Arbutus Biopharma Corp (ABUS) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Arbutus Biopharma Fourth Quarter and 2018 Year-End Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the call over to Ms. Pam Murphy. Ma'am, you may begin.

Thank you. Good afternoon, and thank you all for joining us. On the call today from the Arbutus management team are Dr. Mark Murray, CEO; Dr. Mike Sofia, Chief Scientific Officer; Dr. Gaston Picchio, Chief Development Officer; and Dave Hastings, Chief Financial Officer.

Before we begin, we'd like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding expectations for Arbutus' proprietary HBV pipeline, including clinical time lines and results for the lead compounds AB-506, AB-729, and AB-452; 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 SEC documents. 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 Murray.

Thanks, Pam, and thank you to everyone for joining us on the call today. I'm going to focus my remarks on our key objectives for 2019, and Mike Sofia will follow with an update on AB-452 and the HBV RNA destabilizer program. Dave Hastings will then describe our financial results, after which we'll open up the call for Q&A.

As you know, we are focused on developing a cure for patients with chronic HBV. We believe this can best be achieved by using a combination regimen of complementary therapeutic agents administered for a finite treatment duration. We believe having control over the discovery and development of these compounds is important. To that end, we have developed a pipeline of diverse proprietary therapeutic agents that target the aspects of chronic HBV infection we believe are the most important and are, therefore, the ones we are focused on, including HBV replications, hepatitis B surface antigen expression and immune reawakening.

Our 2 lead compounds, AB-506 and AB-729, have the potential to be used in combination with an approved nucleoside analog to deliver a meaningful advance over the current standard of care. AB-506 is our oral capsid inhibitor. It is pan-genotypic, has a favorable PK profile and is quite potent. It works against NUC-resistant variants, is dosed once daily and is complementary with respect to hepatitis B surface antigen targeting compounds. AB-506 is now being evaluated in HBV patients in a 28-day daily dosing monotherapy clinical trial. This trial includes the evaluation of several doses of AB-506 and may include a cohort using AB-506 in combination with the nucleoside analog.

We intend to report top line results of the completed cohorts in this Phase Ia/Ib study late in the second quarter, with full results presented later in the year at an appropriate scientific meeting.

We also plan to initiate a Phase II clinical trial, combining AB-506 and a nucleoside analog in the second half of the year to establish long-term safety of AB-506 plus a NUC to support use of these in future combination trials.

Now regarding surface antigen reduction, as I said in our third quarter call, we confirmed that our first-generation LNP-enabled RNAi agent ARB-1467 reduced hepatitis B surface antigen to very low levels in some patients. We are now focused on our GalNAc conjugated subcutaneously delivered RNAi agent AB-729. AB-729 employs a single RNAi trigger that spans all of the HBV transcripts, thus reducing all the viral antigens and inhibits HBV replication. This compound employs our proprietary GalNAc hepatocyte-targeting technology, which not only allows for subcutaneous dosing but also provides the important benefit of less-frequent dosing, potentially once a month dosing.

We are currently completing IND-enabling studies and believe AB-729 is on track to begin a Phase Ia/Ib clinical trial in the second quarter of this year.

We believe that these 2 agents, AB-506, a capsid inhibitor, which inhibits HBV replication; and AB-729, which reduces hepatitis B surface antigen; will, when combined with an approved NUC, have the potential to be an effective, well-tolerated combination regimen.

Provided the monotherapy trials of AB-506 and AB-729 proceed as expected, we anticipate initiating a Phase II combination clinical trial with these 2 agents, together with an approved nucleoside, in the first half of 2020.

I would now like to move to an update on AB-452, our oral RNA destabilizer, which also targets hepatitis B surface antigen expression but via a very novel mechanism of action. We opted to delay the initiation of our Phase Ia/Ib clinical trial in order to evaluate a nonclinical safety finding seen in longer-term safety studies. Since that announcement, we have initiated a number of studies designed to further characterize these findings, the compound itself and its mechanism of action and to determine if proceeding into human testing with AB-452 is appropriate.

