Arbutus Biopharma Corp (ABUS) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Arbutus Biopharma Corporation 2018 Third Quarter Financial Results and Corporate Update. (Operator Instructions)

As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Ms. Pam Murphy. You may begin.

Thank you, and good afternoon. Thank you all for joining us. With me today are Dr. Mark Murray, Arbutus CEO; Dr. Mike Sofia, Arbutus Chief Scientific Officer; David Hastings, Arbutus Chief Financial Officer; and Koert VandenEnden, Arbutus Chief Accounting Officer.

Before we begin, we'd like to remind you that some of the statements made during this call today are forward-looking statements, including statements regarding our expectations for our proprietary HBV pipeline, including clinical timelines and results for the lead compound AB-506 and AB-729, our expected cash runway and expected revenues from our current and potential licensing agreements. These forward-looking statements 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 and from time to time, in our documents filed with the SEC.

Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

I'd now like to pass the call to Mark for his introductory remarks. Mark?

Thanks, Pam, and thank you to everyone for joining us on the call today. Our singular mission at Arbutus is to develop a cure for patients with chronic HBV. We believe this can best be achieved using an effective combination of complementary therapeutic agents administered for a finite treatment duration. To that end, we have developed a pipeline of proprietary therapeutic agents that target multiple aspects of the chronic HBV infection. The most important of which are HBV DNA replication, hepatitis B surface antigen expression and immune reactivation.

We are confident that our broad proprietary pipeline of drug candidates will allow us to develop an effective combination therapy for HBV. We are now focused on 2 agents in our pipeline, AB-506 and AB-729, which we believe in combination could deliver a meaningful advance over the current standard of care. Today, I'm pleased to report that we have advanced our second generation capsid inhibitor 506 into HBV patients. Mike will further describe this study in a few minutes.

Although we have confirmed that our first generation LNP-enabled RNAi agent 1467 can lower hepatitis B surface antigens in some patients, we are now focused on our subcutaneously delivered second generation RNAi agent AB-729. This is a GalNAc conjugate which Mike will also discuss in a few minutes.

We anticipate that these 2 agents, AB-506 and AB-729 will comprise an effective clinical combination. Provided the clinical trials for AB-506 and AB-729 proceed as expected, we anticipate initiating combination clinical trials with these 2 agents in the first half of 2020.

Now as most of you know, last month, we announced our decision to delay initiation of a planned Phase I clinical trial of AB-452 based on emerging nonclinical safety findings. AB-452 was a new chemical entity acting via a novel RNA destabilizing mechanism which targets hepatitis B surface antigen expression and we believe it is important that we take the time needed to further characterize the compound before deciding to initiate clinical studies. In a few minutes, Mike Sofia will discuss the steps we're taking to better understand these results. But I want to assure you that we remain confident that the RNA destabilizing mechanism represents a very relevant and important target and its success here could be very meaningful for patients and for Arbutus. And for that reason, while we further characterize the AB-452 observations, we are advancing backup compounds that utilize the same mechanism.

Before turning the call over to Mike, I think it's worth noting that the FDA recently issued guidance regarding the development and approval of new HBV therapies. This guidance is timely and helpful to Arbutus because it illustrates a path to approval for new HBV therapies. The guidance anticipates the use of combination therapy and outlines what is needed to demonstrate safety, efficacy and durability of response. Also this quarter, Alnylam announced the approval of ONPATTRO, an RNAi therapeutic they have developed for the treatment of hereditary hATTR amyloidosis. Arbutus is entitled to a royalty on global sales of ONPATTRO for the LNP technology licensed by Arbutus to Alnylam for this product. We expect the receipt of our first royalty payment in the fourth quarter and this could also be a source of nondilutive capital for us.

I'll now turn the call over to Mike Sofia.

Thanks, Mark. As Mark said, we are committed to developing a cure for chronic hepatitis B, using an effective combination of therapeutic agents administered for a finite treatment duration. Our initial targets focus on fully blocking HBV DNA replication and reducing, even eliminating surface antigens. To that end, we have identified a novel and very compelling target which very selectively destabilizes or degrades all HBV RNA and thus, has effects on many aspects of the virus life cycle including DNA replication and surface antigen production.

We've also identified a series of molecules exemplified by AB-452, which are potent and highly selective for hepatitis B virus. These molecules, when in the presence of the hepatitis B virus PRE sequence, shortened the viral poly (A) -- RNA poly (A) tail, thereby making them susceptible for degradation. This target mechanism is novel and is very exciting. Success here could enable our ultimate aspiration to provide a more effective, all-oral regimen for hepatitis B patients.

Today, I'm not going to comment further on the AB-452 observations Mark mentioned, other than to say that we have initiated a series of studies designed to fully understand the effects we have observed, including determining that the effects we have seen are species-specific, that is, may not occur in man, and if they are AB-452 specific or mechanism-based. These studies will require several months to complete and we will provide an update when we've resolved these questions.

