Vir Biotechnology, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Financial amounts below are in millions of U.S. dollars unless stated otherwise. Vir is a clinical-stage immunology company developing treatments and vaccines for infectious diseases. Sotrovimab received U.S. emergency use authorization (EUA) in May 2021.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $177.1 | $67.0 | $179.1 | $72.7 |
| Operating income (loss) | $61.0 | $(29.1) | $(97.6) | $(101.0) |
| Net income (loss) | $61.8 | $(31.2) | $(107.1) | $(108.4) |
| Operating cash flow | Not provided by quarter | Not provided by quarter | $50.5 | $(59.0) |
- Q2 contract revenue was $168.7 million, including $168.3 million recognized when Vir granted GSK a license under its 2021 expanded collaboration. Q2 collaboration revenue was $5.3 million, reflecting Vir’s share of sotrovimab profits. H1 grant revenue was $4.5 million; no related-party license revenue was recognized in 2021.
- Q2 2021 operating margin was approximately 34% (operating income divided by revenue), but results were significantly affected by the one-time license revenue. The filing does not present a gross-margin measure.
- H1 R&D expense rose to $221.0 million from $144.6 million; SG&A increased to $54.5 million from $29.0 million. Higher clinical and personnel costs were key drivers. H1 net loss remained substantial despite increased revenue.
- At June 30, Vir had $742.0 million in cash and equivalents, $134.8 million in short- and long-term investments, and $876.7 million in cash, equivalents and investments excluding restricted cash. Total current assets were $862.3 million and current liabilities $146.0 million.
- Vir reported no debt outstanding. Operating lease liabilities totaled $72.5 million. Stockholders’ equity was $737.3 million; common shares outstanding were 130.5 million at June 30.
- H1 operating cash flow was positive largely because deferred revenue increased $90.5 million, including the GSK upfront payment; it does not represent sustained operating profitability. Cash, cash equivalents and restricted cash increased $304.5 million during H1.
Material changes and notable items
- Revenue increased year over year, primarily due to the 2021 GSK license revenue and initial sotrovimab profit share. Comparisons also reflect prior-year one-offs: $43.3 million of GSK license revenue and $22.7 million of Brii Bio license revenue were recognized in 2020.
- The 2021 GSK agreement provides a $225.0 million upfront payment and included a $120.0 million equity investment. The combined transaction price for accounting purposes was $259.8 million, including a $34.8 million premium on the share purchase. After $168.3 million of license revenue recognition, $91.5 million remained deferred at June 30.
- Vir recorded $42.9 million of noncash contingent-consideration revaluation adjustments in H1. The Humabs contingent-consideration fair value was $62.5 million at June 30, versus $29.2 million at year-end 2020; estimates depend on clinical, regulatory and commercial milestone assumptions.
- In July, Alnylam elected to discontinue development of the COVID-19 siRNA target, and related rights reverted to Alnylam. Also in July, Vir paid a $10.0 million TomegaVax milestone, partly in cash and partly in shares.
Outlook, risks and management commentary
- Management believes available cash, equivalents and investments will fund operations for at least 12 months from issuance of the financial statements. Vir nevertheless expects substantial losses and rising R&D and SG&A costs for the foreseeable future and says it will need additional capital to complete development and commercialization plans.
- Management expected to submit a sotrovimab BLA to the FDA in the second half of 2021. Sotrovimab’s EUA and future revenue remain subject to regulatory, demand, reimbursement, competition, variant, supply and manufacturing risks. The EUA could be revoked, including if the public health emergency ends.
- Management reported positive confirmatory Phase 3 COMET-ICE results: a 79% adjusted relative risk reduction in hospitalization for more than 24 hours or death by Day 29 versus placebo. Additional sotrovimab trial data were expected in the second half of 2021; the company also described ongoing HBV and HIV programs and anticipated clinical data.
- Vir cited approximately $365 million in estimated aggregate commitments to GSK under manufacturing services agreements as of June 30, excluding a potential Biogen access fee. Insufficient demand, delays or unused capacity could leave Vir responsible for significant costs.
- Key risks include clinical-trial failure or delay, dependence on collaborators and third-party manufacturers, uncertain commercial demand for COVID-19 therapies, competition and variants, additional financing needs, contingent milestone obligations, and COVID-19-related operational disruption. The company reported no material legal proceedings and said disclosure controls were effective.
Important facts for investors to verify
- Whether sotrovimab sales, procurement commitments and Vir’s contractual profit share produce material, continuing cash generation beyond the initial quarter.
- Progress and timing of the FDA BLA and other regulatory authorizations, including any changes in EUA status or activity against emerging variants.
- How the $91.5 million of deferred GSK consideration is recognized, and the costs, opt-out provisions and profit-sharing terms of the expanded collaboration.
- Whether manufacturing capacity and the disclosed commitments are aligned with actual demand, and whether supply constraints or unused-capacity costs arise.
- Future cash burn and financing needs, along with movements in contingent consideration, milestone payments and share dilution.