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Edited Transcript of ABUS earnings conference call or presentation 2-Nov-17 8:15pm GMT

Thomson Reuters StreetEvents

Q3 2017 Arbutus Biopharma Corp Earnings Call

Burnaby Nov 8, 2017 (Thomson StreetEvents) -- Edited Transcript of Arbutus Biopharma Corp earnings conference call or presentation Thursday, November 2, 2017 at 8:15:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bruce G. Cousins

Arbutus Biopharma Corporation - Executive VP of Finance & CFO

* Mark Joseph Murray

Arbutus Biopharma Corporation - CEO, President & Executive Director

* Michael J. Sofia

Arbutus Biopharma Corporation - Chief Scientific Officer

* Tiffany Tolmie

* William T. Symonds

Arbutus Biopharma Corporation - Chief Development Officer & Executive Director

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Conference Call Participants

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* Audrey Pham Le

William Blair & Company L.L.C., Research Division - Associate

* Varun Kumar

Leerink Partners LLC, Research Division - Associate

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Arbutus Biopharma Corporation Third Quarter 2017 Financial Results and Corporate Update. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms. Tiffany Tolmie. Ma'am, you may begin.

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Tiffany Tolmie, [2]

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Good afternoon, and thank you for joining us as we review our third quarter 2017 financial results and provide a corporate update. Speaking on today's call are Dr. Mark Murray, Arbutus' CEO; Dr. Mike Sofia, Arbutus' Chief Scientific Officer; Bill Symonds, Arbutus' Chief Development Officer; and Bruce Cousins, Arbutus' CFO. Mark will provide some opening comments. Mike will provide an update on our preclinical pipeline including data presented at the recent AASLD meeting. Bill will provide an update on our clinical pipeline including data presented at AASLD and detail on our next studies. Bruce will provide summary comments on our third quarter financial results, and then Mark will provide some closing comments.

I'd like to remind everyone that certain statements made on today's call constitute forward-looking statements under applicable securities laws. Forward-looking statements discussed in this conference call include, but are not limited to, our clinical plans for ARB-1467 and AB-423 along with their potential efficacy and timing of reported results, plans for our preclinical assets and expected revenues from our current and potential licensing agreements. All of these statements involve certain assumptions, risks and uncertainties that are beyond our control and can cause our actual results to differ materially. A description of these risks can be found in our latest disclosure documents and recent press releases. In addition, Arbutus does not undertake any obligation to update any forward-looking statements made during this call.

This conference call is being webcast live, and the archive will be made available on our website at www.arbutusbio.com, following today's call. At the end of the prepared comments, we'll open up the call for your questions.

I will now turn the call over to Mark.

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Mark Joseph Murray, Arbutus Biopharma Corporation - CEO, President & Executive Director [3]

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Thanks, Tiffany, and thank you to everyone who's joining us on the call and webcast today. We're very pleased with the HBV product pipeline progress that we have made at Arbutus. Our lead candidate, ARB-1467, an RNA interference agent which targets all the vital proteins, has generated very promising results from a Phase II clinical study and yielded important data that was presented recently at AASLD. We expect to build on that data and the knowledge gleaned from that study in our next ARB-1467 study that will be initiated later this year. My colleague, Bill Symonds, will provide more detail on those plans in a moment.

We believe that this study has the potential to lead to S-antigen loss in some patients and could pave the way for late-stage development and approval pathway for ARB-1467. We have completed dosing in Phase I healthy volunteers study of our lead capsid inhibitor, AB-423, and it will enter a multiple ascending dose study in HBV patients in early 2018. This study, which is expected to yield results in 2018, is designed to demonstrate AB-423's ability to reduce HBV DNA in patients.

On our last quarterly call, we announced that we had nominated 2 new development candidates, AB-506, our second-generation capsid inhibitor and AB-452, our novel HBV RNA destabilizer. These compounds, which are progressing through IND-enabling studies, were the subject of presentations at AASLD that you will hear more about from Dr. Mike Sofia in a moment.

I would like to briefly discuss 2 exciting developments that were announced over the last several weeks. In September, and again today, Alnylam announced positive Phase III results for patisiran, which is an LNP-based RNA interference product that they have developed under a license from Arbutus. This positive Phase III outcome was an important milestone for the RNA interference deal and serves as an important validation of Arbutus' LNP technology as a leading delivery solution for nucleic acid-based therapeutics.

