(EDGAR Online via COMTEX) -- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements and notes and other financial information included elsewhere in this Annual Report on Form 10-K. Unless the context requires otherwise, references in this Annual Report on Form 10-K to the "Company", "Vir," "we," "us" and "our" refer to Vir Biotechnology, Inc. and its consolidated subsidiaries.
Our discussion and analysis below are focused on our financial results and liquidity and capital resources for the years ended December 31, 2020 and 2019, including year-over-year comparisons of our financial performance and condition for these years. Discussion and analysis of the year ended December 31, 2018 specifically, as well as the year-over-year comparison of our financial performance and condition for the years ended December 31, 2019 and 2018, are located in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 26, 2020.
We are a clinical-stage immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases. Infectious diseases are among the leading causes of death worldwide and can cause trillions of dollars of direct and indirect economic burden each year - as evidenced by the current coronavirus disease 2019, or COVID-19 pandemic. We believe that now is the time to apply the recent and remarkable advances in immunology to combat current and prepare for potential future infectious diseases. Our approach begins with identifying the limitations of the immune system in combating a particular pathogen, the vulnerabilities of that pathogen and the reasons why previous approaches have failed. We then bring to bear powerful technologies that we believe, individually or in combination, will lead to effective therapies.
Our current development pipeline consists of product candidates targeting COVID-19, hepatitis B virus, or HBV, influenza A virus, and human immunodeficiency virus, or HIV. We have assembled four technology platforms, focused on antibodies, T cells, innate immunity and small interfering ribonucleic acid, or siRNA, through internal development, collaborations and acquisitions. We have built an industry-leading team that has deep experience in immunology, infectious diseases and product development. Given the global impact of infectious diseases, we are committed to developing cost-effective treatments that can be delivered at scale.
VIR-7831, a severe acute respiratory syndrome coronavirus 2, or SARS-CoV-2, -neutralizing monoclonal antibody, or mAb, started the lead-in phase of a Phase 2/3 trial named COVID-19 Monoclonal antibody Efficacy Trial - Intent to Care Early, or COMET-ICE, in August 2020 for the treatment of adults at high risk of hospitalization or death from COVID-19. In October 2020, the trial continued into Phase 3 based on a positive evaluation of the safety and tolerability data from the Phase 2 lead-in. Results for the primary endpoint of COMET-ICE are expected in the first quarter of 2021, and if positive, will be used to seek Emergency Use Authorization from the Food and Drug Administration and ultimately approval through the submission of a biologics license application. In December 2020, we initiated a Phase 3 trial named Therapeutics for Inpatients with COVID-19, or TICO, of VIR-7831 for the treatment of hospitalized adults with COVID-19 as part of a new sub-trial of the National Institutes of Health's Accelerating COVID-19 Therapeutic Interventions and Vaccines, or ACTIV, Program, specifically ACTIV-3. An evaluation of the benefit/risk profile of VIR-7831 is expected in the first quarter of 2021 and will determine if VIR-7831 continues in the next part of the ACTIV-3 trial. In January 2021, we initiated a Phase 2 combination trial of VIR-7831 and bamlanivimab (LY-CoV555) for the treatment of mild to moderate COVID-19 in low-risk adults as part of Eli Lilly and Company's BLAZE-4 trial. Initial results for this arm of the BLAZE-4 trial are expected in the first half of 2021. In February 2021, we initiated COMET-Patient SafEty, TolerAbility, PharmacoKinetics, or COMET-PEAK, a Phase 2 trial evaluating an intramuscular, or IM, formulation of VIR-7831 in low-risk adults with mild to moderate COVID-19. In the second quarter of 2021, we plan to initiate two additional IM trials of VIR-7831.
VIR-7832, a vaccinal SARS-CoV-2-neutralizing mAb, is anticipated to initiate a Phase 1b/2a trial in the first quarter of 2021 for the treatment of adults with mild to moderate COVID-19 at high risk of hospitalization as part of the U.K.-based and National Health Service supported AGILE initiative.
VIR-2218, an HBV-targeting siRNA, is currently in a Phase 2 clinical trial. Initial Phase 2 data have demonstrated substantial, durable, and dose dependent reduction of hepatitis B virus surface antigen, and VIR-2218 has been generally well-tolerated. In July 2020, we initiated a Phase 2 combination clinical trial of VIR-2218 with pegylated interferon-alpha, an approved immune modulatory agent, and anticipate initial clinical data in the second quarter of 2021.
VIR-3434, an HBV-neutralizing mAb, is currently in a Phase 1 clinical trial. We anticipate additional clinical data from our Phase 1 trial in the second quarter of 2021. We also expect to initiate a Phase 2 clinical trial of VIR-3434 in combination with VIR-2218 in the second half of 2021.
