Arbutus Biopharma Corp (ABUS) 2019 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Arbutus Biopharma Corporation 2019 First Quarter Financial Results and Corporate Update Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, 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, Chief Executive Officer; 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 our 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 documents filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change.

Now I would like to turn the call over to Mark.

Thank you, Pam, and thank you to everyone for joining us on the call today. Arbutus is committed to the development of an effective combination regimen to achieve an HBV cure. We are now more convinced than ever that this combination approach is correct. As you saw in the press release, we expect to report top line interim HBV patient data for HB-506 (sic) [AB-506,] our oral capsid inhibitor in July. Gaston will describe what data we plan to share and update you on our clinical plans for 506 over the next several months.

As you also saw in the press release, while we had planned to initiate the Phase I clinical trial of AB-729, our subcutaneously administered RNAi agent which targets viral antigens, notably hepatitis B surface antigen, this quarter, but due to a regulatory request we received last Friday, May 3, the clinical trial start will be delayed. We will update you on the time line once the clinical trial start has been approved by regulators. Gaston will add more color in just a moment.

Regarding AB-452, our lead oral RNA destabilizer, Arbutus remains committed to the development of AB-452 and our oral RNA destabilizer program because these compounds have shown compelling antiviral effects in multiple HBV preclinical models. AB-452 is being evaluated in a series of in vitro and in vivo studies to further characterize the compound, its mechanism of action, safety and pharmacokinetic profile before deciding whether to initiate clinical trials. Mike Sofia will take you through our current plans and expectations for AB-452 and the RNA destabilizer program.

Now I'd like to turn the call over to Gaston.

Thank you, Mark. We are developing the capsid inhibitor as a new mechanism to further decrease HBV replication and to inhibit the formation of new cccDNA. Capsid inhibitors are complementary with nucleoside analogs and together lead to deeper HBV DNA reductions. AB-506 is a potent Class II capsid inhibitor, which has shown pan-genotypic activity, it's active against NUC-resistant variants and is dosed once daily. AB-506 is currently being studied in healthy subjects and HBV patients in a Phase Ia/Ib 28-day daily dosing clinical trial. We intend to conduct an interim analysis and report top line safety data in healthy volunteers and the safety and efficacy interim data in 2 dose cohorts of HBV subjects totaling a number of 24 patients later in July, with full results presented later in the year at the appropriate scientific meeting.

Efficacy parameters will include mean change in HBV DNA and RNA levels from baseline at the end of dosing, which is actually day 28. We plan to continue dosing HBV patients this year in 2 additional cohorts, one of which will include a nucleoside analog, and also to initiate a Phase II dose finding and long-term safety trial of AB-506 with an approved nucleoside analog later in the second half of this year. These studies are the sign to support the use and approval of AB-506 in a combination therapeutic regimen. Based on the accumulated preclinical data obtained so far, we are confident AB-506 will exhibit comparable potency to other capsid inhibitors in development.

However, we remain convinced that AB-506 would still need to be combined with other novel surface antigen lowering agents to meet our goal of developing a curative regimen of finite duration. To that end, we have designed an RNAi agent, which will target all viral antigens, including surface antigen, regardless of its source. That is whether it arises from the cccDNA or from integrated DNA.

AB-729 employs a single RNAi trigger that spans all the HBV transcripts, reduces all the viral antigens and inhibits HBV replication. This compound also 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.

We have successfully completed the AB-729 IND-enabling studies in support of the single ascending dosing portion of a Phase Ia/Ib clinical trial that we planned to initiate this quarter. But as mentioned, in response to our recently submitted CTA, a regulatory authority has requested that the company completes its ongoing 3- and 6-months toxicology studies before commencing the single ascending portion of the Phase Ia/Ib clinical trial.

I want to emphasize, we remain confident in the safety and efficacy of AB-729, given the preclinical data we have gathered so far. Further, the results of these longer tox studies, which are currently ongoing, were planned to support a latter part of the clinical study involving 3- and 6-months dosing of HBV-positive subjects. However, as Mark mentioned, due to a regulatory authority requesting that we complete the ongoing toxicology studies, the clinical trial start will be delayed. We plan to explore a variety of options to accelerate the clinical trial initiation based on the currently available tox duration data.

With that, I would like now to turn the call over to Mike Sofia.

