Vir Biotechnology, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited consolidated results; amounts below are in millions of dollars except per-share data. Vir is a clinical-stage immunology and infectious-disease company. Sotrovimab is its only product with prior authorization or marketing approval, but it is not authorized for use in the United States.
Financial summary
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $2.6 | $374.6 | $69.4 | $1,566.4 |
| Operating expenses | $189.4 | $179.6 | $614.7 | $582.8 |
| Operating income (loss) | $(186.7) | $195.0 | $(545.3) | $983.6 |
| Net income (loss) | $(163.4) | $175.3 | $(499.1) | $617.4 |
| Net income (loss) per diluted share | $(1.22) | $1.30 | $(3.73) | $4.58 |
| Net cash from (used in) operations | — | $(670.9) | $1,628.1 |
- Revenue and margins: Q3 collaboration revenue was negative $4.4 million, reflecting sotrovimab profit-sharing losses, partly offset by release of previously constrained amounts. With revenue so low and collaboration revenue negative, conventional revenue-margin comparisons are not informative.
- R&D: $148.3 million in Q3 and $477.8 million year to date, up 30% and 50%, respectively, from comparable 2022 periods. SG&A was $41.1 million in Q3 and $135.0 million year to date.
- Cash and liquidity: At September 30, cash and cash equivalents were $452.1 million, short-term investments $1,233.6 million, and long-term investments $39.6 million. The company reported $1.7 billion in cash, cash equivalents and investments and believes this will fund operations for at least 12 months from the financial-statement issuance date.
- Cash use: Cash, cash equivalents and restricted cash declined $395.6 million in the first nine months. Investing activities provided $269.4 million, mainly as investment maturities exceeded purchases.
- Debt and balance sheet: No debt was outstanding. Total assets were $2,044.9 million, total liabilities $369.8 million, and stockholders’ equity $1,675.1 million. Accumulated deficit was $121.9 million.
Material changes and unusual items
- Revenue and earnings fell sharply against 2022, when sotrovimab profit-sharing drove unusually high collaboration revenue. For the first nine months of 2023, collaboration revenue was $28.4 million versus $1,483.9 million in 2022; grant revenue rose to $39.5 million from $7.7 million.
- GSK reported excess-supply and unused-capacity manufacturing costs for sotrovimab. Vir paid GSK $67.0 million in Q3 and $340.5 million year to date; further adjustments may be reported. Vir released $35.6 million of previously constrained profit-sharing amounts during the first nine months, while recording $7.2 million of net negative profit-sharing revenue.
- Q3 R&D included $21.9 million of VIR-2482 Phase 3 manufacturing cancellation costs. The company also recorded impairment charges related to equipment and non-prioritized in-process R&D assets during 2023; the cash-flow statement lists $6.9 million and $7.5 million, respectively.
- Cash flow from operations shifted from $1,628.1 million provided in the first nine months of 2022 to $670.9 million used in 2023, reflecting operating losses and settlement of accrued liabilities, including sotrovimab profit-sharing amounts.
Outlook, management commentary and risks
- The Phase 2 PENINSULA trial of influenza candidate VIR-2482 did not meet its primary or secondary efficacy endpoints. Full analysis was expected in Q1 2024; preliminary post-hoc analyses suggested different relative-risk reductions under alternate case definitions.
- Vir planned to present Phase 2 HBV and HDV data at AASLD in November 2023; initial data from the PREVAIL HBV platform trial were expected in the first half of 2024. Initial Phase 1 data for HIV vaccine VIR-1388 were expected in the second half of 2024.
- BARDA awarded $50.1 million in new funding: $40.0 million for VIR-7229 through Phase 1 and $10.1 million for discovery of antibodies against another pandemic-potential pathogen. Vir expected to initiate a VIR-7229 Phase 1 trial in 2024. The amended agreement allows up to $11.2 million more for winding down VIR-2482 activities; $60.9 million of potential reimbursement remained available at September 30.
- Management expects R&D spending to increase as programs advance and anticipates continuing net losses. Revenue from sotrovimab remains uncertain; the FDA has excluded its use in all U.S. regions, and Vir and GSK did not plan to file a U.S. BLA at that time.
- Key risks include clinical-trial failure or delay, dependence on third-party manufacturers and collaborators, uncertain sotrovimab demand and further manufacturing costs, and the possibility that additional capital may be needed. Vir disclosed $161.1 million of expected lease payments through 2033 and $9.2 million in accrued amounts potentially refundable under Gates Foundation grants. It reported no material pending legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether final VIR-2482 analyses alter interpretation of the failed PENINSULA trial and affect development plans or related manufacturing commitments.
- Subsequent HBV, HDV, HIV and VIR-7229 trial progress, data timing, and any changes to development priorities or spending.
- Future GSK reports and settlements for sotrovimab manufacturing costs, including whether further profit-sharing adjustments or liabilities arise.
- BARDA reimbursement recognition and remaining funding availability, and whether the company’s stated cash runway remains consistent with its operating plan.
- Any changes to sotrovimab authorization or commercial access outside the United States, and the resulting effect on revenue and supply obligations.