In October, we announced a $116 million strategic investment from Roivant Sciences. The $50 million first tranche of this financing closed in October, and the $66 million second tranche is expected to close by year-end upon obtaining shareholder approval. We view this as a very important vote of confidence in Arbutus by Roivant, and we look forward to working more closely with our partners at Roivant to accelerate the development of our pipeline and to maximize the value of our LNP technology. We hope that shareholders will cast their votes in favor of the second tranche of this investment, and we would welcome the opportunity to answer any questions about this investment.

Now I will turn the call over to Mike to discuss our research pipeline. Mike?

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Michael J. Sofia, Arbutus Biopharma Corporation - Chief Scientific Officer [4]

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Thanks, Mark. I'd like to summarize some of the data that we represented at the recent AASLD meeting, highlighting our innovative research efforts. In one presentation, we described AB-452, a novel, orally bioavailable, small-molecule HBV RNA destabilizer that has broad genotype coverage. Unlike nucs, AB-452 not only inhibits HBV DNA but also affects all stages of the HBV life cycle by knocking down multiple viral products including E- and S-antigens. The compound is HBV-specific and shows synergistic effects when combined with Arbutus' proprietary siRNA agents in vitro. Furthermore, in a study in an AAV mouse model, oral administration of AB-452 resulted in up to 1.4 log reduction of serum S-antigen in a dose-dependent manner and correlated well with liver HBV RNA levels. AB-452 has the potential for once-daily oral dosing, and we expect to file an IND or CTA midyear 2018.

In another presentation, we described AB-506, Arbutus' next-generation, highly selective and potent HBV capsid inhibitor. AB-506, which is chemically distinct from AB-423 and other capsid inhibitors in development today, exhibits favorable drug-like properties and demonstrates potent inhibition of HBV replication in vitro and in vivo. In an HBV cell culture model, AB-506 treatment resulted in empty capsid formation devoid of the viral genome. High-resolution x-ray structure showed that AB-506, like other capsid inhibitors, binds the HBV core protein at the dimer:dimer interface and provides a rationale for improved potency through increased binding interaction with its target. Experimentally, this improved binding interaction conferred increased thermal stability of the core protein, indicating improved target engagement compared to first-generation capsid inhibitors. Dosing studies performed in multiple species suggested potential for once-a-day oral administration where significant liver concentrations of AB-506 were achieved. We anticipate filing an IND or CTA for AB-506 midyear 2018.

In addition to AB-506 and AB-452, our research team continues to make progress in other areas such as GalNAc-delivered RNAi agent, a small-molecule checkpoint inhibitor and a program targeting cccDNA.

I would like now to turn the call over to Bill. Bill?

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William T. Symonds, Arbutus Biopharma Corporation - Chief Development Officer & Executive Director [5]

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Thanks, Mike. I will provide an update on our clinical programs. At AASLD, we presented important new data on our lead pipeline program, RNAi agent ARB-1467. These results from Cohort 4 of our first Phase II study of this compound showed that 5 biweekly doses of ARB-1467 led to an average of 1.4 log reduction in serum S-antigen levels with a maximum individual decline of 12.7 logs.

All 12 treated subjects experienced a reduction in hepatitis B surface antigen from baseline. 7 of 11 evaluable subjects receiving biweekly doses had a decline of greater than or equal to 1 log10 hepatitis B surface antigen, reaching less than or equal to 1,000 IU per ml during the first 10 weeks of treatment. We are highly encouraged that 5 of these 7 subjects also reached very low absolute serum S-antigen levels of less than 50 IU per ml by 6 weeks. In a separate presentation at AASLD, we described the study conducted in a preclinical animal model of chronic hepatitis B infection, where we examined drug combinations of siRNA with immune-boosting treatments to invigorate host immune responses to hepatitis B and facilitate long-lasting control of the virus even after cessation of treatment. Combination of siRNA treatment with checkpoint blockade resulted in reduction of serum S-antigen levels, stimulation of HBV-specific immune cells and increased production of anti-HBS antibody. Off treatment viral control was achieved upon further addition of an HBV vaccine in this preclinical model. These data are consistent with the hypothesis that management of S-antigen is a critical element in the development of curative therapy. Antigen reduction, in combination with agents that boost immune reactivation applied in a specific sequence, could improve clinical treatment efficacy.

We are incorporating elements of both these studies in our next ARB-1467 clinical trial, which we'll initiate by year-end. We are also contemplating additional studies to further elucidate the opportunity of this important agent, so please stay tuned on this front.

