Vir(VIR) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Presents Vir Biotechnology's unaudited condensed consolidated financial statements and detailed notes for Q3 2023 and FY 2022 Condensed Consolidated Balance Sheets Summarizes the company's financial position, assets, liabilities, and equity as of September 30, 2023, and December 31, 2022 | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | ASSETS | | | | Cash and cash equivalents | $452,100 | $848,631 | | Short-term investments | $1,233,628 | $1,521,517 | | Total current assets | $1,769,176 | $2,519,077 | | TOTAL ASSETS | $2,044,895 | $2,802,088 | | LIABILITIES & EQUITY | | | | Total current liabilities | $165,050 | $511,029 | | TOTAL LIABILITIES | $369,810 | $724,125 | | TOTAL STOCKHOLDERS' EQUITY | $1,675,085 | $2,077,963 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $2,044,895 | $2,802,088 | - Total assets decreased from $2.80 billion at December 31, 2022, to $2.04 billion at September 30, 2023, primarily driven by a reduction in cash and cash equivalents and short-term investments[14] - Total liabilities significantly decreased from $724.1 million to $369.8 million, mainly due to a reduction in accrued and other liabilities[14] Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net (loss) income for the three and nine months ended September 30, 2023 and 2022 | Metric (in thousands, except per share) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenues | $2,639 | $374,557 | $69,393 | $1,566,387 | | Total operating expenses | $189,371 | $179,593 | $614,682 | $582,817 | | (Loss) income from operations | $(186,732) | $194,964 | $(545,289) | $983,570 | | Net (loss) income attributable to Vir | $(163,413) | $175,312 | $(499,088) | $617,440 | | Net (loss) income per share, basic | $(1.22) | $1.32 | $(3.73) | $4.66 | - Total revenues for the three months ended September 30, 2023, significantly decreased to $2.6 million from $374.6 million in the same period of 2022, primarily due to lower collaboration revenue[16] - The company reported a net loss of $163.4 million for the three months ended September 30, 2023, a substantial shift from a net income of $175.3 million in the prior year period[16] Condensed Consolidated Statements of Comprehensive (Loss) Income Presents net (loss) income and other comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022 | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) income | $(163,413) | $175,312 | $(499,144) | $617,440 | | Other comprehensive income (loss) | $1,003 | $(4,327) | $7,222 | $(10,781) | | Comprehensive (loss) income attributable to Vir | $(162,410) | $170,985 | $(491,866) | $606,659 | - Comprehensive loss attributable to Vir for the three months ended September 30, 2023, was $(162.4) million, compared to comprehensive income of $171.0 million in the prior year, reflecting the net loss and changes in unrealized gains/losses on investments[19] Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity, including common stock, additional paid-in capital, and retained earnings | Metric (in thousands, except shares) | Balance at Dec 31, 2022 | Balance at Sep 30, 2023 | | :----------------------------------- | :---------------------- | :---------------------- | | Common Stock (Shares) | 133,236,687 | 134,497,886 | | Common Stock (Amount) | $13 | $13 | | Additional Paid-in Capital | $1,709,835 | $1,798,823 | | Accumulated Other Comprehensive Loss | $(9,122) | $(1,900) | | Retained Earnings (Accumulated Deficit) | $377,237 | $(121,851) | | Total Stockholders' Equity | $2,077,963 | $1,675,085 | - Total stockholders' equity decreased from $2.08 billion at December 31, 2022, to $1.68 billion at September 30, 2023, primarily due to a net loss of $499.1 million[25] - Additional paid-in capital increased by $89.0 million, driven by stock-based compensation and proceeds from stock option exercises and ESPP[25] Condensed Consolidated Statements of Cash Flows Analyzes cash flows from operating, investing, and financing activities for the nine months ended September 30, 2023 and 2022 | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Operating activities | $(670,858) | $1,628,127 | | Investing activities | $269,440 | $(1,040,326) | | Financing activities | $5,800 | $32,750 | | Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents | $(395,618) | $620,551 | | Cash, cash equivalents and restricted cash and cash equivalents at end of period | $472,350 | $983,966 | - Net cash used in operating activities was $670.9 million for the nine months ended September 30, 2023, a significant change from $1.63 billion provided by operating activities in the prior year, mainly due to a net loss and a decrease in accrued liabilities[28][174] - Net cash provided by investing activities was $269.4 million, primarily from maturities of investments offsetting purchases of investments[28][176] Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed explanations of accounting policies, fair value measurements, grant, and collaboration agreements 1. Organization Describes Vir Biotechnology's focus on infectious diseases, its subsidiary Encentrio, and financial position - Vir Biotechnology, Inc. is an immunology company focused on treating and preventing serious infectious diseases, with