Arbutus Biopharma Corp (ABUS) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Arbutus Biopharma Corporation Fourth Quarter and Year-end 2019 Financial Results and Corporate Update Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your speaker, Ms. Pam Murphy. Please go ahead.

Good morning. On the call from the Arbutus Executive team are: Bill Collier, President and Chief Executive Officer; Dave Hastings, Chief Financial Officer; Dr. Gaston Picchio, Chief Development Officer; and Dr. Mike Sofia, Chief Scientific Officer. Bill will begin with a review of corporate objectives and clinical development, followed by Dave Hastings who will provide a summary of the company's fourth quarter and year-end financial results. We'll then open up the call for Q&A. Mike and Gaston will be available to address research and clinical development-related questions.

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 expectations for Arbutus's proprietary HBV pipeline, including potential clinical results and time lines for AB-729 and AB-836 and future compounds, our 2020 objectives, our expected cash use and cash runway and the potential for our drug candidate to improve upon the standard of care and contribute to a curative combination regimen for HBV. 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, quarterly report on Form 10-Q and other periodic reports filed with the SEC. Bill?

Thanks, Pam, and thank you, everyone, on the line for joining us today. We really appreciate your interest in Arbutus Biopharma. We also know that this is a really busy time for many of you, so we're going to keep this call pretty focused and succinct.

I do believe, however, it's worth reminding ourselves that hepatitis B remains a significant unmet medical need, with over 257 million people chronically infected worldwide, including over 2 million here in the United States. And over 900,000 people die worldwide each year despite the availability of vaccines and antivirals. Also, it's worth remembering that existing antivirals have very low cure rates, less than 5%. So it's actually our belief that a hepatitis B curative regimen would substantially increase diagnosis rates and treatment rates and unlock significant market growth opportunities.

At Arbutus, our goal is to focus exclusively on developing a portfolio of products with different mechanisms of actions that when used in combination could result in a functional cure. We have a talented and experienced team focused on this goal as evidenced by our 2020 objectives, which include the following: firstly, completing the Phase Ia/Ib clinical trial of AB-729, our proprietary GalNAc-delivered RNAi compound; secondly, progressing our next-generation capsid inhibitor, AB-836 through IND-enabling studies; and thirdly, advancing our research efforts for a next-generation oral HBV-specific RNA destabilizer and a lead oral compound that inhibits PD-L1. So let me briefly summarize each of these programs for you.

First of all, AB-729. 729 is an RNA interference therapeutic targeted to hepatocytes using our novel covalently conjugated GalNAc delivery technology that enables subcutaneous delivery. In preclinical models, 729 inhibits viral replication and reduces all HBV antigens, including hepatitis B surface antigen. Reducing s antigen is thought to be a key prerequisite to enable reawakening of a patient's immune system to respond to the virus. Now we're currently conducting a single and multiple dose Phase Ia/Ib clinical trial for 729 to determine the safety, tolerability, pharmacokinetics and pharmacodynamics in healthy volunteers and in subjects with chronic hepatitis B.

Preliminary safety data in single-dose cohorts of healthy volunteers and safety and efficacy data in single-dose cohorts of subjects with hepatitis B are expected later this month. Additionally, single-dose data and preliminary multi-dose data are expected in the second half of 2020.

Let me turn to AB-836. 836 is an oral HBV capsid inhibitor. HBV core protein assembles into a capsid structure, which is required for viral replication. The current standard of care for therapy for HBV, primarily nucleoside analogues, work by inhibiting the viral polymerase, significantly reducing virus replication, but not completely.

Capsid inhibitors inhibit viral replication by preventing the assembly of functional viral capsids. They've also been shown to inhibit the uncoating step of the viral life cycle, thus reducing the formation of new covalently closed circular DNA. That's the viral reservoir which resides in the cell nucleus.

Now in January this year, we selected 836 as our next-generation oral capsid inhibitor. 836 is a novel chemical series differentiated from our previously discontinued capsid inhibitor candidate, AB-506, and also from other competitive compounds in the capsid inhibitor space. We believe 836 has the potential for increased potency and an enhanced resistance profile compared to 506. And we anticipate completing IND-enabling studies by the end of 2020. Now for a few comments on our early R&D programs.

