Vir Biotechnology, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This annual filing was signed February 28, 2022; it is not a stand-alone fourth-quarter report. Vir is a commercial-stage immunology company whose lead commercial product is sotrovimab (Xevudy), developed with GSK. Its other programs target HBV, influenza A and HIV.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $1,095.4 million | $76.4 million |
| Operating income (loss) | $420.8 million | $(297.0) million |
| Net income (loss) | $528.6 million | $(298.7) million |
| Operating cash flow | $(47.6) million | $(190.9) million |
- Revenue mix: $917.2 million of collaboration revenue, principally Vir’s 72.5% share of sotrovimab collaboration profits; $169.9 million of contract revenue, including $168.3 million recognized for a GSK license under the expanded collaboration; and $8.3 million of grant revenue. No sotrovimab collaboration revenue was recorded in 2020.
- Expenses: Cost of revenue was $65.9 million, research and development $448.0 million, and selling, general and administrative expense $160.8 million. The filing does not present a gross-margin percentage.
- Other income and unusual items: Net income included a $138.0 million unrealized gain from the remeasurement of Vir’s Brii Bio Parent equity investment. The company also recorded $91.8 million of noncash contingent-consideration revaluation expense. These items materially affect interpretation of reported earnings.
- Cash and investments: At year-end, Vir reported $347.8 million of cash and cash equivalents, $217.2 million of short-term investments and $201.4 million of long-term investments. Management cited $909.5 million of cash, cash equivalents and investments excluding restricted cash, or $766.4 million excluding its Brii Bio Parent equity investment.
- Working capital and debt: Current assets were $1.563 billion and current liabilities $341.2 million, implying working capital of approximately $1.222 billion. Vir reported no debt outstanding.
- Cash flow: Investing activities used $140.8 million and financing activities provided $100.3 million. Operating cash use remained significant despite net income, in large part because the sotrovimab collaboration receivable increased by $773.1 million.
Changes versus 2020
- Revenue rose by $1.019 billion, chiefly as sotrovimab sales generated collaboration profit-share revenue and the expanded GSK agreement contributed license revenue.
- R&D expense increased $145.6 million to $448.0 million, primarily from clinical-trial activity and higher personnel costs. SG&A increased $89.9 million to $160.8 million, including personnel, consulting and contingent-consideration expense.
- Net income of $528.6 million replaced a $298.7 million net loss. The swing reflects commercial and license revenue as well as the $138.0 million equity-investment gain; it should not be treated as a simple measure of recurring operating performance.
- Operating cash use improved from $190.9 million to $47.6 million, but large collaboration receivables meant cash generation lagged reported earnings.
Outlook, commentary and key risks
- Management outlook: Based on its operating plan, management said the $766.4 million of cash, cash equivalents and investments excluding the Brii investment at year-end should fund operations for at least 12 months. Vir cautioned that plans and funding needs may change.
- Sotrovimab expectations: Vir and GSK reported binding agreements for approximately 1.7 million doses worldwide. Based on agreements then in place, they expected approximately $1.1 billion of collaboration revenue when doses were delivered in the first half of 2022. This is a disclosed expectation, not formal full-year guidance. The partners planned to manufacture about two million doses in the first half of 2022, with additional supply targeted for the second half.
- Regulatory and variant risk: Sotrovimab had an FDA EUA and authorizations or marketing approvals in more than 40 countries, but no FDA BLA approval at filing. The FDA requested additional support for Vir’s position on activity against Omicron BA.2 and safety data for higher doses; Vir said it had supplied the requested information and was awaiting further correspondence. The clinical relevance of the reported 16-fold reduction in neutralization against BA.2 was stated to be unknown. Loss or restriction of the EUA, changing variants, competition from vaccines and oral antivirals, or weaker demand could materially affect sales.
- Partner, supply and commitments: GSK leads sotrovimab commercialization, and manufacturing depends on third parties. Vir disclosed approximately $188 million of estimated aggregate commitments to GSK under manufacturing arrangements as of December 31, 2021. Excess capacity, supply disruption or lower demand could leave Vir bearing costs without corresponding revenue.
- Pipeline and operating risks: Vir expects continued investment in clinical development and may continue to incur losses. Product candidates remain subject to clinical, regulatory, manufacturing, financing and commercialization uncertainty. Some HBV trial sites were in Ukraine and Moldova, and Vir was monitoring possible effects of the regional conflict.
- Contingencies: Vir had $95.0 million of Humabs milestone payments accrued at year-end; the filing says the $35.0 million regulatory milestone and $60.0 million sales milestone were paid in January and February 2022, respectively. Contractual lease payments totaled $185.4 million through 2033. The filing reported no material legal proceedings.
Investor verification checklist
- Confirm actual 2022 sotrovimab deliveries, recognized collaboration revenue and cash collection of the $773.1 million year-end receivable.
- Check the FDA’s subsequent decisions on the EUA, BA.2 activity, higher-dose safety information, intramuscular administration and the planned BLA.
- Separate recurring sotrovimab economics from the $168.3 million GSK license revenue, the $138.0 million unrealized Brii investment gain and contingent-consideration remeasurement.
- Review updates to manufacturing commitments, supply capacity, procurement contracts and demand as COVID-19 treatments and variants evolve.
- Track clinical data and timelines for HBV, influenza and HIV programs, along with cash use and any additional financing needs.
Audit and controls: Ernst & Young issued unqualified opinions on the consolidated financial statements and internal control over financial reporting as of December 31, 2021.