Phase 1 trial. This proof-of concept trial is designed to test the hypothesis that this new approach can elicit potentially protective immune responses that differ from other HIV vaccines. If observed, this T cell vaccine could potentially have utility in additional types of infections and other challenging areas, including cancer. Initial clinical data are anticipated in the second half of 2021.
We were incorporated in
We have financed our operations primarily through sales of our common stock from
our initial public offering and subsequent follow-on offering and convertible
preferred securities and payments received under our grant and collaboration
agreements. As of
We have incurred significant operating losses since our inception and expect to
continue to incur significant operating losses for the foreseeable future. We do
not have any products approved for sale, we have not generated any revenue from
the sale of products, and we do not expect to generate revenue from the sale of
our product candidates until we complete clinical development, submit regulatory
filings and receive approvals from the applicable regulatory bodies for such
product candidates, if ever. Our net losses were
We are currently manufacturing product candidates from three of our platforms:
antibodies, T cells and siRNAs. We have established our own internal chemistry,
manufacturing and control capabilities and are working with contract development
and manufacturing organizations, or CDMOs to supply our early stage product
candidates in the near-term. We have completed our internal capacity build in
process development, analytical development, quality, manufacturing and supply
chain. Specifically, our
COVID-19 Business Update
With the global spread of the current COVID-19 pandemic, we have implemented a
number of plans and policies designed to address and mitigate the impact of the
COVID-19 pandemic on our employees and our business. We continue to closely
monitor the COVID-19 situation and will evolve our plans and policies as needed
going forward. As a result of these developments, in
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of clinical trial supply. For some of our clinical development programs, we are experiencing, and may continue to experience, a disruption or delay in our ability to initiate trial sites and enroll and assess patients. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic.
Our License, Collaboration and Grant Agreements
We have entered into grant, license and collaboration arrangements with various third parties. For details regarding these and other agreements, see Note 5-Grant Agreements and Note 6-Collaboration and License Agreements to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Components of Operating Results
Revenue
We do not have any products approved for sale, we have not generated any revenue from the sale of our products, and we do not expect to generate revenue from the sale of our product candidates until we complete clinical development, submit regulatory filings and receive approvals from the applicable regulatory bodies for such product candidates, if ever.
Our revenue consists of: (i) grant revenue; and (ii) license and contract revenue. Grant revenue is comprised of revenue derived from grant agreements with government-sponsored and private organizations. License and contract revenue is comprised of revenue generated from license rights issued and research and development services.
Operating Expenses Research and Development
To date, our research and development expenses have related primarily to discovery efforts and preclinical and clinical development of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We do not track research and development expenses by product candidate.
Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:
• expenses related to license and collaboration agreements, and contingent
consideration from business acquisitions;
• personnel-related expenses, including salaries, benefits and stock-based
compensation for personnel contributing to research and development
activities;
• expenses incurred under agreements with third-party contract manufacturing
organizations, contract research organizations, and consultants;
• clinical costs, including laboratory supplies and costs related to
compliance with regulatory requirements; and
• other allocated expenses, including expenses for rent and facilities
maintenance, and depreciation and amortization.
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We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our product candidates into and through preclinical studies and clinical trials and pursue regulatory approval of our product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors including: the safety and efficacy of our product candidates, early clinical data, investment in our clinical programs, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments, our ongoing assessments as to each product candidate's commercial potential and the impact of public health epidemics, such as the COVID-19 pandemic. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our clinical development costs may vary significantly based on factors such as:
• whether a collaborator is paying for some or all of the costs; • per patient trial costs; • the number of trials required for approval; • the number of sites included in the trials; • the countries in which the trials are conducted; • the length of time required to enroll eligible patients; • the number of patients that participate in the trials; • the number of doses that patients receive; • the drop-out or discontinuation rates of patients; • potential additional safety monitoring requested by regulatory agencies; • the duration of patient participation in the trials and follow-up; • the cost and timing of manufacturing our product candidates; • the phase of development of our product candidates; and • the efficacy and safety profile of our product candidates.
General and Administrative
Our general and administrative expenses consist primarily of personnel-related expenses for personnel in executive, finance and other administrative functions, facilities and other allocated expenses, and other expenses for outside professional services, including legal, audit and accounting services, and insurance costs. Personnel-related expenses consist of salaries, benefits and stock-based compensation.
We expect our general and administrative expenses to increase substantially in
absolute dollars for the foreseeable future as we continue to support our
continued research and development activities, grow our business and, if any of
our product candidates receive marketing approval, commercialization activities.
We also anticipate incurring additional expenses associated with operating as a
public company, including increased expenses related to audit, legal,
regulatory, and tax-related services associated with maintaining compliance with
the rules and regulations of the
Interest Income
Interest income consists of interest earned on our cash, cash equivalents and investments.
