Vir Biotechnology, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited consolidated financial statements; amounts below are U.S. dollars unless stated otherwise. Vir is an immunology-focused biotechnology company developing therapies and vaccines for infectious diseases.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $3.8 million | $(40.6) million | $66.8 million | $1,191.8 million |
| Operating expenses | $219.0 million | $184.6 million | $425.3 million | $403.2 million |
| Operating loss | $(215.2) million | $(225.2) million | $(358.6) million | Operating income $788.6 million |
| Net income (loss) | $(194.8) million | $(76.5) million | $(335.7) million | $442.1 million |
| Basic and diluted EPS | $(1.45) | $(0.58) | $(2.51) | $3.34 basic; $3.28 diluted |
- Q2 2023 collaboration revenue was negative $13.8 million: a negative $8.4 million sotrovimab profit-sharing amount and a $5.4 million constraint for expected allowable manufacturing expenses. Revenue also included $16.5 million in grant revenue, primarily BARDA funding.
- For the first half, collaboration revenue was $32.8 million, including a $34.0 million release of a previously constrained profit-sharing amount, partly offset by a negative $1.2 million profit-sharing amount. The comparable 2022 period included $1.175 billion of collaboration revenue, principally from sotrovimab.
- Q2 R&D expense increased 49% to $171.9 million; first-half R&D expense rose to $329.5 million from $205.3 million. Higher clinical and manufacturing costs, including VIR-2482 activity, were principal drivers. SG&A was $47.1 million in Q2 and $93.9 million for the half-year.
- Interest income was $23.0 million in Q2 and $44.3 million for the first half, up substantially year over year as interest rates and investment balances increased. First-half fair-value losses on the Brii Bio Parent equity investment were $18.2 million, compared with $106.4 million in 2022.
- At June 30, cash and cash equivalents were $666.9 million; short- and long-term investments were $1.219 billion. The company described cash, cash equivalents and investments of approximately $1.9 billion. Current assets were $1.946 billion and current liabilities $225.6 million. Vir reported no debt outstanding.
- First-half operating cash flow was $(515.0) million, versus $1.510 billion provided in 2022. Investing activities provided $328.4 million, mainly from investment maturities; financing activities provided $5.5 million. Cash, cash equivalents and restricted cash decreased $181.1 million to $686.9 million.
Material changes and significant items
- Revenue and earnings fell sharply against first-half 2022, when sotrovimab-related collaboration revenue drove substantial profit. In 2023, Vir recorded a first-half net loss and significant operating cash use.
- Vir paid GSK $273.6 million in June, primarily for its share of excess sotrovimab supply write-offs and unused reserved manufacturing capacity. Accrued and other liabilities declined to $197.6 million from $489.1 million at year-end, largely reflecting settlement of profit-sharing-related amounts.
- On February 8, 2023, amendments to the GSK collaboration removed the vaccine program and narrowed the antibody program, while Vir retained specified rights to pursue removed programs independently subject to royalties.
- Vir increased its ownership of oncology-focused subsidiary Encentrio to 100% during Q2. It recorded $6.9 million of in-process R&D impairment and $5.4 million of long-lived asset impairment during the first half.
Outlook, risks and contingencies
- Management said existing cash, cash equivalents and investments were expected to fund operations for at least 12 months from the financial-statement issuance date. Vir expects continuing losses and anticipates R&D expense will rise substantially as programs advance; SG&A is also expected to increase. The company may need additional capital, and its operating plan and funding needs may change.
- After quarter-end, Vir announced that the Phase 2 PENINSULA trial of influenza candidate VIR-2482 did not meet its primary or secondary efficacy endpoints. The filing reports up to approximately $36 million of unpaid, noncancellable VIR-2482 manufacturing commitments at June 30. Vir said it was analyzing the trial data and planned to share additional findings.
- HBV studies of VIR-2218 and VIR-3434 and the Phase 2 HDV SOLSTICE trial were reported on track, with initial data expected in Q4 2023. Initial data from the PREVAIL HBV platform trial were expected in the first half of 2024. Vir expected the Phase 1 VIR-1388 HIV vaccine trial to begin dosing in Q3 2023.
- Sotrovimab was not authorized for use in any U.S. region at filing, and Vir and GSK did not plan to file a U.S. BLA at that time. Its use remained subject to limitations outside the U.S.; future sales and reauthorization were uncertain. Vir cautioned that future GSK manufacturing-cost adjustments could affect collaboration revenue.
- BARDA may provide up to an estimated $1.0 billion under an agreement to advance influenza and potentially other infectious-disease solutions. The initial period included approximately $55 million of funding; $2.5 million of potential reimbursement remained available for that base period at June 30. Further funding depends on BARDA exercising options and other agreement terms.
- Other risks include clinical and regulatory failure, reliance on collaborators and third-party manufacturers, competition, uncertain product demand, and potential need for additional funding. The company reported no material legal proceedings and no off-balance-sheet arrangements. It had no significant credit losses on available-for-sale debt securities in the periods presented.
Most important facts for investors to verify
- Final PENINSULA trial results, the program’s future and the financial impact of the VIR-2482 manufacturing commitments.
- Subsequent GSK reports of sotrovimab allowable expenses, any further profit-share constraints or releases, and related payments.
- Whether the stated cash runway remains valid as clinical spending and operating plans evolve, and whether additional capital will be needed.
- Timing and results of the planned HBV and HDV data readouts and the expected start of the VIR-1388 trial.
- BARDA option exercises and actual reimbursement received, rather than the agreement’s potential maximum funding.
- The company’s revenue-recognition estimates for collaboration profit sharing, including the effects of excess supply and unused manufacturing capacity.