In the meantime, we are advancing a number of potent backup compounds with similar potent RNA destabilizing activities. At this time, it's difficult to predict when we will have a lead backup compound ready for IND-enabling studies. I hope to be able to provide you with more details on the AB-452 as well as the backup program in the coming months.

As part of our commitment to target S-antigen reduction, we have also developed a second-generation RNAi agent that acts through a different mechanism than AB-452, that is AB-729. AB-729 employs a single RNAi trigger, which spans all of the HBV transcripts and reduces all of the viral antigens. Importantly, AB-729 also employs our proprietary GalNAc hepatocyte-targeting technology, which will allow for less frequent subcutaneous dosing. We are currently carrying out IND-enabling studies and expect to bring AB-729 into clinical development sometime in the second quarter of next year.

As Mark mentioned, we anticipated combining AB-729 with our capsid inhibitor, AB-506, once these agents have completed their initial monotherapy studies in patients. As Mark also mentioned, AB-506, our second-generation capsid inhibitor, has progressed with a healthy volunteer portion of a Phase Ia, Ib study and into HBV patients. This portion of the study is a 28-day, dose-escalation study, which will include combinations with new therapy. We expect the results of these studies to be available in the second quarter of next year.

I would like now to turn the call over to Dave.

Thanks, Mike, and good afternoon, everybody. I'll start today by discussing the company's cash position and runway. Cash and cash used are our most important financial metrics. At September 30, 2018, we had a cash and investments balance of $142 million compared to $155 million at June 30, and $139 million at December 31. Our cash used in operating activities during Q3 2018 was $13.2 million. And on a year-to-date basis, our cash used in operating activities has been $50.8 million.

We expect our total cash burn for 2018 to be within our previous guidance of $70 million, consisting of approximately $65 million for ongoing operations and R&D investment and $5 million for onetime costs related to the closure of the Burnaby facility.

And while we're not giving 2019 cash burn guidance yet, I can say that our current cash and investment balance should support us into 2020. The only other area I'd like to address today is the various noncash adjustments included in this quarter. These adjustments include a $14.8 million write-down of the intangible asset related to our first generation capsid inhibitor, AB-423, which we have decided to indefinitely defer developing due to the advancement of our next-generation capsid inhibitor, AB-506. This write-down was partially offset by the related decrease in deferred taxes of $4.3 million and a reduction in our contingent consideration liability of $5.6 million.

And finally, we also recorded for the first time in Q3, our share of losses in our equity investee, Genevant, which was $2.8 million.

So with that, I'll turn the call back to Mark.

Thanks, Dave. As you heard, we're in a strong financial position to proceed with advancing the pipeline and building our company. Over the past month, we have made some important strategic additions to our team and our Board of Directors. Dr. Gaston Picchio has joined our executive team in the role of Chief Development Officer, and we have appointed Dr. Bill Symonds as the Chair of our Clinical Advisory Board, where Bill will continue to contribute to Arbutus in this important role. We also announced the appointments of Myrtle Potter and Jim Meyers to our Board of Directors. I'm very pleased with these additions to our executive team and our board. Each of these individuals bring such significant expertise and experience in our sector.

Operator, I'll turn it over to you for Q&A.

(Operator Instructions)

And our first question comes from Liisa Bayko with JMP Securities.

Wondering if you could just maybe provide a little bit more detail on what you're learning about the RNAi program. And it seems like if you're moving another compound forward, maybe it's something specific to that particular compound, is that the right way to interpret that? And what do you think -- maybe you can give us a little more clarity on the timing of the backup.

So Liisa, so as I said, we're focused now on the second-generation RNAi product. 1467, as you know, is a very complicated protocol, complicated mode of administration to patients and we think it will be very difficult to commercialize that compound. We are treating some patients and trying to learn something from that study. And as we learn more, we'll report that to you. Now with respect to 729...

I think I misspoke. I said the -- I meant the RNAi destabilizers, sorry. I misspoke.

Oh, I'm sorry. Okay. All right. So, Mike, why don't you take that on?

Sure. Thanks, Liisa. So the RNA destabilizer, right now, it's a little premature to say anything about what we've learned. We're analyzing the data, we're doing experiments to really get a significant and deep understanding of the observations that we have. So it will be -- as we said, it will be some months before we can sort of do all of those studies and pull all that data together to really give a clear understanding. From the backup compounds, we still -- as we've always said, we're a big -- we have a big commitment to the S-antigen knockdown field. We believe that's going to be a critical component of an HBV cure and so we have this sort of comprehensive strategy to address that. And the RNA destabilizer, for us, was a foray into the small molecule, orally bioavailable, all-oral combination strategy and we still very firmly believe in the mechanism of this agent. It's very compelling, the data we have, the preclinical data was very compelling to us. And so we have -- still have a very strong commitment to that and we still have a very active program in that area, bringing forward new agents that we think will be able to provide a differentiating profile to AB-452. But we still believe that it's possible that AB-452 can move forward, but that will be determined based on all the study results that we come through with.

Okay. And when do you -- how will you make it with that? Will that be a press release or just sort of in passing or how...