a clinical pipeline targeting HBV, HDV, and HIV, and preclinical candidates for influenza, COVID-19, RSV, MPV, and HPV[30] - In January 2023, Vir incorporated Encentrio Therapeutics, Inc., a majority-owned subsidiary for oncology therapeutics research and development, increasing its ownership to 100% during Q2 2023[31] - As of September 30, 2023, the Company had $1.7 billion in cash, cash equivalents, and investments, which is believed to be sufficient to fund operations for at least the next twelve months[33] 2. Summary of Significant Accounting Policies Outlines the accounting principles, consolidation practices, and revenue recognition methods used in financial reporting - The financial statements are prepared in conformity with GAAP and SEC rules, consolidating Vir and its majority-owned subsidiaries, with intercompany balances eliminated[34] - The company's financial instruments, including cash, cash equivalents, and investments, are subject to credit risk, but management believes this risk is not significant due to investment policies and the resolution of the SVB closure[39][40] - Revenue recognition follows ASC 606 for collaboration, license, and contract revenue, identifying performance obligations, determining transaction price, and allocating it. Grant revenue is recognized when donor-imposed conditions are met[47][55] 3. Fair Value Measurements Details the valuation hierarchy and fair values of financial assets and liabilities, including equity investments and contingent consideration | Asset Type (in thousands) | Valuation Hierarchy | Amortized Cost | Aggregate Fair Value (Sep 30, 2023) | | :------------------------ | :------------------ | :------------- | :---------------------------------- | | Money market funds | Level 1 | $470,323 | $470,323 | | U.S. government treasuries | Level 2 | $1,073,982 | $1,072,988 | | U.S. government agency bonds and discount notes | Level 2 | $167,372 | $167,166 | | Equity securities | Level 1 | N/A | $10,825 | | Total financial assets | | $1,711,677 | $1,721,302 | - The company recognized an unrealized loss of $2.7 million for the three months and $20.9 million for the nine months ended September 30, 2023, on its equity investment in Brii Bio Parent[65] - Contingent consideration for the Humabs acquisition was valued at $24.3 million as of September 30, 2023, using Level 3 inputs including discount rates (12.7%-13.3%) and probability of achievement (14.4%-60.0%) for clinical/regulatory milestones, and a Monte Carlo simulation for commercial milestones[66][67][68] 4. Grant Agreements Summarizes grant agreements with the Bill & Melinda Gates Foundation and BARDA for vaccine and antibody programs - Vir has grant agreements with the Bill & Melinda Gates Foundation totaling up to $49.9 million for HCMV vaccine programs (HIV, tuberculosis) and vaccinal antibody programs (HIV, malaria), expiring through June 2027[71] - Grant revenue from the Bill & Melinda Gates Foundation was $3.8 million and $10.5 million for the three and nine months ended September 30, 2023, respectively[73] - In September 2023, BARDA awarded Vir $50.1 million in new funding, including $40.0 million for VIR-7229 development through Phase 1 and $10.1 million for discovery of new mAbs against a second pandemic pathogen[77] - Grant revenue from BARDA was $2.9 million and $29.0 million for the three and nine months ended September 30, 2023, respectively, with $60.9 million of potential future reimbursement remaining[78] 5. Collaboration and License Agreements Details key collaboration and license agreements, including amendments to the GSK SARS-CoV-2 agreement and the expanded GSK collaboration - The 2020 GSK Agreement for SARS-CoV-2 collaboration was amended in February 2023 to remove the Vaccine Program and narrow the Antibody Program to sotrovimab and VIR-7832, with Vir retaining independent development rights for terminated programs subject to royalties[79][80] | Collaboration Revenue (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Profit-sharing amount | $(6,038) | $291,226 | $(7,198) | $1,863,374 | | Profit-sharing amount previously constrained, released | $1,651 | $20,350 | $35,606 | $20,350 | | Total collaboration revenue, net | $(4,387) | $309,145 | $28,408 | $1,483,860 | - Collaboration revenue for the three and nine months ended September 30, 2023, was negative $4.4 million and positive $28.4 million, respectively, a significant decrease from 2022, primarily due to lower profit-sharing from sotrovimab sales and payments to GSK for manufacturing expenses[85][86] - The 2021 Expanded GSK Collaboration focuses on influenza mAbs (excluding VIR-2482 unless GSK options in), expanded functional genomics, and additional programs for selected pathogens (RSV selected as first). Parties share 50% of development costs and profits/losses[89][91][92] - GSK has an exclusive option for VIR-2482, with a $300.0 million exercise fee if criteria are met, and a potential $200.0 million milestone payment for the first influenza product[93] 6. Balance Sheet Components Breaks down property and equipment, and accrued and other liabilities, highlighting changes over time | Property and Equipment, net (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------------------- | :----------- | :----------- | | Laboratory