Thanks, Gaston. Mark and Gaston have mentioned our plan to combine AB-506 and AB-729 with nucleoside analogs in the clinic in 2020. We believe that AB-506 and AB-729 will complement one another in chronically infected patients. Last month at EASL, we reported that these 2 agents were synergistic with one another in a preclinical in vitro model of HBV replication. This demonstrates that, in addition to inhibiting S-antigen expression, AB-729 inhibits HBV replication. As many of you know, we have been working on an exciting new mechanism, which could lead to a very significant benefits for HBV patients. We refer to this mechanism as RNA destabilization. This program is a high priority for the team at Arbutus. For the last several years, we have been designing small molecules of differentiating chemotypes, all with their -- this RNA destabilizing activity, dissecting the mechanism of action and the host factors involved and preparing to advance compounds into clinical development.

Last fall, we held off advancing our first RNA destabilizer compound, AB-452, into the clinic due to a safety signal we observed in a long-term nonclinical safety study. Since then, we have conducted and continued to conduct a number of studies designed to fully characterize these findings as well as the mechanism of action and to determine if proceeding into human testing is appropriate. This evaluation has resulted in some confounding findings, which include a lack of histopathology associated with clinical observations, a lack of dose response associated with some key pathology and an unexplained vehicle effect. It is therefore our position that these confounding findings potentially cast doubt on the validity of the current nonclinical safety study. Because this compound has the potential to change the HBV treatment landscape, we intend to do more work on it before making a go/no-go decision about advancing AB-452. This is simply the scientifically rigorous thing to do. We have a wide range of studies underway, including repeating the 90-day safety studies in 2 species, and we now expect to make a go/no-go decision about AB-452 in early 2020.

While disappointing, we think doing more work to thoroughly evaluate the safety of AB-452 while we continue to bring back ups forward is warranted. Because the RNA destabilizer mechanism itself is novel and highly differentiated and, if successful, will be very important for patients and the company. The target we are addressing with AB-452 in our follow-on compounds very selectively destabilizes or degrades all HBV RNAs and thus has effects on many aspects of the bio life cycle, including DNA replication and S-antigen production. The chronic HBV patient population will have a very low tolerance for compounds which are not safe and well tolerated. We have performed a variety of studies in vitro to look for signs of toxicity or other off-target effects, but we cannot find them. The compound looks clean. We have knocked out several cellular proteins involved in the mechanism, and there appears to be no deleterious effects on the cells. And finally, we have made a competitive position in this space and would like to maintain that with the first RNA destabilizer to the clinic.

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

Thanks, Mike. I'll start today by discussing the company's cash position. As a reminder, cash and cash use are our most important financial metrics. At March 31, 2019, we had a cash and investments balance of $110.6 million versus a balance of $124.6 million at December 31, 2018. Our cash used in operating activities during the first quarter of 2019 was $16.5 million, offset by $2.5 million of net proceeds from the use of our ATM. We believe our cash balance is sufficient to fund operations into 2020.

The only other area I would like to speak to 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. 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 if we feel such a transaction aligns with the product's potential.

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

Thanks, Dave. While we have today reported some delays, which are reporting to -- disappointing to me and our team, I want to reiterate our belief and our commitment to the belief that the most effective approach to developing a cure for HBV will require a combination regimen of complementary therapeutic agents administered for a finite treatment duration.

This thesis is now shared by many, and this is our focus. We believe having control over the discovery and development of effective compounds with complementary mechanism of action which can be used in combination is important. And to that end, we've developed a pipeline of therapeutic agents that target aspects of chronic HBV infection we believe are the most important and therefore the ones we are focused on, including HBV replication, S-antigen expression and immune reawakening.

We continue to believe that our 2 lead compounds, AB-506 and AB-729, have the potential to be used in combination with an approved nucleoside analog and deliver a meaningful advance over the current standard of care. That is our focus.

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

(Operator Instructions) And our first question comes from Keay Nakae with Chardan.

A question for Mike. Just on, I guess, the issues you're seeing with the tox study. So in terms of repeating that 3- and 6-months longer-term tox -- redoing those tox studies, what are you hoping to find that you're not already getting?

So as I mentioned, there are several aspects of the studies that we had completed that we were concerned about. One of that was that we saw a vehicle effect. There, we've decided to change the vehicle in the study to eliminate that concern. The other is we've see -- we have not seen a correlation with some of these histopathology with some of the other findings. And so we think changing the vehicle hopefully would help us sort out some of these issues as well. And there was a lack of a dose response with some of the findings. So we just feel it's imperative that we repeat this study to just either confirm or refute these findings and depending on the results will give us a path forward. We're also actually doing quite a number of other studies that will help inform us as well with regard to any of these findings. So that package of information we think is going to be very, very helpful to us in making our final decision.