I don't think we've decided exactly how we're going to do that. But we have been fairly, let's say, open in presenting data in the scientific meetings on what we believe is the mechanism of action of this. And so we will find an appropriate mechanism to provide that information.

And our next question comes from Katherine Xu with William Blair.

So with regard to the royalty stream from ONPATTRO, I'm just wondering what's your kind of internal planning in terms of projection for that is. And does it make sense to monetize that at some point? And then also on 452, did the species -- well, let's say 1 species observation of the safety issue, did that happen at kind of high superhuman dose? Would you be able to comment on that? And then is there a timeline for the backup compounds to move up? It'll be good to have some details along that line.

Katherine, I just -- well, do you want to take the ONPATTRO first, Dave?

Sure, sure. Yes, Katherine, look, we were -- we did see that Alnylam announced their revenue numbers today. There was really nothing on that call or presentation that lessens our confidence about that product and the potential to provide a reasonable source of nondilutive capital for the company. And so, we'll look at all our options and decide what is best when that's available.

Katherine, with respect to the 452 study, I think we're just not in a position to talk about that any further until we really understand it. But as Mike said a moment ago, once we have complete understanding, we'll present that information.

And our next question comes from Keay Nakae with Chardan.

452, do you at least have a working hypothesis of why you think you're seeing the effects that you are?

I think in any -- when you find any observations, you generate a couple of hypotheses that around which you then develop experiments to investigate and see which one of these hypotheses may lead to the answer. So we do have a couple of hypotheses that we're working on. It's too early to say which one is going to be the most relevant, and that will be depending on what the data from our studies tells us.

Okay. And then in terms of the backup compound, how different are they in 452? I'm assuming they're also small molecules but any color you can provide on that would be helpful.

Well, I mean, they're backup compounds. One -- any time one continues to do work in the field, you commit to try to diversify the chemical matter that you're working on. I can't really say at this point in time the characteristics of these molecules because it's an ongoing study.

And our next question comes from Madhu Kumar with B. Riley.

This is Mayank calling in for Madhu. Just a couple for me. Just thinking about AB-506. Just broadly, could you talk a little bit about how you see the positioning of the molecule against the other core inhibitors that are out there. And in the context of maybe the liver meeting, if anything, we would love just broadly on the HBV landscapes on core inhibitors or even RNAi platform. And then secondly, I think you mentioned in your remarks about the FDA roadshow that has happened recently. Could you give more color on how you're thinking about the program? How -- anything, if there is, to talk about endpoints and development program as you think about dosing, potency of these different -- of these 2 molecules that you're thinking about advancing.

Mike, do you want to just comment a little bit on what your expectations for 506 are?

Yes, sure. So I think we reported on preclinical data with 506. It looks competitive to all the other agents that are currently in clinical development, so we have high hopes for that molecule. It's pan-genotypic, it has this dual mechanism of action, it has a very nice PK profile preclinically. It works against NUC-resistant variants, so it has all the right characteristics. Obviously, it progressed very nicely for IND-enabling studies into human subjects and we're now into patients, so we've cleared the PK safety piece of the Phase I study. So it's moving along very nicely and as we said, we'll have data on patient data sometime in the latter part of first half of 2019. On the AASLD, I guess you were talking about what we expect to learn there. There are a couple -- certainly a couple of studies being reported there on some capsid inhibitors. At this point in time, it doesn't look like there's going to be anything earth-shattering based on what we can see from the abstracts that we've seen. But we're anxious to sort of attend the meeting and see what everyone has to say about the field. On the FDA guidance, we were happy to see that the document that came out from the FDA, the draft guidance, it certainly is -- provides us the appropriate guidance for us, and we were happy to see their focus in one part on combination therapy. And I believe that that's going to be key as we've always believed it would be. It does provide us some guidance on endpoints, none of them surprising to us as far as viral endpoints. So we continue to study the document. Obviously, the FDA is looking for feedback on it and we'll see what ultimately comes out as the final document there.

Is there anything specific you could talk to whether you're looking for basically in first half that will give you at least an idea or understanding on what that combination would look like? Or is it too early to say that?

I think it's too early to say. I mean, we firmly believe that you have to address the viral replication issue aggressively, so a new combination, we believe, with the capsid inhibitor will help us do that. And the S-antigen question has to be addressed, I think that's generally accepted in the field and I think certainly, the guidance and their comments about looking at S-antigen levels is something that the FDA, I believe, is also looking at. So we believe those 2 things are going to be critical for a cure, and I think our portfolio allows us to address those issues.

And at this time, I'm showing no further questions in queue. I'd like to turn the call back over to Mark Murray for further remarks.

Thank you, operator. As you heard today, we remain singularly focused on our mission to develop a cure for hepatitis B based on a combination of complementary agents. Both AB-506 and AB-729 will yield clinical data next year and are on a path to be used in an effective combination. We are well-positioned scientifically and financially to meet this objective for patients and our stakeholders. We appreciate your participation in the call today and look forward to sharing updates on our progress with you in the months ahead.

Operator, this concludes our call today.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.