Vir Biotechnology, Inc. quarterly report, Q1 FY2022

Vir Biotechnology, Inc. — Q1 2022 Form 10-Q

Reporting period: Three months ended March 31, 2022. Unaudited results are consolidated. Vir is a commercial-stage immunology company whose near-term revenue depended on sotrovimab, developed with GSK; its broader pipeline targets COVID-19, HBV, HDV, influenza and HIV.

Financial performance and position

Metric	Q1 2022	Q1 2021
Total revenue	$1,232.5 million	$2.0 million
Collaboration revenue	$1,229.7 million	—
Operating income (loss)	$1,013.8 million	$(158.6) million
Net income (loss)	$518.6 million	$(168.9) million
Diluted EPS	$3.85	$(1.32)
Operating cash flow	$550.1 million	$(89.5) million

Q1 2022 gross profit was approximately $1,142.3 million, or a 92.7% gross margin, based on reported revenue less $90.1 million cost of revenue. Operating margin was approximately 82.3%. These unusually high margins reflect sotrovimab collaboration revenue and should not be assumed to recur.
Net income included a $95.0 million unrealized loss on Vir’s Brii Bio Parent equity investment. Income tax provision was $403.3 million; the effective tax rate was 43.7%, versus (0.1)% in Q1 2021.
At March 31, cash and cash equivalents were $812.4 million; short- and long-term investments totaled $503.4 million. Including the $47.9 million Brii Bio Parent equity investment, Vir reported $1.4 billion in cash, cash equivalents, investments and that equity holding, excluding restricted cash; excluding the equity investment, it reported $1.3 billion.
Collaboration receivable was $1.223 billion, up from $773.1 million at year-end 2021. Current liabilities were $702.4 million and total liabilities $886.1 million. Vir reported no debt outstanding. Cash, cash equivalents and restricted cash totaled $835.8 million.
Operating cash flow included substantial working-capital timing effects, notably a $450.1 million increase in collaboration receivable offset largely by a $433.6 million increase in accrued and other liabilities. Investing cash outflow was $105.4 million, including $89.6 million of investment purchases and $15.8 million of property and equipment purchases.
Vir’s current ratio was approximately 3.7, though current assets include the large collaboration receivable. Shares outstanding were 132.4 million at quarter-end; 132.4 million were reported as outstanding on May 2, 2022.

Material changes versus Q1 2021

Revenue rose by $1,230.5 million, chiefly because Vir recognized its share of sotrovimab profits under its GSK collaboration. Vir reports a 72.5% contractual share, calculated on GSK net sales after specified costs and adjustments. Approximately 900,000 doses were delivered in Q1 2022, including 600,000 to the U.S. government.
Net income improved by $687.5 million, from a loss to a profit. The result also reflects $95.0 million of investment fair-value loss and a much larger tax provision.
Cost of revenue increased to $90.1 million, primarily royalties owed to Xencor on sotrovimab sales. R&D expense declined $44.6 million to $90.2 million, mainly because of lower collaboration and contingent-consideration expenses and lower clinical costs; SG&A increased $12.5 million to $38.3 million.
Cash increased materially from year-end, but the earnings-to-cash relationship and timing of collaborator collections, accrued liabilities and milestone payments are important to interpret. Vir paid $95.0 million of sotrovimab-related Humabs milestones in January and February 2022.

Outlook, commentary and key risks

Management said $1.3 billion of cash, cash equivalents and investments, excluding the Brii Bio Parent equity investment, was expected to fund operations for at least 12 months from the financial-statement issuance date. Vir cautioned that it may need further capital and expects R&D and SG&A spending to increase; future revenue and profitability remain uncertain.
After quarter-end, the FDA excluded sotrovimab use in all U.S. regions as BA.2 became dominant, citing likely lack of effectiveness at the authorized 500 mg dose. The filing says future U.S. reauthorization is uncertain. Sotrovimab had authorization or marketing approval in more than 40 countries, but other jurisdictions could impose limitations. Approximately 100,000 doses were expected to be delivered outside the U.S. in Q2.
Vir and GSK planned a Phase 2 study of higher sotrovimab doses in Q3 2022 and a U.S. BLA submission in the second half of 2022. An application to add intramuscular administration was pending; two prevention Phase 3 trials were expected to start in Q2.
Other stated 2022 milestones included additional HBV trial data, Phase 2 studies of VIR-2218 combinations for HBV and HDV, a Phase 2 VIR-2482 influenza trial, and further VIR-7832 and VIR-1111 data. These are plans, not assured outcomes; the filing noted potential clinical delays from the war in Ukraine and Moldova.
Key risks include reliance on sotrovimab and GSK, variant-driven loss of product activity or demand, uncertain procurement contracts, regulatory and clinical-trial risk, dependence on third-party manufacturing, supply-chain disruption, collaboration obligations and milestone payments, and possible need for additional financing. Manufacturing commitments under agreements with Samsung and WuXi were estimated at $82 million as of March 31; operating lease payments were $184.5 million through 2033.
Vir reported no material legal proceedings and said disclosure controls were effective. It reported no material changes to internal control over financial reporting during the quarter.

Important facts for investors to verify

Whether and when GSK collects the $1.223 billion collaboration receivable, and how collaboration revenue and cash receipts develop after Q1.
Any updated FDA or other-regulator decisions on sotrovimab, BLA progress, dose studies and commercial access outside the U.S.; also confirm remaining dose deliveries and any new government procurement agreements.
Whether sotrovimab royalties, manufacturing commitments, inventory exposure and milestone payments remain aligned with realized demand, especially after the U.S. use restriction.
Progress, timing and results of the listed HBV, HDV, influenza and HIV programs, including any trial delays or changes in development plans.
Future cash burn, tax payments, the concentration of current assets in collaborator receivables, the volatility of the Brii Bio Parent investment, and any financing or dilution needs.