Arbutus Biopharma Corporation (ABUS) Q2 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Arbutus Biopharma Corporation 2019 Second Quarter Financial Results and Corporate Update Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.I would not like to introduce your host for today's conference Pam Murphy. You may begin.

Thank you, and good morning. On the call from the Arbutus executives team are Bill Collier, President and Chief Executive Officer; Dave Hastings, Chief Financial Officer; Dr. Gaston Picchio, Chief Development Officer; and Dr. Mike Sofia, Chief Scientific Officer.Bill will begin with a summary of key corporate and clinical developments and objectives followed by Dave Hastings, who'll provide a review of the company's second quarter financial results. We'll then open up the call for Q&A. Gaston on and Mike will be available to address research and/or clinical development-related questions.Before we begin, we'd like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding expectations for Arbutus' proprietary hepatitis B pipeline, including clinical results and time lines review of our lead compounds AB-506 and AB-729 and the potential for our drug candidates to improve upon standard of care and contribute to a curative combination regimen for HBV. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our most recent annual report on 10-K, quarterly report on Form 10-Q and other periodic reports filed with the SEC from time to time. Bill?

Thank you very much, Pam, and thank you, everyone, for joining us today. As I stated on our AB-506 call just a few weeks ago, as the new President and CEO of Arbutus, I really look forward to working with all of you.Now we appreciate that this is a very busy time for many of you, and so we're going to try and keep this call succinct as our objective remains unchanged, and that is to improve upon the existing standard of care in hepatitis B by developing a curative combination regimen that includes several different mechanisms of action.Currently, we're intensively focused on advancing our 2 lead compounds, AB-506 and AB-729, through Phase Ia/Ib trial and then moving into a combination proof-of-concept trial in subject with chronic hepatitis B in the second half of 2020.First, let me comment regarding AB-729. We've now initiated dosing in the healthy subject portion of the Phase Ia/Ib clinical trial. This will be followed by several single-dose cohort in chronic hepatitis B subject, and we intend to report preliminary safety and efficacy results from this portion of the Phase Ia/Ib clinical trial in the first quarter of 2020.Secondly, regarding the preliminary Phase Ia/Ib clinical trial results that we described in a press release and conference call on July 15 for AB-506, we believe these results demonstrate that this compound is a potent captive inhibitor, and we invite you to visit the company's website at www.arbutusbio.com to view the full press release and the recording of the conference call.But just to recap, mean HBV DNA and HBV RNA decreased at the end of treatment on day 28, range from minus 2 logs of 160-milligram dose to minus 2.8 logs for the 400-milligram dose and minus 2.4 logs for both doses effectively, which is comparable with other capsid inhibitors currently in development.Also, on July 15, we provided a very thorough description of these preliminary results and stated our belief that at least 1 of the 4 Grade 4 ALT players that we saw in the AB-506-treated patients was immune-mediated and beneficial. This subject had notable declines in S-antigen and E-antigen of minus 1.4 logs and minus 2 logs, respectively, by day 100 following discontinuation of the drug. It's also worth noting that serum-based cytokine analysis of this subject showed an abrupt increase in IFN-gamma at the time of the flare suggesting a beneficial immune-mediated response. And we continue to investigate the nature of the other 3 Grade 4 players. Importantly, none of the Grade 4 players in this trial met drug-induced liver injury criteria.Now as stated in the press release and during the conference call, no serious adverse events or clinically-significant safety findings were observed in the healthy subjects. And notably, ALT levels and other liver function tests remain normal throughout the 10 days of dosing in healthy subjects.Also, no serious adverse events were observed in the chronic hepatitis B subject. And based on these preliminary results, we continue to believe that 506 is a potent oral capsid inhibitor but warrants further development. These results - preliminary results also support our confidence in its potential to contribute to the inhibition of HBV replication as part of the combination regimen.Our next steps for AB-506 include a 28-day clinical trial in healthy subjects, and an absence of players in this trial, if observed, could help us understand flares that we've seen in some HBV subjects between day 14 and 28. Results from this 28-day healthy volunteer trial will be submitted along with additional data from the Phase Ia/Ib clinical trial for presentation at an appropriate scientific meeting later this year.We also plan on dosing AB-506 to additional cohorts at different doses with or without a nucleoside analog. We intend to review data from the healthy volunteer 28-day clinical trial and final data from the Phase Ia/Ib trial is expected in the first half of 2020, before we move forward with the our plans for an AB-506, AB-729 and nucleoside analog proof-of-concept Phase II clinical trial in subjects with chronic hepatitis B.But just to recap, provided both AB-506 and AB-729 progress as expected, we anticipate moving into the combination proof-of-concept Phase II clinical trial in chronic hepatitis B subjects in the second half of 2020.We continue to believe the combination of AB-729 and AB-506 with their distinct mechanisms of action have the potential to result in profound inhibition of HBV replication in conjunction with a reduction in S-antigen level, and that this combination will enable a reawakening of the patient's immune system.We also believe that these combined effects should lead to significantly higher rates of sustained S-antigen loss than the current standard of care after a yet-to-be-established finite dosing period.That being said, I'll now hand over the call to Dave Hastings for his summary of our most recent financial results.