These studies are still ongoing, and we expect to be able to make a go/no-go decision with respect to AB-452 itself in the second half of the year. In a moment, Mike Sofia will describe some of the activities going on to make -- to allow us to make this decision.

We are often asked if we remain committed to the RNAi destabilizer program, and the answer is a resounding yes. In addition to AB-452, we have a robust lead-optimization effort underway for other distinct compounds with this novel biological activity. We are confident the RNA destabilizing mechanism we are focused on represents a very relevant and important therapeutic target, and success here could be very meaningful for patients and for Arbutus.

I'd now like the call -- turn the call over to Mike Sofia. Mike?

Thanks, Mark. All our scientific efforts at Arbutus are focused on developing a cure for chronic hepatitis B using an effective combination of therapeutic agents administered for a finite treatment duration. Our target is focused on fully blocking HBV DNA replication and reducing, even eliminating, surface antigen and reawakening the host immune response. Through our work, we have identified a novel, very compelling target, which very selectively destabilizes or degrades all HBV RNAs and, thus, has effects on many aspects of the viral life cycle, including DNA replication and surface antigen production.

We have 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 shorten the viral RNA poly (A) tail, thereby making them susceptible for degradation. This target/mechanism is novel and very exciting and could lead to a more effective all-oral regimen for HBV patients, a regimen that would include our RNA destabilizer, our capsid inhibitor and an improved NUC.

We have initiated a series of in vivo and in vitro studies designed to fully understand the nonclinical safety effects we have observed, including determining that the effects we have seen are specie-specific, if they are AB-452-specific or if these effects are mechanism-based.

At the time of our announcement in late 2018, AB-452 was ready to enter clinical trials based on a complete CTA package, including the 28-day GLP toxicology studies, and the Phase Ia/Ib clinical trial CPA had been accepted by the regulatory authority. The nonclinical safety effects that led us to pause the program were observed in a long-term nonclinical study initiated early in order to accelerate the program.

Some of these studies we are conducting will require several months to complete, but we are encouraged by the progress we are making and the data we have seen thus far. We have gained greater insight into how AB-452 works and why it is selective for hepatitis B virus. We are in the midst of testing various hypothesis that might explain the in vivo safety findings we have observed and whether they have any relevance to the future development of AB-452, the class of molecules or the mechanism of action. We believe we will be in a position to make a go/no-go decision regarding the clinical development of AB-452 in the second half of this year.

In parallel, because we believe that this is an important target, we are advancing several potent backup compounds of different chemo types with similar potent RNA-destabilizing activity.

We are also working on other very interesting early stage research programs with different and potentially complementary mechanisms of actions, including our immunovirology checkpoint inhibitor program. This program is focused on identifying and developing orally available small molecule candidates. Success here could complement and strengthen our pipeline, provide additional opportunities to form effective combination treatment regimens for a broad HBV patient population.

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, 2019 cash guidance and our runway. As a reminder, cash and cash used are our most important financial metrics.

At December 31, 2018, we had a cash and investments balance of $125 million. Our cash used in operating activities during 2018 was $68 million, which was on the lower end of our guidance. For 2019, we expect to use between $70 million and $75 million in cash, which allows our current cash balance to fund us into 2020.

The only other area I would like to touch on today is our ONPATTRO royalty entitlement. As we have previously disclosed, our royalty rate is in the low to mid-single digits, tiered based on net sales. Because of that tiering, we do not expect our royalty income to be material this year. However, we are pleased with the trajectory of the launch and the long-term potential of this product. Additionally, while we can't predict when or if a deal may happen, we are still open to monetizing this royalty stream for an upfront cash payment and possible downstream retention of economics as long as we feel such a transaction aligns with the product's potential.

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

Thanks, Dave. As you heard, we are in a strong financial position to proceed with advancing our HBV pipeline. We believe we have a very strong team with the skills, experience and commitment to developing a curative combination regimen for HBV patients.