As you know, we recently stopped development of our RNA destabilizer, 452. However, we are continuing to focus our efforts on discovering follow-on RNA destabilizer compounds for our current HBV pipeline, including the development of oral destabilizers that have shown compelling antiviral effects in multiple HBV preclinical models. Arbutus is now focused on advancing a next-generation oral HBV-specific RNA destabilizer with chemical scaffolds distinct from 452 through lead optimization. We also have compounds in lead optimization that are potentially capable of reawakening patients' HBV-specific immune response by inhibiting PD-L1.

I'll now turn the call over to Dave Hastings, our CFO, for his summary of our most recent financial results.

Thanks, Bill, and good morning, everybody. I'll be brief this morning, as we've previously disclosed our key financial metrics in early January of this year.

Our ending cash was approximately $91 million as of December 31, 2019. Our cash used from operations for 2019 was $71 million, which was on the lower end of our guidance of $70 million to $75 million, this despite the fact that our cash use in 2019 included a payment of $5.9 million for the arbitration with the University of British Columbia and a $2.3 million severance payment to our former CEO.

Our use of cash in 2019 was partially offset by $18.5 million in net proceeds from the sale of a portion of a royalty entitlement on net sales of ONPATTRO and $18.6 million of net proceeds from the issuance of shares under our ATM program. Now notably, we have $12.3 million of additional net proceeds from our ATM program so far in the first quarter of this year.

For 2020, we expect our cash use to range from $54 million to $58 million, and therefore, we expect our cash runway is sufficient to fund operations into mid-2021.

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

Thanks very much, Dave. And operator, Sherry, perhaps we could open up the lines now for a question-and-answer session.

(Operator Instructions) Our first question comes from Mayank Mamtani from B. Riley.

My best wishes for a busy 2020 for you. So maybe starting with AB-729. Could you comment on -- I know it's single dose we're talking about, but could you maybe comment on the baseline characteristics of these patients? Maybe are they treatment naïve? Are they not experienced? And then I have a follow-up.

Okay. Gaston, perhaps you'd like to answer that question?

Sure. So the patients that we are enrolling in our Phase Ia/Ib AB-729 study have the following characteristics: they are chronic hepatitis B subjects who have no cirrhosis, so we are including METAVIR scores F0 to F2. They have ALT levels up to less than 5x upper limit normal. There is a mixture of -- we're allowing both e-antigen positive and e-antigen negative. And in the first cohorts that we're testing, we're including only subjects who are on a stable nucleoside therapy with undetectable HBV DNA for at least 6 months before we start dosing with AB-729.

And the follow-up, Mayank?

Yes. And how does this inform the patients you plan to enroll in the MAD section which would be in follow-up to that?

Well, so basically, what we are doing right now is single doses. And based on the efficacy and safety of the single doses, that will inform our next steps in terms of what dose we will move forward in multi dosing as well as the frequency of dosing that we will select.

Okay. And then on the oral capsid, it seems like the time line for this was pretty quick for you to identify a follow-on. Maybe could you talk to what work happened in order to identify this and why were you able to move so quickly after experiencing a little bit of a setback last year?

Sure. This is Mike Sofia. Well, our strategy has always been that we continue to develop follow-on agents in parallel with the work that we're doing in the clinic. So the idea here is to continue to innovate in that particular space that we're focused in. And so with the capsid program, AB-836 and related molecules, we're already very far along in our preclinical programs, such that we were able to then introduce 836, nominate that compound pretty quickly post the 506 stoppage.

Okay. I guess last question, what are you looking at the -- from an external landscape standpoint? As you know, there are other drugs in these different classes that could help inform what a combination and what your development could be like to that goal that was talked about the functional cure towards the end of this.

Well, I mean -- and it's Mike again. Look, our position has always been that you need to do a couple of things to actually achieve a functional cure, as defined by AASLD and EASL guidelines. And that is you need to stop viral replication and reduce HBV DNA levels to undetectable. You have to address the s antigen question since we believe and I think it's well-established that s antigen is playing a critical role in the host immune response control that this virus has. So you need to now drop s antigen levels to enable the host immune system to ultimately reengage. And then, to make a more broad-based therapy, we ultimately believe, in coupling with s antigen drop, the addition of an immune modulatory agent may be critical to achieving that broad-based cure. So those are the things that we believe, and I think the data that continue to be developed in HBV space supports that strategy, and our portfolio is built around that.