equipment | $43,158 | $36,533 | | Leasehold improvements | $80,207 | $84,422 | | Total property and equipment, net | $99,309 | $105,609 | - Depreciation expenses were $4.5 million and $14.6 million for the three and nine months ended September 30, 2023, respectively, compared to $1.6 million and $4.4 million for the same periods in 2022[97] | Accrued and Other Liabilities (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------------- | :----------- | :----------- | | Research and development expenses | $65,693 | $48,880 | | Net profit-sharing amount | $6,964 | $357,762 | | Total accrued and other liabilities | $146,111 | $489,090 | - Accrued and other liabilities decreased significantly from $489.1 million at December 31, 2022, to $146.1 million at September 30, 2023, primarily due to a reduction in the net profit-sharing amount[98] 7. Commitments and Contingencies Addresses potential legal proceedings and indemnification provisions, noting no material impact on financial statements - The company may be party to legal proceedings in the normal course of business but is not currently involved in any material legal proceedings[99][190] - Vir enters into agreements with indemnification provisions, but no demands have been made to date that would materially affect financial statements[100][102] 8. Related Party Transaction Discloses Vir's minority equity interest in Brii Biosciences and shared board membership - Vir holds a minority equity interest in Brii Biosciences Offshore Limited through Brii Bio Parent, and one of Vir's board members also serves on Brii Bio Parent's board[103] 9. Stock-Based Awards Details assumptions for stock option valuations and reports stock-based compensation expenses by functional area | Stock Option Assumption | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Expected term (years) | 6.1 | 6.1 | 5.5 - 6.1 | 5.3 - 6.1 | | Expected volatility | 99.9% - 100.9% | 110.6% - 110.8% | 99.6% - 101.5% | 103.8% - 111.2% | | Risk-free interest rate | 4.0% - 4.4% | 3.0% - 3.6% | 3.4% - 4.4% | 1.6% - 3.6% | | Expected dividend yield | — | — | — | — | | Stock-Based Compensation Expense (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $15,819 | $12,607 | $46,284 | $39,791 | | Selling, general and administrative | $11,125 | $12,207 | $36,760 | $37,426 | | Total stock-based compensation | $26,944 | $24,814 | $83,044 | $77,217 | 10. Net (Loss) Income Per Share Presents basic and diluted net (loss) income per share, including weighted-average shares outstanding | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) income attributable to Vir | $(163,413) | $175,312 | $(499,088) | $617,440 | | Weighted-average shares outstanding, basic | 134,289,620 | 132,729,530 | 133,969,878 | 132,422,028 | | Net (loss) income per share, basic | $(1.22) | $1.32 | $(3.73) | $4.66 | | Net (loss) income per share, diluted | $(1.22) | $1.30 | $(3.73) | $4.58 | - For periods of net loss (e.g., Q3 2023 and 9M 2023), basic and diluted net loss per share are the same as potential common securities would be anti-dilutive[110] 11. Income Taxes Reports (loss) income before taxes, benefit from (provision for) income taxes, and effective tax rates | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | (Loss) income before benefit from (provision for) income taxes | $(166,626) | $217,732 | $(507,437) | $905,918 | | Benefit from (provision for) income taxes | $3,213 | $(42,420) | $8,293 | $(288,478) | | Effective tax rate | 1.9% | 19.5% | 1.6% | 31.8% | - The benefit from income taxes for the three and nine months ended September 30, 2023, was primarily due to a pre-tax loss and the ability to carry back research and development credits to 2022[113] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, clinical pipeline developments, collaboration impacts, and liquidity Overview Introduces Vir Biotechnology as an immunology company focused on infectious diseases with a diverse pipeline - Vir Biotechnology is an immunology company focused on treating and preventing serious infectious diseases, leveraging two technology platforms to stimulate and enhance the immune system[116][117] - The company's clinical pipeline targets HBV, HDV, and HIV, with preclinical candidates for influenza, COVID-19, RSV, MPV, and HPV[117] - Vir has internal process development, manufacturing, and quality capabilities, supplemented by CDMOs for early- and late-stage product candidates[118] Significant Developments Highlights recent clinical trial data, new funding, pipeline advancements, and key executive appointments - Phase 2 MARCH Part B data for VIR-3434 and VIR-2218 in chronic hepatitis B, and initial data from Phase 2 SOLSTICE trial for chronic HDV, were to be presented at AASLD on November 13, 2023[120] - Initial data from the Phase 2 PREVAIL platform trial, evaluating combinations of VIR-3434, VIR-2218, and/or peginterferon alpha in CHB, are expected in the first half of 2024[121] - Phase 1 trial of VIR-1388, an investigational HIV T cell vaccine, initiated in September 2023 with initial data expected in H2 2024, supported by NIH and Bill & Melinda Gates Foundation[126] - Awarded $50 million in new BARDA funding in October 2023: $40 million for VIR-7229 (COVID-19 mAb) Phase 1 development (expected to initiate in 2024, complete H2 2025) and $10 million for discovery of new mAbs against a second pandemic pathogen[126] - Full analysis of Phase 2 PENINSULA trial data for VIR-2482 (influenza A prevention) expected in Q1 2024; post-hoc analyses showed improved efficacy (57% to 65% reduction in symptomatic flu) with adjusted case definitions[126] - Preclinical pipeline advancing next-generation mAbs using AI/machine learning, with multiple new IND filings expected in the next 12-24 months, including VIR-2981 (influenza A/B), VIR-8190 (RSV/MPV), and VIR-1949 (HPV therapeutic vaccine)[124][127] - Jennifer Towne, Ph.D., appointed Executive Vice President and Chief Scientific Officer, effective November 6, 2023[127] Our Collaboration, License and Grant Agreements Emphasizes the importance of collaboration, license, and grant agreements to the company's business - The company has various collaboration, license, and grant agreements, detailed in Notes 4 and 5 of the financial statements, which are crucial to its business[128] Components of Operating Results Explains revenue recognition, research and development, and selling, general and administrative expense components - Sotrovimab's EUA in the U.S. has been excluded due to Omicron subvariants, and no BLA filing is planned, leading to uncertainty in future revenue from its sales[129] - Collaboration revenue includes profit-share from sotrovimab sales under the 2020 GSK Agreement, net of costs and allowable expenses, with variable consideration subject to constraint based on manufacturing expenses[130][133] - Research and development expenses are recognized as incurred and are expected to increase substantially as product candidates advance through preclinical and clinical trials[137][139] - Selling, general and administrative expenses are also expected to increase to support R&D, potential commercialization, and public company operations[143] Results of Operations Compares total revenues, operating expenses, and net (loss) income for the current and prior periods | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change (3 Months) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change (9 Months) | | :-------------------- | :-------------------------- | :-------------------------- | :---------------- | :-------------------------- | :-------------------------- | :------------------ | | Total revenues | $2,639 | $374,557 | $(371,918) | $69,393 | $1,566,387 | $(1,496,994) | | Research and development | $148,253 | $114,166 | $34,087 | $477,756 | $319,475 | $158,281 | | Net (loss) income | $(163,413) | $175,312 | $(338,725) | $(499,144) | $617,440 | $(1,116,584) | - Collaboration revenue decreased significantly due to lower profit-sharing from sotrovimab sales, resulting in negative revenue of $6.0 million for Q3 2023, partially offset by a $1.7 million release of previously constrained profit-sharing[151] - Research and development expenses increased by $34.1 million (Q3 YoY) and $158.3 million (9M YoY), driven by higher personnel costs, contract manufacturing expenses (including $21.9 million for VIR-2482 cancellation costs), increased clinical trial costs, and impairment charges[156][157] - Interest income increased due to higher interest rates and larger investment balances[161] - The company recorded a benefit from income taxes in 2023 due to pre-tax loss and R&D credit carry-back, contrasting with a provision for income taxes in 2022 due to significant taxable collaboration revenue[163] Liquidity, Capital Resources and Capital Requirements Assesses the company's cash position, funding needs, and operating lease commitments for future operations - As of September 30, 2023, Vir had $1.7 billion in cash, cash equivalents, and investments, which is expected to fund operations for at least the next 12 months[164][166] - The company may need additional capital to complete product development and commercialization, potentially through equity/debt financings, government funding, or collaborations, which could dilute stockholders or impose restrictions[167][209] - Operating lease commitments total $161.1 million through 2033 for office and laboratory spaces[169] Cash Flows Analyzes cash flows from operating, investing, and financing activities, detailing changes and primary drivers | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Operating activities | $(670,858) | $1,628,127 | | Investing activities | $269,440 | $(1,040,326) | | Financing activities | $5,800 | $32,750 | | Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents | $(395,618) | $620,551 | - Net cash used in operating activities for 9M 2023 was $670.9 million, primarily due to a net loss of $499.1 million and a $316.9 million decrease in accrued liabilities related to profit-sharing settlement[173][174] - Net cash provided by investing activities for 9M 2023 was $269.4 million, mainly from $1.5 billion in investment maturities, partially offset by $1.2 billion in new investment purchases[176] - Net cash provided by financing activities for 9M 2023 was $5.8 million, from stock option exercises and ESPP common stock issuance[178] Critical Accounting Policies and Estimates Confirms no significant changes in