At this point, I'd like to turn the call over for questions. Operator?

(Operator Instructions) Our first question comes from the line of Liisa Bayko from JMP Securities.

This is Jon on for Liisa. I just have a couple of -- the first on AB-506. You mentioned in the ongoing study, there may be a cohort, looking at 506 plus a NUC, and I was wondering if you could talk more about what would trigger that decision and if that is ongoing now.

Yes. So Jon, it's a question of if we think we can learn something important with that cohort that we are not able to learn either from the data we see from others or it -- we just need to determine, we'll learn something meaningful doing that.

Okay. And moving to the destabilizer. You mentioned again the unknown, whether it's species-, compound- or mechanism-specific, but given the backups that you're working on, I think it's safe to say you're more confident in the mechanism than the other two. But can you discuss kind of the backups and how they might differ from 452?

Sure. Maybe I'll ask Mike to comment on that. Mike?

Sure. So we have a -- we set a very aggressive program in this area because we believe very strongly in this mechanism of action. All the data that we've produced tells us this is very compelling. So we'd had a continuing large operating chemistry to look at, not only AB-452-like molecules but other molecules that are very chemically distinct from AB-452 that have the same mechanism of action and work very similarly. So all I can say is that we have a number of different series that we're working on. All of them work like AB-452, but they're extremely chemically distinct.

And our next question comes from the line of Katherine Xu from William Blair.

I'm just wondering, with regard to 729, can you maybe summarize a little bit your GalNAc conjugate RNAi kind of platform, your potential differentiation from others. And also, to date, the animal talk that you have conducted and what you have observed?

Yes, so Katherine, just sort of high level, this is an agent that employs a single RNAi trigger. That sequence spans all of the viral transcripts, and it has a unique GalNAc ligands and linker, which we have specifically designed to be proprietary to us. And it -- the GalNAc moiety specifically binds to the surface of hepatocytes and mediates the entry of the -- into the hepatocyte. We're currently in the process of the IND-enabling studies, including the GLP tox studies. And I -- we don't have anything specific to say about that at this time.

And our next question comes from the line of Keay Nakae from Chardan.

Yes, question for Dave. In terms of the cash burn, how should we think about that in terms of how it's spread out in each of the quarters? Should we do that as evenly spread out throughout the year or more front-end, back-end loaded?

Yes, Keay, I think it's probably a slight hockey stick in the second half of the year as our clinical spending ramps, but not dramatic.

Okay, great. And then just a follow-up question on AB-729. In going to GalNAc, how much does this allow you to use a more fully modified payload?

Keay, if I understand you properly, what I would say is using this route of administration, which is subcutaneous, you do end up chemically modifying the trigger sequence to protect it from degradation.

Right. And in -- while -- in doing that modification, what is your expectation of the potency and durability impact?

Well, the product has obviously been designed to be as potent, as durable as we can make it. So we have looked at a variety of ways to do this and are comfortable that we have found one that is potent and durable.

So this is Mike. So we -- clearly, the triggers -- as Mark said, we have a number of modifications in the triggers that make it unique in some ways. But as far as the potency, we've certainly disclosed that this molecule demonstrates a very, very potent knockdown in HBV S-antigen production in animal models, more so than 1467. And also that this molecule has a very nice extended duration of action, meaning in animal models, we've seen a very nice maintenance of S-antigen loss or drop after one month after our -- the initial dose. So that sort of leads to the belief that we believe this is going to be a once-monthly dosing agent in the clinic.

Okay. Yes, that's helpful, Mike. And then will we be seeing any publications on your preclinical work for this?

We've actually presented some of this work at AASLD and EASL. At the upcoming EASL work, we're also going to be showing 729 combination studies that we've done with other agents. So we have a poster there.

And Keay, you can find some of the past work on our website.

(Operator Instructions) Our next question comes from the line of Mayank Mamtani from B. Riley.