This first triple combination study will dose HBV patients with ARB-1467, tenofovir and pegylated interferon to maximize reduction of HBS antigen and evaluate the importance of immune stimulation in patients who have achieved low hepatitis B virus DNA and HBS antigen levels. This 30-week study will enroll approximately 20 E-antigen negative patients who will receive biweekly dosing of ARB-1467 at the 0.4 milligram per kilogram dose and daily tenofovir for up to 30 weeks.

Predefined treatment responders at week 6 will qualify for the addition of weekly interferon treatment while continuing to receive biweekly doses of ARB-1467 and daily tenofovir for the remaining 24 weeks. Nonresponders at 6 weeks will discontinue dosing. The study will conclude with a 24-week posttreatment period. Interim on-treatment results for this study are expected in the second half of 2018, followed by final results in 2019. We believe that this regimen has the potential to drive S-antigen loss, which, if durable, could pave the way for later-stage studies and a potential approval pathway for ARB-1467.

While interferon may not be the ideal immunomodulator for HBV, it is an approved HBV therapy and is, therefore, a familiar option for this combination study. Over time, we expect to replace interferon with other immune modulators emerging from our immuno-virology discovery programs.

As for AB-423, our lead capsid inhibitor, we presented Phase I data at AASLD showing favorable safety and pharmacokinetics in a single ascending dose study in healthy volunteers. We have completed the multiple ascending dose portion of this study in healthy volunteers and expect to begin dosing HBV patients in a multiple ascending dose study early next year. As ARB-1467 and AB-423 advance in the clinic, we look forward to adding new agents to the clinical development portfolio such as AB-506 and AB-453, which Mike Sofia described earlier. While we see a potential path to approval for ARB-1467 in combination with currently approved agents, we are striving to continue to improve treatment options for HBV patients by developing new combinations with multiple Arbutus components.

I would now like to turn the call over to Bruce. Bruce?

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Bruce G. Cousins, Arbutus Biopharma Corporation - Executive VP of Finance & CFO [6]

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Thanks, Bill. I'll touch on the financial highlights for the third quarter of 2017. Arbutus' net loss for Q3 2017 was $11.6 million or $0.21 per share as compared to $19.6 million, or $0.37 per share in Q3 of 2016. The reduction in net loss was largely the result of increased revenue compared to the comparable quarter. In Q3 2017, we recorded revenues of $6.9 million versus revenue of $800,000 in Q3 of '16.

As previously announced, due to a strategic review of its R&D activities, Alexion terminated its licensing agreement, and we completed all remaining service obligations during Q3. As a result, we recognized the remainder of the $7.5 million upfront payment from this transaction in Q3.

On the expense side of the income statement, total research, development, collaboration and contracts expenses were steady at $15.5 million compared to $15.7 million in Q3 of the year prior. As we continue to invest in our clinical assets and preclinical pipeline, as described by Drs. Murray, Sofia and Symonds earlier on this call. G&A expenses were also consistent at $3.7 million for both Q3 2017 and the corresponding Q3 in 2016. Other income increased from a loss of $600,000 in Q3 '16 to income of $1.3 million in Q3 2017. This was due to a foreign currency gain of $1.2 million on investment holdings denominated in Canadian dollars, which fluctuates with exchange rate changes from quarter-to-quarter compared to the loss of $800,000 in Q3 2016.

At the end of Q3, we had an aggregate cash and investments balance of $100.8 million compared to $143.2 million at the end of 2016 and $115.6 million at the end of Q2. Our Q3 operating cash burn was $7.1 million. With the recent close of the $50 million first tranche of the strategic investment from Roivant, we expect our current cash balance to fund the company into 2019.

I would now like to turn the call back over to Mark.

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Mark Joseph Murray, Arbutus Biopharma Corporation - CEO, President & Executive Director [7]

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Thanks, Bruce. Before we go to Q&A, I'd like to review a few key expected milestones for Arbutus in the next 12 months. Having completed the capsid inhibitor AB-423 healthy volunteers study, we will transition into a multi-dosing HBV patients study early next year with the results expected next year. Also in Q4 of this year, we expect to initiate the new combination study of ARB-1467, tenofovir, and pegylated interferon, as Bill described earlier in the call. And we look forward to sharing interim on-treatment data from this study in the second half of 2018.

Lastly, in 2017, Alnylam has stated their intention to file an NDA for patisiran, setting that product up for an approval decision in 2018. Expected HBV pipeline milestones for 2018 include DNA reduction in patients being treated with AB-423 and INDs or equivalents for AB-506 and AB-452 and on-treatment data from the study of ARB-1467 with tenofovir and pegylated interferon.