Influenza A virus
VIR-2482, a mAb designed for the prevention of influenza A, is currently in a Phase 1/2 clinical trial and has been generally well-tolerated. Initiation of the Phase 2 trial for VIR-2482, which was delayed due to the impact of COVID-19, is now planned for the fourth quarter of 2021 with proof-of-concept results anticipated in the first half of 2022.
VIR-1111, an HIV T cell vaccine based on human cytomegalovirus, or HCMV, is currently in a Phase 1 trial. We anticipate initial clinical data for VIR-1111 in the second half of 2021.
We were incorporated in April 2016 and commenced principal operations later that year. To date, we have focused primarily on organizing and staffing our company, business planning, raising capital, identifying, acquiring, developing and in-licensing our technology platforms and product candidates, and conducting preclinical studies and early clinical trials.
Prior to our initial public offering, or IPO, we funded our operations primarily from the issuance and sale of convertible preferred stock, and to a lesser extent from revenue from grant agreements with government-sponsored and private organizations, as well as research and development services. In October 2019, we completed our IPO pursuant to which we received net proceeds of $126.4 million, after deducting underwriting discounts, commissions and offering expenses. In July 2020, we completed a follow-on offering of our common stock and issued 8,214,285 shares of our common stock for net proceeds of $323.2 million, after deducting underwriting discounts, commissions and offering expenses. As of December 31, 2020, we had $736.9 million in cash, cash equivalents and short-term investments. Based upon our current operating plan, we believe that our existing cash, cash equivalents and short-term investments as of December 31, 2020 will enable us to fund our operations through at least the next 12 months from the issuance date of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We have incurred significant operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future. We do not have any products approved for sale, we have not generated any revenue from the sale of products, and we do not expect to generate revenue from the sale of our product candidates until we complete clinical development, submit regulatory filings and receive approvals from the applicable regulatory bodies for such product candidates, if ever. Our net losses were $298.7 million, $174.7 million and $115.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, we had an accumulated deficit of $667.2 million. Our primary use of our capital resources is to fund our operating expenses, which consist primarily of expenditures related to identifying, acquiring, developing, manufacturing and in-licensing our technology platforms and product candidates, and conducting preclinical studies and early clinical trials, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We expect to continue to incur net operating losses for at least the next several years. In particular, we expect our expenses and losses to increase as we continue our research and development efforts, advance our product candidates through preclinical and clinical development, seek regulatory approval, prepare for commercialization, as well as hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company. We also expect to increase the size of our administrative function to support the growth of our business. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
We are currently manufacturing product candidates from three of our platforms:
development and manufacturing organizations, or CDMOs, to supply our early stage product candidates in the near-term. We have completed our internal capacity build in process development, analytical development, quality, manufacturing and supply chain. Specifically, our San Francisco, California and Portland, Oregon facilities include laboratories that support process development, production of HCMV research viral seed stock and selected quality control testing for our product candidates. We have established relationships with multiple CDMOs and have produced material to support preclinical studies and Phase 1 and Phase 2 clinical trials. Material for Phase 3 clinical trials and commercial supply will generally require large-volume, low-cost-of-goods production. For example, for our COVID-19 program, we and our partner GSK have executed manufacturing agreements with large-scale CDMOs to support future scale-up and capacity, particularly for potential commercialization.
Since February 2020, we have entered into a number of collaboration agreements to accelerate the development, manufacture, and potential commercialization of therapies to treat and prevent COVID-19 and other coronaviruses. We have also made substantial efforts to protect our intellectual property in this area, as evidenced by the expansion of our patent portfolio.
Development and Commercialization
In June 2020, we, Glaxo Wellcome UK Limited and Beecham S.A. (collectively referred to as GSK), entered into a definitive collaboration agreement, or the GSK Agreement, pursuant to which we agreed to collaborate to research, develop and commercialize products for the prevention, treatment and prophylaxis of diseases caused by SARS-CoV-2 and potentially other coronaviruses. The collaboration is focused on the development and commercialization of three types of collaboration products under three programs: (1) antibodies targeting SARS-CoV-2, and potentially other coronaviruses, or the Antibody Program; (2) vaccines targeting SARS-CoV-2, and potentially other coronaviruses, and (3) products based on genome-wide CRISPR screening of host targets expressed in connection with exposure to SARS-CoV-2. The initial antibodies under the Antibody Program are VIR-7831 and VIR-7832, which have demonstrated high affinity for the SARS-CoV-2 spike protein and are highly potent in neutralizing SARS-CoV-2 in live-virus cellular assays.