Thanks, Bill, and good morning, everybody. I'll start today by discussing the company's cash position and runway. And as a reminder, cash and cash used are our most important financial metric.At June 30, 2019, we had a cash and investments balance of $95.3 million versus a balance of $124.6 million at December 31, 2018. Not included in our at June 30, 2019, cash and investments balance are the proceeds from the previously announced sales of portion of our ONPATTRO royalty empowerment, which closed in July and resulted in $20 million of gross proceeds before advisory fees.Our cash used in operating activities during the first 6 months of 2019 was $34.1 million. And we believe our cash balance at June 30, 2019, plus the net proceeds from the monetization of a portion of our ONPATTRO royalty entitlement received in July is sufficient to fund operations into the second half of 2020.The only other area I'd like to discuss this morning is the increase in general and administrative expense in the second quarter of 2019 when compared to the second quarter of 2018. This was a result of the $4.5 million severance charge related to the June 2019 retirement of our former CEO.The severance charge arose out of the severance package due to our former CEO in accordance with his legacy 2008 employment contract. The charge included $2.3 million in cash severance and $2.2 million in noncash charge with the acceleration vesting of his own vested stock options.I'll conclude by saying I believe Arbutus is well positioned with significant clinical milestones coming and enough cash to achieve these potentials however.So with that, I'll now turn the call back to Bill.

Thanks very much, Dave. Before we move into the Q&A session of the call, I'd like to just reinforce Dave's confidence in our ability to advance the pipeline through the completion of and the potential initiation of several important clinical trials.So just to recap. First, the completion of the 28-day healthy volunteer Phase Ia trial for AB-506. Results from this trial are expected later this year and will be submitted for presentation at an appropriate scientific meeting.Second, we intend to report preliminary Phase Ia/Ib safety and efficacy results from the AB-729 healthy volunteer portion of the trial as well as several single ascending doses in chronic hepatitis B subjects in the first quarter of 2020.Third, we expect to have final results from the additional cohorts of the AB-506 Phase Ib study in the first half of 2020. And provided these 2 compounds perform as expected, we'll then move directly into a combination proof-of-concept Phase II clinical trial in subjects with chronic hepatitis B in the second half of 2020.So with that being said, I'd like to ask the operator now to open up the lines for the Q&A session.

[Operator Instructions] And our first question is from Keay Nakae from Chardan. Your line is now open.

Thank you I'm just wondering as we plan ahead to seeing the data from 506 later this year, how many -- can you give us an estimate of how many chronic hepatitis B patients you'll have data for?

Okay. Well, on the line, we also have Gaston and Mike. So I'll ask Gaston to take that question.

Sure. Thank you. In response to the question of how many chronic hepatitis B patients we will have by the end of the year, that should be 24, 2 cohorts of 12.

Okay. Very good. And then just any update on the progress for the RNA destabilizer?

This is Mike Sofia. So right now we are in the midst of a redo of our 90-day type study in 2 species. So we will have data by the first quarter of 2020 that will inform us more on the potential for moving forward with this agent. We continue to do other studies looking at various aspects of mechanism of action and various aspects of the observed findings that we saw in the original study.But the real pivotal study is going to be the 3P 90-day study in 2 species. So we're awaiting that to complete by the end of this year or early next year, and then we'll be able to make a final decision at that point.

Okay. Very good. Thanks.

Thank you [Operator Instructions] And our next question is from Mayank Mamtani from B. Riley FBR. Your line is now open.

Good morning. And thanks for taking my questions. This is Jeffrey Tan, on for Mayank. My first question is with regards to AB-506 and its Phase I trial on safety and efficacy. Can you give us an update on how the study is progressing? And what a successful outcome would look like?

Okay. Gaston, I'll let you on for that one.

Sure. Thank you. So as you know, we reported already 2 cohorts, 1 dose with 160 milligram, the other one dose with 400 milligrams. Both of them still due. We're very satisfied with the HBV DNA drop of 2 logs and 2.9. So the next cohort that we're planning will depend on the outcome of the healthy volunteer study that we announced, 28-day healthy volunteer study.So - but once we have those results, we plan to continue dosing in the same Phase Ib study with additional cohorts and some of those may include combination with a NUC and some of those may also include a longer duration.

And do you think that seeing a surface antigen response is a point of competitive advantage relative to, say, other capsid inhibitors?

Well, I think, as we stated before and as far as we understand and based on the published literature, we believe our capsid is the only [Technical Difficulty] drop in surface antigen as well as e-antigen in single patients.So if we were able to repeat that, that will be obviously something different from the other capsid inhibitors that are out there. But I think it's still premature to decide whether that's a competitive advantage given the number of patients that we have dosed so far. So I think we need more data to conclude that.

And finally, for AB-729. I know you recently began studies on healthy volunteers, but were there any protocol amendments to include hep-B patients down the line? How is the company thinking about Part II, Part III and dose level?

Sure. So the study has started -- any Phase Ia/Ib study has started with single ascending dosing in healthy volunteers and that's already proceeding. And after that, the protocol already called, we will need -- we will start -- we will not need an amendment.The protocol already called for single ascending dose in chronic hepatitis B patients as well as multiple doses in chronic hepatitis B patients. So it's already included in the protocol.

All right. Great. Thank you and good luck for the rest of the year.

Thank you

Thank you. At this time, I'm not showing no further questions. I would like to turn the call back over to Bill Collier for closing remarks.

All right. Thank you very much to everyone for dialing in earlier on a Monday morning. We appreciate your interest very much indeed, and we look forward to further updates as the year progresses. Thank you, again.

Ladies and gentlemen, thank you for your participation in today's conference. This includes the program. You may now disconnect.