In addition, we expect 2018 to bring an approval decision for Alnylam's patisiran. Operator, please open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Michael Schmidt with Leerink Partners.

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Varun Kumar, Leerink Partners LLC, Research Division - Associate [2]

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This is Varun Kumar on behalf of Michael Schmidt. My first question is on capsid inhibitor. What kind of efficacies results are being planned for AB-423 in mid-'18? And how are you thinking to position the next gen 506 with respect to 423?

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Mark Joseph Murray, Arbutus Biopharma Corporation - CEO, President & Executive Director [3]

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Maybe I'll answer that first and ask Mike to fill in. The efficacy results that we expect is to be able to demonstrate that AB-423 will reduce HBV DNA in patients. It's a 28-day study. Mike, would you add anything to that?

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Michael J. Sofia, Arbutus Biopharma Corporation - Chief Scientific Officer [4]

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No, I think, right now, that's the primary readout that we anticipate. We will be looking at other viral markers as well as immune markers in the study to see if we can see anything interesting that would've been unexpected in that study. But to your question, with regard to our second-generation agent, AB-506, this particular agent is clearly much more potent than our first agent. It is expected to be, based on all our preclinical modeling, to be a once-daily dosing agent. So it has a number of both potency and pharmacokinetic parameter advantages over 423. So as we move forward, I think the challenge for us will be to ultimately determine between these 2 agents, which one we will take forward. And that will be decided based on clear clinical data that we generate both from a potency, safety and pharmacokinetics standpoint.

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Varun Kumar, Leerink Partners LLC, Research Division - Associate [5]

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Okay. That's very helpful. And last question on 1467 Phase II trial. So what's the rationale for going after only E-antigen-negative patients and excluding out E-antigen-positive patients in the proposed trial design?

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Mark Joseph Murray, Arbutus Biopharma Corporation - CEO, President & Executive Director [6]

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Bill, do you want to answer that?

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William T. Symonds, Arbutus Biopharma Corporation - Chief Development Officer & Executive Director [7]

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Yes, so -- Sure. Yes. So the main rationale is really around going after a population which can be homogenous. With a small sample size like this of only 20 patients, we really don't want to split that 10-10 between E-negative and E-positive. If you remember back to the initial Phase II data, we don't see a difference between E-positive and E-negative with 1467. So we're really using the E-negative population to have a homogenous group to actually test the hypothesis we're going after.

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Operator [8]

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(Operator Instructions) Our next question comes from Katherine Xu with William Blair.

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Audrey Pham Le, William Blair & Company L.L.C., Research Division - Associate [9]

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This is Audrey on for Katherine. First, I was wondering what's the 6-week responder criteria that you're looking for, for the triple combo study?

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Mark Joseph Murray, Arbutus Biopharma Corporation - CEO, President & Executive Director [10]

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Bill?

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William T. Symonds, Arbutus Biopharma Corporation - Chief Development Officer & Executive Director [11]

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Yes, so -- what we're looking for is really some criteria which we've set up based upon the results we saw in the biweekly cohort that I referenced earlier. So basically at the week 6 evaluation point, we want people to have S-antigen results below 1,000, so low S-antigen below 1,000 IU per ml, and have had at least a 0.7 log or greater reduction. So we want to make sure patients are below a certain threshold of 1,000, and we want to make sure that patients are actually seeing a decline from an amount above that of at least 0.7 logs.

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Audrey Pham Le, William Blair & Company L.L.C., Research Division - Associate [12]

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All right. Great. That's helpful. And a second question, on AB-542. I was wondering about the mechanism of action, so what's the target -- does this bind the RNA product off the integrated DNA?

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Mark Joseph Murray, Arbutus Biopharma Corporation - CEO, President & Executive Director [13]

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Mike, I'll turn it over to you.

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Michael J. Sofia, Arbutus Biopharma Corporation - Chief Scientific Officer [14]

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Audrey, so you're saying AB-452. So this molecule definitely should be able to knock down the transfer valve of the integrated DNA. So no, this particular molecule does destabilize the RNA irrespective of where it generates from either integrated or obviously from cccDNA that's currently in the hepatocyte.

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Operator [15]

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At this time I'm showing no further questions. I would like to turn the call back over to Ms. Tiffany Tolmie for closing remarks.

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Tiffany Tolmie, [16]

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Thank you, operator. We appreciate your participation in the call today, and we look forward to sharing updates on our progress with you in the months ahead. This concludes our call today. Thank you, everyone.

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Operator [17]

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Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.