In March and April 2020, we entered into two further amendments to our collaboration and license agreement with Alnylam Pharmaceuticals, Inc., or the Alnylam Agreement, to expand our existing collaboration of five infectious disease targets to nine, including one targeting SARS-CoV-2 and potentially other coronaviruses, and up to three targeting human host factors for SARS-CoV-2. In December 2020, we entered into a letter agreement with Alnylam to modify certain funding and governance provisions in connection with RNAi programs directed to certain specified targets directed to coronaviruses, including VIR-2703, and to modify certain rights of each party with respect to products arising from such programs.
In February 2020, we entered into a development and manufacturing collaboration with WuXi Biologics (Hong Kong) Limited, or WuXi Biologics, for the clinical development, manufacturing, and commercialization of our proprietary antibodies developed for SARS-CoV-2. In addition, in June 2020, we entered into a binding letter of intent with WuXi Biologics, or the WuXi Biologics Letter Agreement, under which WuXi Biologics will perform certain development and manufacturing services for our SARS-CoV-2 antibody program. In July 2020, we assigned the WuXi Biologics Letter Agreement to GlaxoSmithKline Trading Services Limited, or GSKTSL, and GSKTSL entered into a non-exclusive Master Services Agreement for Commercial Manufacture of Drug Substance with WuXi Biologics, or the WuXi Biologics MSA, thereby superseding the WuXi Biologics Letter Agreement, and pursuant to which, among other things, WuXi Biologics will perform development and manufacturing services for clinical and commercial supply of antibody products under our SARS-CoV-2 antibody program. In accordance with the terms of the GSK Agreement, we will continue to be responsible for 72.5% of the costs under the WuXi Biologics MSA, and GSK will bear 27.5% of such costs, subject to certain conditions and exceptions.
In May 2020, we entered into a clinical development and manufacturing agreement with Biogen, Inc., or Biogen, under which Biogen will perform process development activities and specified manufacturing services under agreed statements of work for certain pre-commercial and clinical supply of SARS-CoV-2 antibodies.
In April 2020, we entered into a binding letter agreement, or the Samsung Letter Agreement, with Samsung Biologics Co., Ltd., or Samsung, under which Samsung will perform development and manufacturing services for
our SARS-CoV-2 antibody program. In July 2020, we assigned the Samsung Letter Agreement to GSKTSL, and GSKTSL entered into a Master Services Agreement with Samsung, or the Samsung MSA, thereby superseding the Samsung Letter Agreement, and pursuant to which, among other things, Samsung will perform development and manufacturing services for clinical and commercial supply of antibody products under our SARS-CoV-2 antibody program. In accordance with the terms of the GSK Agreement, we will continue to be responsible for 72.5% of the costs under the Samsung MSA, and GSK will bear 27.5% of such costs, subject to certain conditions and exceptions.
COVID-19 Business Update
With the global spread of the current COVID-19 pandemic, we have implemented a number of plans and policies designed to address and mitigate the impact of the COVID-19 pandemic on our employees and our business. We continue to closely monitor the COVID-19 situation and will evolve our plans and policies as needed going forward. As a result of these developments, in March 2020, we implemented work-from-home policies for most of our employees. We have also implemented plans to reopen our offices to allow employees to return when appropriate. Although these plans are based on a phased approach consistent with local government requirements, and focused on employee safety, and contemplate returning to remote work should new restrictions be implemented, there is uncertainty regarding recent phased reopening, which may be rolled back, and restrictions re-implemented. We are also working to provide our employees with the support they need to ensure continuity of business operations. We are working closely with our CDMOs to manage our supply chain activities and mitigate any potential disruptions to our clinical trial supplies as a result of the COVID-19 pandemic. If the COVID-19 pandemic persists for an extended period of time and begins to impact essential distribution systems, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing of clinical trial supply. For some of our clinical development programs, we are experiencing, and may continue to experience, a disruption or delay in our ability to initiate trial sites and enroll and assess patients. For example, the initiation of the Phase 2 trial for VIR-2482, which was delayed due to the impact of COVID-19, is now planned for the fourth quarter of 2021. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic.
Our Collaboration, License and Grant Agreements
We have entered into collaboration, license and grant arrangements with various third parties. For details regarding these and other agreements, see the section titled "Business-Our Collaboration, License and Grant Agreements" and Note 6-Grant Agreements and Note 7-Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We have completed various acquisitions. For details regarding our acquisitions, see the section titled "Business-Our Acquisition Agreements" and Note 4-Acquisitions to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Components of Operating Results
We do not have any products approved for sale, we have not generated any revenue from the sale of our products, and we do not expect to generate revenue from the sale of our product candidates until we complete clinical development, submit regulatory filings and receive approvals from the applicable regulatory bodies for such product candidates, if ever.