Our next question comes from Keay Nakae with Chardan.

A question for Mike. Of your preclinical data for 729, what would you point investors to as perhaps being most informative as we try to handicap what the single-dose data might look like?

Well, I think if you go look at the in vivo studies that we did in AAV mouse model, in that study, what you see are several things. One, that you get a nice dose dependent, deep drop in HBV s antigen levels, and it's persistent post a single dose of the agent. So it looks like at least a once-monthly dosing, potentially longer, if, in fact, the preclinical data holds into clinic. You'll also see that, in fact, you can add a repeat dosing, so every 4 weeks, and you still get a precipitous additive drop in HBV s antigen levels. So this all sort of projects into the clinic where we believe that we're going to be very competitive with other agents that are out there and have an ability to drop s antigen in a sustained way.

Okay. Great. And Bill, one of your competitors, Dicerna, has -- on a couple of occasions, post their collaboration with Roche, has said that for their RNAi for hepatitis B, has stated that they had multiple suitors looking at that asset. I mean what is your view of the landscape there going forward?

Yes. Good question. So I mean I think one of the points to underline here is that Arbutus, our aim and our ambition is to develop a portfolio of medicines, as we've described, with different mechanisms of actions. So yes, there is an intent for us to move these molecules through on our own.

However, we've also said that we're not ignoring potential partnerships. And yes, we do talk to other institutions and organizations. So we don't rule that out. I think our general view is if it's going to help assist and speed the development of our molecules, that obviously is going to be good for patients and good for shareholders. So that's our general approach.

Dave, I don't know if you want to add anything else to that.

No. I mean I would just say, obviously, any collaboration, discussions we would want to approach from a position of strength. I think we're in that position. We have -- we're well capitalized and we have an interesting portfolio.

(Operator Instructions) Our next question comes from Madhu Kumar with Baird.

So I guess, the first one we have is thinking about this single-dose 729 data coming out later this month, what is the effect on surface antigen that would make you feel really enthusiastic for the way forward for this drug? Yes, sort of. What would be a reasonable (inaudible) surface antigen where you would feel quite positive for 729 and the RNAi hep B-linked data?

Okay. Gaston?

So in terms of establishing success with the 729 data, let me just point out to the data that's out there. Unfortunately, there is no single-dose data that we can directly compare to, but the -- if you look at the data from the Arrowhead-Johnson program as well as the Vir program, it appears that looking at around day 29, the mean surface antigen drops were around, and this is a visual -- what I'm going to refer to is just a visual assessment because there is no formal data provided at day 29 or week 4. It appears to be around 0.4 to 0.5 logs drop from baseline. So taking that as a reference, we think that anything in that ballpark or above will be considered successful.

Okay. Great. And then kind of stepping back into the earlier-stage programs, you make a point of developing oral drugs, both a RNA destabilizer for hepatitis B and a PD-L1 inhibitor. I mean, I guess a natural question I'm registering, you're developing an RNAi drug for the hepatitis B viral transcripts, have you thought about the development of an RNAi compound to target both host factors that could affect on HBV RNA stability or PD-L1?

Well, yes, we thought about that. We believe that the oral strategy here has some advantages over an RNAi strategy, particularly for a host factor. If you have an RNAi strategy, you're going to be knocking down the production of that protein for a very extended period of time. It's unlike in a viral factor that you knock down, which is a viral target that doesn't have direct impact on the host.

So what we're very interested in doing, for example, in PD-L1 is being able to control the PK/PD relationship with an oral agent that helps us circumvent any potential, let's say, safety issues that may arise because we do know, in antibody-based PD-1 and PD-L1 agents that you do have some adverse events associated with that, that we don't feel will be compatible with an HBV therapeutic area. So in that regard, we think the small molecule provides us with ability to modulate any issues that may arise with regard to non-desirable effects.

Speakers, I'm showing no further questions in the queue at this time. I would now like to turn the call back over to management for any further remarks.

Okay. Well, look, thank you very much for dialing in this morning. We really appreciate that you could join us. And we look forward to seeing some of you in EASL in London perhaps and also to updating you as we report our preliminary results from the Phase I study of AB-729 later this month. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.