Just three for me. And tagging along the previous question, for 506, just thinking about the class of drugs, how do you think about the second quarter readout that we should have and also contextualizing what we may learn at EASL and others in the meanwhile?

And then on 452, I was just curious. You said 9 clinical studies that you went down the path of just, obviously, keeping in mind that you may have to move through the clinic. So how much of that is relevant to some of the work that you will do for your backup? And once you do learn what you're anticipating to learn around the 2 hypothesis, how much of that work would be relevant to a backup molecule there? And then last minor question, you said immunovirology checkpoint inhibitors. Is there a particular target you guys have identified that you may want to prioritize this?

Yes, so maybe let's start backwards. Mike, do you want to comment on immunovirology? And maybe we could ask Gaston to comment then on what our expectations are for 506 readout? And then maybe come back to -- maybe we get -- we'll need to get you to repeat the second question Mayank.

Okay. I'll do that later.

Let's start with immunovirology.

Sure. So we've identified a while ago that the checkpoint inhibition was going to be a good approach from an immunovirology standpoint in HBV. We initiated this program in the small molecule area because we believe the small molecule is going to be a better modality for HBV as a therapeutic field than a antibody would be. So we've made a lot of progress in our lead optimization on our small molecule program and believe that we have -- we're in a position to ultimately, in the not too distant future, move one forward into development. But at this point in time, we are fully engaged in our lead optimization effort in that space. I hope I answered your question okay?

Yes, yes. No, it does. Can you talk to the target-specific that you may want to pursue there? Or is that too early?

Well, yes -- no, we've, I think, publicly said that we're very interested in PD-L1 as a target, and that's where much of our effort is currently engaged in the immunovirology space. We are looking at other targets in immunovirology, but they're still earlier than our PD-L1 checkpoint program.

Maybe, Gaston, do you want to just at a high-level comment on sort of what we're expecting to see in a couple of cohorts in the 506 study?

Sure. Yes, thank you. So basically, we're looking for the classical biomarkers, surface antigen, HBV DNA, HBV RNA and others, such as correlated antigen and a few more. Also, we're looking at immunological parameters. So at the minimum, we're looking at a rapid decline in HBV DNA and RNA, the mechanism we should go down or capsid inhibitor. And then we'll see what happens with the most precious marker, if you wish, surface antigen. Although you have to remember this is a short-term course, it's only 28 days. So as others, we do not expect to see dramatic changes here.

Mayank, did we cover them? Or did we lose one of your questions?

(inaudible)

(Operator Instructions)

I don't think we answered the questions Mayank asked about 452.

And he requeued again. Let me go ahead and open his line again. Go ahead, Mayank.

Sorry about that, I got cut off. The question on 452, I can -- happy to repeat. I was just curious about some of the work that you're already doing to characterize the 3 components. And I was just curious how some of that work, like you said, that was, basically, you were doing earlier than expected, like earlier -- just to be ready to move through the trials. I was just curious if that -- some of that work is actually relevant for the backup molecule. Once you are able to identify what the issue is, you can move with the backup molecule pretty quickly. Is that the right way to think about it?

Yes, Mayank, I think...

Yes, go ahead, Mike.

Yes, I think that's the right way to think about it. We are gaining a lot of knowledge and understanding of how this molecule works, the mechanism of action for HBV. We're understanding more and more about the observation that we saw preclinically, what's cause -- what may be causing that. And what it does, it informs us as we now move to our next-generation agents and allows us to, let's say, work around maybe some of the issues that we have seen before because we know more about how the molecule works and know more about what may be causing the issue that we observe. So I can say that, definitely, it's having a significant impact on how we progress future agents forward in this program.

And I'm showing no further questions. I'd like to turn the call back to Mr. Mark Murray, CEO, for closing remarks.

Thank you, operator. We appreciate your participation in the call today. 2019 promises to be an important and every eventful year, and we look forward to sharing our updates on our progress with you in the months ahead. Operator, back to you.

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, please have a great day.

Thank you.

Thank you.