Our revenue consists of: (i) grant revenue; and (ii) license and contract revenue. Grant revenue is comprised of revenue derived from grant agreements with government-sponsored and private organizations. License and contract revenue is comprised of revenue generated from license rights issued and research and development services.
Research and Development
To date, our research and development expenses have related primarily to discovery efforts and preclinical and clinical development of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We do not track research and development expenses by product candidate.
Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:
expenses related to license and collaboration agreements, and contingent consideration from business acquisitions;
personnel-related expenses, including salaries, benefits and stock-based compensation for personnel contributing to research and development activities;
expenses incurred under agreements with third-party contract manufacturing organizations, contract research organizations, and consultants;
clinical costs, including laboratory supplies and costs related to compliance with regulatory requirements; and
other allocated expenses, including expenses for rent and facilities maintenance, and depreciation and amortization.
We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our product candidates into and through preclinical studies and clinical trials and pursue regulatory approval of our product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors including: the safety and efficacy of our product candidates, early clinical data, investment in our clinical programs, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments, our ongoing assessments as to each product candidate's commercial potential and the impact of public health epidemics, such as the COVID-19 pandemic. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our clinical development costs may vary significantly based on factors such as:
whether a collaborator is paying for some or all of the costs;
per patient trial costs;
the number of trials required for approval;
the number of sites included in the trials;
the countries in which the trials are conducted;
the length of time required to enroll eligible patients;
the number of patients that participate in the trials;
the number of doses that patients receive;
the drop-out or discontinuation rates of patients;
potential additional safety monitoring requested by regulatory agencies;
the duration of patient participation in the trials and follow-up;
the cost and timing of manufacturing our product candidates;
the phase of development of our product candidates; and
the efficacy and safety profile of our product candidates.
General and Administrative
Our general and administrative expenses consist primarily of personnel-related expenses for personnel in executive, finance and other administrative functions, facilities and other allocated expenses, and other expenses for outside professional services, including legal, audit and accounting services, and insurance costs. Personnel-related expenses consist of salaries, benefits and stock-based compensation.
We expect our general and administrative expenses to increase substantially in absolute dollars for the foreseeable future as we continue to support our continued research and development activities, grow our business and, if any of our product candidates receive marketing approval, commercialization activities. We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.
Interest income consists of interest earned on our cash, cash equivalents and investments.
Other Income (Expense), Net
Other income (expense), net consists of gains and losses from foreign currency transactions and the remeasurement of contingent consideration related to our acquisition of TomegaVax, Inc., or TomegaVax, and convertible preferred stock warrant liability prior to the IPO. Upon completion of our IPO, the outstanding warrant to purchase shares of our Series A-1 convertible preferred stock automatically converted into a warrant to purchase shares of common stock and therefore, was no longer subject to remeasurement each period.
Provision for Income Taxes
Provision for income taxes consisted of immaterial international income tax.
Results of Operations
Comparison of Years Ended December 31, 2020 and 2019 The following table summarizes our results of operations for the periods presented: Year Ended December 31, 2020 2019 Change (in thousands) Revenue: Grant revenue $ 9,123 $ 7,380 $ 1,743 License revenue from a related party 22,747 - 22,747 Contract revenue 44,498 711 43,787 Total revenue 76,368 8,091 68,277 Operating expenses: Research and development 302,411 148,472 153,939 General and administrative 70,937 37,598 33,339 Total operating expenses 373,348 186,070 187,278 Loss from operations (296,980 ) (177,979 ) (119,001 ) Other income (expense): Interest income 2,836 8,511 (5,675 ) Other expense, net (4,467 ) (5,061 ) 594 Total other income (expense) (1,631 ) 3,450 (5,081 ) Loss before provision for income taxes (298,611 ) (174,529 ) (124,082 ) Provision for income taxes (54 ) (154 ) 100 Net loss $ (298,665 ) $ (174,683 ) $ (123,982 )
Total revenue was $76.4 million and $8.1 million for the years ended December 31, 2020 and 2019, respectively. The increase in total revenue was primarily due to $43.3 million of revenue related to the license granted to GSK under our collaboration agreement, and $22.7 million of revenue related to Brii Biosciences Offshore Limited's, or Brii Bio's, exercise of its option to obtain exclusive rights to develop and commercialize compounds arising from VIR-2218 in the China territory.
Research and Development Expenses The following table shows the primary components of our research and development expenses for the periods presented: . . .
Feb 25, 2021
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