Vir Biotechnology, Inc. quarterly report, Q1 FY2021

Vir Biotechnology, Inc. — Q1 2021 Form 10-Q

Reporting period: Three months ended March 31, 2021. Vir is a clinical-stage immunology company developing therapies for infectious diseases, including COVID-19, hepatitis B (HBV), influenza A and HIV. It had no approved products and generated no product-sales revenue.

Financial performance and position

Metric	Q1 2021	Q1 2020
Total revenue	$2.0 million	$5.7 million
Research and development expense	$134.9 million	$65.0 million
General and administrative expense	$25.7 million	$12.6 million
Operating loss	$158.6 million	$71.9 million
Net loss	$168.9 million	$77.2 million
Basic and diluted loss per share	$1.32	$0.71
Cash used in operating activities	$89.5 million	$48.4 million

• Revenue fell 65%, mainly due to timing of research activities under Gates Foundation HIV and TB grants. Revenue comprised grant revenue of $1.4 million and contract revenue of $0.6 million.
• R&D expense more than doubled, driven by clinical trials, manufacturing and collaboration costs, personnel, and a higher fair value estimate for Humabs contingent consideration. G&A also approximately doubled, largely from additional personnel and professional fees.
• Cash, cash equivalents and short-term investments, excluding restricted cash, totaled $733.0 million at March 31; restricted cash was $15.6 million. Total assets were $1.14 billion. The company reported no debt outstanding.
• Operating cash use was partly offset by noncash charges, including $44.5 million from remeasurement of contingent consideration and $15.5 million of stock-based compensation. Investing cash inflow of $87.5 million primarily reflected investment maturities; financing cash inflow of $87.5 million primarily reflected GSK-related stock proceeds.
• Current liabilities were $361.1 million, including $262.9 million of current deferred revenue. Stockholders’ equity was $651.0 million, down from $716.9 million at year-end. Shares outstanding were 129.9 million at quarter-end.

Material changes and significant developments

• On March 31, Vir issued 1.925 million shares to a GSK affiliate for approximately $120 million. The reported fair value of the shares was $85.2 million; the $34.8 million premium was attributed to the expanded collaboration.
• The expanded GSK agreement provides for a $225 million upfront fee, plus the equity investment, for influenza and other respiratory-virus programs. At quarter-end, $112.5 million of the upfront fee was recorded as a receivable and subsequently received in April; the other $112.5 million was conditional on execution of a definitive agreement. The filing recorded $259.8 million of current deferred revenue for the transaction price, including the equity premium. The definitive agreement’s detailed terms were still being negotiated.
• R&D expense included $18.5 million of costs under the 2020 GSK collaboration. Vir reported a $13.6 million payable to GSK at quarter-end.
• Contingent consideration was $70.4 million at March 31, versus $36.0 million at year-end. Vir recorded a $10 million TomegaVax milestone payable after a share-price milestone was achieved; the Humabs contingent consideration fair value rose to $63.3 million from $29.2 million.

Outlook, management commentary and risks

• Management said available cash, cash equivalents and short-term investments were expected to fund operations for at least 12 months from issuance of the financial statements. Vir nevertheless expects continued substantial losses, rising R&D spending and a need for additional capital to develop and commercialize its candidates.
• For VIR-7831, an interim COMET-ICE analysis in 583 high-risk patients showed an 85% reduction in hospitalization or death versus placebo (p=0.002); the monitoring committee recommended stopping enrollment for efficacy. The trial remained ongoing and blinded, with further follow-up pending. Vir had submitted an FDA Emergency Use Authorization request; a BLA submission was planned for the second half of 2021.
• The VIR-7831 ACTIV-3 arm was closed to enrollment following an independent monitoring recommendation based on available analyses; the filing reported no safety signals. Vir also planned further trials of intramuscular VIR-7831, with COMET-PEAK data expected in the second half of 2021.
• Other pipeline updates included VIR-2218 in Phase 2 for HBV, VIR-3434 in Phase 1, VIR-2482 in Phase 1/2 for influenza A, and first patient dosing of VIR-7832 in a Phase 1b/2a trial in April. These are investigational candidates, and results and regulatory outcomes remain uncertain.
• Vir cited COVID-19-related risks to trial timelines, enrollment and supply chains, as well as competition, changing demand as vaccines and variants evolve, and dependence on third-party manufacturers. Estimated commitments to GSK under manufacturing agreements with Samsung and WuXi were approximately $362 million at March 31, excluding a conditional Biogen access fee; excess capacity could also impose costs if demand is insufficient.
• Other key risks include clinical failure or delays, regulatory uncertainty, reliance on collaborators and contract manufacturers, future financing and potential dilution, contingent milestone obligations, and volatile share price. No material legal proceedings were reported. Management said disclosure controls were effective and reported no material first-quarter change in internal control over financial reporting.

Important facts for investors to verify

• Final COMET-ICE results and regulatory decisions on the VIR-7831 EUA request, including the timing and content of any planned BLA filing.
• Execution and final terms of the GSK definitive collaboration agreement, receipt of the remaining $112.5 million upfront payment, and the accounting and funding implications of the expanded programs.
• Clinical progress and data for VIR-7831, VIR-7832, VIR-2218, VIR-3434, VIR-2482 and VIR-1111, including any changes to trial timelines or safety findings.
• Manufacturing commitments and capacity utilization, especially the approximately $362 million GSK-related commitments, alongside COVID-19 product demand and supply-chain developments.
• Cash burn, deferred revenue recognition, contingent consideration revaluations and milestone payments, and any subsequent financing or share dilution.