Vir Biotechnology, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Filed November 10, 2020. Vir is a clinical-stage immunology company developing therapies for infectious diseases; it has no products approved for sale and has generated no product-sales revenue.
Financial performance and position
Amounts below are in millions of dollars, except per-share data.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $1.9 | $1.4 | $74.6 | $7.1 |
| Research and development expense | $70.7 | $39.9 | $215.3 | $95.5 |
| General and administrative expense | $18.9 | $9.2 | $47.9 | $25.8 |
| Operating loss | $(87.6) | $(47.7) | $(188.6) | $(114.2) |
| Net loss | $(84.6) | $(48.3) | $(193.0) | $(110.9) |
| Basic and diluted loss per share | $(0.67) | $(4.60) | $(1.66) | $(11.53) |
| Cash used in operating activities | — | $(108.9) | $(90.7) |
- Revenue quality: Nine-month revenue included $43.3 million recognized for the GSK antibody-program license and $22.7 million from Brii Bio’s VIR-2218 China-territory option exercise. These are not recurring product sales. Q3 revenue was mainly grant revenue.
- Cash and liquidity: At September 30, cash and cash equivalents were $462.5 million and short-term investments were $364.1 million. Excluding restricted cash, management reported $826.6 million in cash, cash equivalents and short-term investments, and expects this to fund operations for at least 12 months from the financial statements’ issuance date.
- Cash flows and financing: Nine-month investing cash outflow was $70.6 million; financing cash inflow was $529.7 million, principally from the GSK share issuance ($206.7 million) and follow-on offering ($323.2 million net). Cash, cash equivalents and restricted cash increased $350.3 million.
- Debt and obligations: The company reported no debt outstanding. It had $130.9 million of total liabilities, including $52.0 million of contingent consideration and $15.6 million of operating lease liabilities. No off-balance-sheet arrangements were reported.
- Margins: The filing does not present a margin measure. With no product sales and substantial R&D spending, operating results reflect development-stage losses rather than a mature commercial margin profile.
Changes versus comparable periods
- Nine-month revenue rose $67.5 million year over year, mainly because of the GSK and Brii Bio license-related revenue. Q3 revenue increased only $0.5 million.
- Nine-month R&D expense increased $119.8 million and G&A increased $22.1 million; net loss widened $82.1 million. R&D growth reflected higher collaboration and license costs, contingent-consideration remeasurement, manufacturing, clinical activity and headcount. G&A growth included higher personnel, legal, consulting and public-company costs.
- Q3 R&D increased $30.8 million and G&A increased $9.6 million; net loss widened $36.3 million.
- The per-share loss comparisons are affected by the much larger weighted-average share count in 2020 (125.8 million for Q3 versus 10.5 million in 2019), following the 2019 IPO and subsequent equity issuances; the figures are not directly comparable in isolation.
- Financing strengthened liquidity: Vir received $250 million from GSK’s April share purchase and $323.2 million net proceeds from its July follow-on offering. Shares outstanding rose to 127.0 million at quarter-end from 107.6 million at December 31, 2019.
Outlook, management commentary and risks
- Outlook: No formal financial guidance was provided. Management expects significant operating losses and increasing expenses for the foreseeable future, particularly as clinical development, manufacturing, commercialization preparation, staffing and public-company costs expand. Additional capital will be needed to complete development and commercialization plans and meet certain commitments.
- Pipeline milestones: VIR-7831 entered the COMET-ICE Phase 2/3 program in August 2020; after quarter-end, the Phase 3 portion proceeded following a positive safety and tolerability review. Interim data were anticipated as early as January 2021, with primary-endpoint results expected in Q1 2021. Vir planned additional Phase 3 studies, including hospitalized-patient treatment and prevention. VIR-7832 was planned to enter a Phase 1b/2a trial in Q1 2021. VIR-2218 was in Phase 2, with initial combination-trial data anticipated in 2021; VIR-3434 was in Phase 1. The VIR-2482 Phase 2 trial was delayed by COVID-19 and expected in Q4 2021; VIR-1111’s Phase 1 trial was expected in Q4 2020.
- Manufacturing commitments: Agreements initially reserved capacity with Samsung and WuXi for SARS-CoV-2 antibodies, including take-or-pay terms. They were assigned to GSKTSL and superseded by GSK manufacturing agreements; Vir remains responsible for 72.5% of costs and GSK for 27.5%, subject to conditions. The filing estimated Vir’s aggregate commitments under the Samsung and WuXi arrangements at approximately $482 million, excluding a potential approximately $100 million Biogen access fee under stated manufacturing assumptions. These commitments are material relative to the cash balance and depend on program needs and manufacturing outcomes.
- Unusual accounting items: The nine-month loss included a $44.4 million increase in the estimated fair value of contingent consideration, primarily tied to Humabs milestones, and a $16.8 million remeasurement of the Alnylam milestone-share derivative before it was reclassified to equity. The Humabs contingent-consideration liability was $42.5 million at quarter-end; TomegaVax contingent consideration was $9.5 million. Vir recorded an $0.8 million impairment of abandoned developed technology.
- Subsequent event: In October 2020, Vir achieved a SARS-CoV-2 clinical milestone under the Humabs acquisition agreement and paid $10.0 million.
- Principal risks: Clinical and regulatory failure or delay; COVID-19-related disruption to trials, operations and supply chains; dependence on collaborators, CROs and contract manufacturers; competition in COVID-19 therapies; funding needs; contingent milestone and manufacturing obligations; and uncertain commercial, reimbursement and intellectual-property outcomes. Management said COVID-19 had delayed some clinical timelines. No material legal proceedings were reported.
- Controls: Management concluded disclosure controls were effective as of September 30, 2020; no material change in internal control over financial reporting was reported during the quarter.
Most important facts for investors to verify
- Whether VIR-7831 clinical results, regulatory interactions and planned trial timelines met or changed from the expectations stated in this filing.
- The company’s current cash runway and projected net cash use, considering continued losses and the stated manufacturing and collaboration commitments.
- How much Vir ultimately bears under the Samsung and WuXi agreements, the conditions on GSK’s 27.5% share, and whether the potential Biogen access fee is triggered.
- Changes in contingent-consideration estimates and payments, including Humabs milestones and the October 2020 payment.
- Whether license-related revenue is recurring or milestone-dependent, and the timing and economics of future collaboration cost-sharing, royalties and potential milestones.
- The effect of further share issuance, stock-based compensation and collaboration terms on dilution and future financing needs.