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Other Income (Expense), Net
Other income (expense), net consists of gains and losses from foreign currency
transactions and the remeasurement of contingent consideration related to our
acquisition of
Provision for Income Taxes
Provision for income taxes consisted of international income tax.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods
presented:
Three Months Ended March 31,
2021 2020 Change
(in thousands)
Revenue:
Grant revenue $ 1,371 $ 5,231 $ (3,860 )
Contract revenue 605 487 118
Total revenue 1,976 5,718 (3,742 )
Operating expenses:
Research and development 134,870 64,979 69,891
General and administrative 25,739 12,649 13,090
Total operating expenses 160,609 77,628 82,981
Loss from operations (158,633 ) (71,910 ) (86,723 )
Other income (expense):
Interest income 164 1,755 (1,591 )
Other expense, net (10,246 ) (7,069 ) (3,177 )
Total other income (expense) (10,082 ) (5,314 ) (4,768 )
Loss before provision for income taxes (168,715 ) (77,224 ) (91,491 )
Provision for income taxes (196 ) (16 ) (180 )
Net loss $ (168,911 ) $ (77,240 ) $ (91,671 )
Revenue
The decrease in total revenue was primarily due to the timing of research
activities under the HIV and TB grants with the
Research and Development Expenses
The following table shows the primary components of our research and development expenses for the periods presented:
Three Months Ended March 31,
2021 2020 Change
(in thousands)
Licenses, collaborations and contingent
consideration $ 53,013 $ 32,995 $ 20,018
Personnel 25,803 14,409 11,394
Contract manufacturing 11,320 1,685 9,635
Clinical costs 29,734 3,221 26,513
Other 15,000 12,669 2,331
Total research and development expenses
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This increase in research and development expenses was primarily due to the following factors:
• clinical costs increased $26.5 million , which was primarily attributable to
activities related to our VIR-7831 and VIR-2218 clinical trials;
• licenses, collaborations and contingent consideration expenses increased by
$20.0 million , which was primarily attributable to increases of $33.8
million related to the change in fair value of the contingent consideration
from our acquisition of Humabs Biomed SA , and $18.5 million in costs under
our collaboration with GSK, partially offset by $31.8 million decrease due
to achievement of the first development milestone under our collaboration
agreement with Alnylam Pharmaceuticals, Inc., or Alnylam, in the first
quarter of 2020;
• personnel-related expenses increased by $11.4 million , which was primarily
attributable to an increase in our headcount;
• contract manufacturing expense increased by $9.6 million , which was
primarily related to initiation of manufacturing activities and process
development for our COVID-19 programs; and
• other research and development expenses increased by $2.3 million , which
was primarily attributable to increase in the allocation of facilities and
other costs due to an increase in our headcount.
General and Administrative Expenses
The increase in general and administrative expenses was primarily due to increases in personnel-related expenses related to additional headcount, legal fees, and external consulting expenses.
Interest Income
The decrease in interest income was primarily due to lower interest rates and
higher amortization of premium on investment balances in the three months ended
Other Income (Expense), Net
The increase in other expense was primarily related to the change in fair value
of the contingent consideration related to our acquisition of
Liquidity, Capital Resources and Capital Requirements
Sources of Liquidity
As of
In
In
Our primary use of our capital resources is to fund our operating expenses, which consist primarily of expenditures related to identifying, acquiring, developing, manufacturing and in-licensing our technology platforms and product candidates, and conducting preclinical studies and early clinical trials, and to a lesser extent, general and administrative expenditures.
Future Funding Requirements
Based upon our current operating plan, we believe that our existing cash, cash
equivalents and short-term investments as of
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it is particularly difficult to estimate with certainty our future expenses given the dynamic and rapidly evolving nature of our business and the COVID-19 pandemic environment generally. We will also need to raise additional capital to complete the development and commercialization of our product candidates and fund certain of our existing manufacturing and other commitments. We anticipate raising additional capital through the sale of our equity securities, incurring debt, entering into collaboration, licensing or similar arrangements with third parties, or receiving research contributions, grants or other sources of financing to fund our operations. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. There can be no assurance that sufficient funds will be available to us on attractive terms or at all. If we are unable to obtain additional funding from these or other sources, it may be necessary to significantly reduce our rate of spending through reductions in staff and delaying, scaling back, or stopping certain research and development programs. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. In addition, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
• the timing, progress and results of our ongoing preclinical studies and
clinical trials of our product candidates;
• the scope, progress, results and costs of preclinical development,
laboratory testing and clinical trials of other product candidates that we
may pursue;
• our ability to establish and maintain collaboration, license, grant and
other similar arrangements, and the financial terms of any such
arrangements, including the timing and amount of any future milestone,
royalty or other payments due thereunder;
• the costs, timing and outcome of regulatory review of our product candidates;
• the costs and timing of future commercialization activities, including
product manufacturing, marketing, sales and distribution, for any of our
product candidates for which we receive marketing approval;
• the revenue, if any, received from commercial sales of our product
candidates for which we receive marketing approval;
• the costs and timing of preparing, filing and prosecuting patent
applications, maintaining and enforcing our intellectual property rights
and defending any intellectual property-related claims;
• any expenses needed to attract, hire and retain skilled personnel;
• the costs of operating as a public company; and
• the extent to which we acquire or in-license other companies' product
candidates and technologies.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Three Months Ended March 31,
2021 2020
(in thousands)
Net cash provided by (used in):
Operating activities $ (89,529 ) $ (48,409 )
Investing activities 87,534 104,219
Financing activities 87,503 85
Net increase in cash and cash equivalents and restricted
cash and cash equivalents$ 85,508 $ 55,895 39
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Operating Activities
During the three months ended
During the three months ended
Investing Activities
During the three months ended
During the three months ended
Financing Activities
During the three months ended
Contractual Obligations and Commitments
There have been no material changes from the contractual obligations previously
disclosed in our Annual Report on Form 10-K for the year ended
Off-Balance Sheet Arrangements
During the periods presented we did not have, nor do we currently have, any
off-balance sheet arrangements as defined under the rules of the
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in
accordance with accounting principles generally accepted in
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There have been no significant changes in our critical accounting policies
during the three months ended
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