Vir Biotechnology, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also presents unaudited fourth-quarter results. Vir is a clinical-stage infectious-disease company; it had no approved products and generated no product-sales revenue.
Financial performance and liquidity
- FY 2020 revenue: $76.4 million, versus $8.1 million in 2019. Revenue consisted of $9.1 million in grants, $22.7 million in related-party license revenue, and $44.5 million in contract revenue. The increase primarily reflected collaboration/license arrangements, including the GSK collaboration and Brii Bio’s VIR-2218 option exercise.
- FY 2020 net loss: $298.7 million, versus $174.7 million in 2019; loss per share was $2.51, versus $5.76. The larger net loss in dollars reflects significantly higher spending despite increased collaboration revenue. Operating expenses were $373.3 million, including $302.4 million of R&D and $70.9 million of G&A.
- Margins: Product gross margin is not applicable because Vir had no product sales. Revenue remained far below operating expenses.
- Fourth quarter: Revenue was $1.7 million and net loss was $105.6 million, compared with $1.0 million and $63.8 million, respectively, in Q4 2019. Q4 2020 operating expenses were $110.1 million versus $64.7 million a year earlier.
- Cash flow: Operating activities used $190.9 million in 2020, compared with $129.6 million in 2019. Investing activities used $9.9 million; financing activities provided $529.5 million, chiefly from the follow-on stock offering and GSK share issuance.
- Liquidity: Cash, cash equivalents and short-term investments totaled $736.9 million at year-end, versus $383.4 million in 2019; working capital was $673.3 million. Management expected available funds to support the current operating plan for at least 12 months from the financial-statement issuance date, while stating additional capital would be needed to complete development and commercialization.
- Debt and commitments: The company reported no debt outstanding. Contractual operating and financing lease obligations totaled $114.5 million. Separate COVID-19 manufacturing commitments under the Samsung and WuXi arrangements were estimated at approximately $370 million as of year-end, excluding a potential Biogen access fee; Vir bears 72.5% of applicable costs under the GSK cost-sharing arrangement.
Business context and material developments
Vir’s pipeline targets COVID-19, hepatitis B (HBV), influenza A and HIV, using antibody, T-cell, innate-immunity and siRNA platforms. In 2020 it rapidly advanced SARS-CoV-2 antibody development with GSK, while continuing HBV, influenza and HIV programs.
- COVID-19: VIR-7831 advanced to Phase 3 trials for high-risk outpatients and hospitalized patients; results were expected in Q1 2021. Further trials and a VIR-7832 study were planned or initiated in early 2021. Potential EUA or approval depended on clinical results and regulatory review.
- HBV: VIR-2218 was in Phase 2; reported data showed dose-dependent HBsAg reductions, generally maintained at higher doses for at least nine months. VIR-3434 was in Phase 1; preliminary data from a small cohort reported HBsAg reductions in responders. Combination studies were underway or planned.
- Influenza and HIV: VIR-2482 remained in Phase 1/2, with its Phase 2 trial delayed by COVID-19 and planned for Q4 2021. VIR-1111, a proof-of-concept HIV vaccine, entered Phase 1 in December 2020; further development would require modifications.
- Capital raised: Vir issued shares to a GSK affiliate for approximately $250 million gross in April 2020 and raised approximately $323.2 million net in a July follow-on offering. A $300 million at-the-market facility was available, but no shares had been sold under it by year-end.
Outlook, risks and unusual items
- Management expected R&D and G&A costs and operating losses to rise as programs advanced, trials expanded and the company prepared for possible commercialization. No product-revenue or profitability guidance was provided.
- On February 14, 2021, after year-end, Vir and GSK signed a binding preliminary agreement to expand collaboration into influenza, respiratory-virus functional genomics and up to three additional pathogens. It contemplated a $225 million upfront payment, subject to agreement terms and conditions; a separate approximately $120 million GSK-affiliate stock purchase was also conditional. GSK could pay a $300 million option fee for VIR-2482 and up to $200 million upon a specified regulatory milestone. These were prospective, conditional amounts, not 2020 revenue or cash.
- Key risks include clinical failure or delay, uncertain regulatory pathways and COVID-19 demand, competition, reliance on third-party manufacturers and trial operators, and substantial capital needs. The large manufacturing commitments and dependence on manufacturing yields could pressure liquidity if programs or demand change.
- COVID-19 disrupted operations and delayed the VIR-2482 Phase 2 trial. The company also warned that pandemic-related restrictions could affect staffing, clinical enrollment, suppliers and access to capital.
- Unusual accounting items included $38.4 million of noncash expense from remeasuring Humabs contingent consideration and $16.8 million of noncash expense from the Alnylam derivative liability. The company also recorded $0.8 million of intangible-asset impairment. The GSK collaboration and related stock issuance produced $43.3 million of recognized license revenue; Brii Bio’s option exercise produced $22.7 million of license revenue.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The filing identifies fair-value measurement of Humabs contingent consideration and accounting for the GSK agreement and stock purchase as critical audit matters.
Most important facts for investors to verify
- Results and regulatory status of VIR-7831 trials, including whether any EUA or approval was obtained and the implications for the GSK collaboration.
- Cash burn, remaining runway and the company’s share of committed manufacturing costs, including any Biogen access fee and future capacity requirements.
- Whether the 2021 expanded GSK collaboration and related stock purchase closed, and the definitive terms, payment timing and VIR-2482 option conditions.
- Durability, safety and clinical significance of early HBV results, and the outcomes and timelines of combination trials.
- How much reported revenue is collaboration-, license- or grant-related, and whether such revenue is recurring; Vir had no product sales in 2020.