In terms of the vehicle, since it was an orally available product, I mean are you just -- are you simply looking at using different excipients? Or what is there to really change there?

Yes. I mean what I can say is that the vehicle we used was really somewhat unusual. And so we feel that going to a more standard vehicle will -- is something we just have to do, right, to eliminate the concerns we had with the vehicle.

Okay, and then -- go ahead, sorry.

Just wanted -- so just to be clear, these vehicles are not -- are only used in animal studies. They are not used in humans.

Right. We have solid dosage formulations for human studies if we are able to move forward.

And then for 729, can you be a little more specific on what the regulatory agency's concern was with the tox package you gave them?

So Keay, I think one of the issues here is we just got this information Friday, okay? So we're trying to be as transparent as possible with you. And at the moment, I think we've communicated really what we know, that is, we believe, the package we submitted supports the initiation of the study in healthy volunteers, and the agency has asked for the longer-term ongoing studies. This does not suggest there is any safety issue with the drug. It's a regulatory issue that we need to work through.

So in terms of your ideas for accelerating the way you're able to conduct the trial, will you still look to move forward with the normal -- healthy volunteers and just wait for the patients with hepatitis B? Or how should we think about what that might look like at this point?

Yes. I think that's among the possibilities that we would consider, right? So there's a variety of ways that we could think about going forward. You just need to give us a little time to kind of sort through these so that we can -- we -- we'll have a clear answer for you.

(Operator Instructions) Our next question comes from Mayank Mamtani with B. Riley FBR.

Just one for me on 506. Could you talk a little bit about the 24 patients that you're dosing, some of the baseline characteristics around -- on, maybe, NUC exposure or genotype status? And then, second part to that question, what -- I know at the higher level, you talked about seeing some of the exposure -- some of the outcomes around cccDNA and maybe RNA response. Could you talk about like what your expectation about that readout in July would be?

Gaston, do you want to take that?

Sure. So we have 2 cohorts of subjects, HBV positive, all of them are -- most of them are treatment naive, but they are not on a nucleoside analog at the time that we are dosing AB-506 because we want to have a readout on HBV DNA decay. So these are a mix of e-antigen-positive and e-antigen-negative subjects. 10 of the subjects in each cohort are being dosed under 2 placebos. In terms of expectations as to the cccDNA and impact on the transcriptional activity of cccDNA, we're looking at exploring the decay of HBV RNA, which, as you know, is a surrogate or has been considered as a surrogate for transcriptional activity of cccDNA as well as other antigens like HBV-correlated antigen. I cannot speak to what we will see what comes out in the interim analysis, but we expect, as with other capsid assembly inhibitors, that we will be able to knock down HBV RNA as well as HB-correlated antigen.

Okay. And would you be able to comment -- just follow-up to that, the surface antigen response, what would be your expectation around that? Or would that be reserved maybe for the following study with NUC?

I mean, as you know, none of the currently available capsid model inhibitors in development have shown any significant dropping HBsAg whether it's in the presence or absence of a NUC. So we really are open to see what the data will show us. We cannot really speculate whether we're going to be different from others or not. But I would just say that let's wait until the data comes out in early July.

Okay. Great. And just 2 housekeeping on 729 and the destabilizer. On 729, just clarifying, is there the agency, could you disclose, which country -- because generally I mean a lot of these studies are being done in Asia Pacific. Is there maybe a cohort that you were planning to do in the -- in Canada or any of the western countries? And then on destabilizer, if you could just briefly comment what are your latest thoughts on how, based on what you would learn from the different parameters, you look at go/no go? And knowing the landscape, how do you expect to develop that, if you do intend to develop that, in 2020?

So let me address the regulatory agency. So we're not prepared to discuss exactly which regulatory agency we're interacting with. So we can't do that. Could you rephrase your question about 452 development?

Just your latest thoughts on how you intend to develop that, like which patient population or which combination? Is it going to be a quadruplet therapy? Is it going a triplet? Just your latest thoughts there.

So I think it's a little bit premature to go too far here. But I think I would let you -- I would say the following. We would develop 452 as an agent that's primarily designed to block surface antigen expression. So much like you're seeing us we do with other compounds here, we would first have to go into patients and establish safety in healthy volunteers and safety and efficacy as a monotherapy in patients, and then, we will know -- then we will consider rolling it into a combination.

I am not showing any further questions at this time. I would now like to turn the call back over to Mark Murray for any closing remarks.

Thank you, operator, and thank you all for joining us today. We'll keep you updated on our progress. Goodbye.

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