critical accounting policies during the nine months ended September 30, 2023 - No significant changes in critical accounting policies occurred during the nine months ended September 30, 2023, compared to those disclosed in the 2022 Annual Report on Form 10-K[181] Item 3. Quantitative and Qualitative Disclosures About Market Risk Outlines exposure to market risks including interest rate, foreign currency, and equity investment risks - The company's exposure to interest rate risk is not significant, as investments are primarily short-term money market funds and U.S. government treasury bonds maturing prior to liquidity needs[183] - Foreign currency risk is primarily related to operations in Switzerland and Australia, and collaboration with GSK, affecting Swiss Franc, Australian dollar, and British pound, but transaction gains and losses were immaterial[184] - Equity investment risk stems from holding Brii Bio Parent ordinary shares, valued at $10.8 million as of September 30, 2023, with fair value changes impacting operating results[185] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of September 30, 2023, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[186] - There were no changes in internal control over financial reporting during the quarter ended September 30, 2023, that materially affected or are reasonably likely to materially affect internal control over financial reporting[187] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any material legal proceedings or aware of significant threatened actions - Vir is not currently involved in any material legal proceedings and is unaware of any pending or threatened legal actions that could adversely affect its business, operating results, or financial condition[190] Item 1A. Risk Factors Details significant risks including financial losses, funding needs, regulatory uncertainties, competition, and operational challenges Risk Factors Summary Summarizes key risks such as net losses, funding requirements, regulatory uncertainties, and operational dependencies - The company has incurred net losses and expects to continue doing so, requiring substantial additional funding to finance operations[192] - Sotrovimab's EUA has been excluded in all U.S. regions, and its use is limited outside the U.S., with no meaningful sales expected without reauthorization[192] - Future success depends on timely clinical development, regulatory approval, and commercialization of product candidates, which is highly uncertain[192] - Significant risks include reliance on third parties for manufacturing, challenges in obtaining and maintaining patent protection, dependence on key personnel, and potential information system failures or security breaches[192] Risks Related to Our Financial Position and Capital Needs Addresses risks related to ongoing net losses, funding requirements, and potential impacts from financial industry instability - Vir incurred a net loss of $499.1 million for the nine months ended September 30, 2023, and expects to continue incurring significant expenses and net losses in the foreseeable future[194][195] - Sotrovimab is not currently authorized for use in any U.S. region, and a BLA filing is not planned, creating uncertainty for future revenue and potential for continued net operating losses[196][213] - The company may require substantial additional funding beyond its current $1.7 billion in cash and investments to complete development and commercialization, which could lead to stockholder dilution or relinquishing product rights[206][209][210] - Adverse developments in the financial services industry, such as bank failures (e.g., SVB), could impact liquidity and access to capital, despite current protection of deposits[226][227][228] Risks Related to the Development and Commercialization Covers uncertainties in clinical development, regulatory approval, market demand, and product liability for candidates - Future success is highly dependent on successful clinical development, regulatory approval, and commercialization of product candidates, which is uncertain and may face unforeseen challenges[229] - Sotrovimab's EUA exclusion in the U.S. and limitations abroad, coupled with no BLA filing plans, mean no meaningful sales are expected without FDA reauthorization[211][213] - Market demand for COVID-19 product candidates is adversely impacted by new variants, competing therapies (mAbs, oral antivirals, vaccines), and administration challenges[219] - Success in preclinical studies or earlier clinical trials does not guarantee success in later trials; for example, VIR-2482's Phase 2 trial for influenza A did not meet primary or secondary efficacy endpoints[245][246] - Clinical product development is lengthy, expensive, and uncertain, with potential for delays due to patient enrollment/retention issues, regulatory feedback, or unforeseen adverse events[250][252][258] - The use of novel technologies like HCMV as a vaccine vector (e.g., VIR-1388) may face increased regulatory scrutiny and public perception challenges, potentially delaying development and approval[254][292][293] - Product liability lawsuits could lead to substantial liabilities, decreased demand, and reputational harm, with insurance potentially inadequate to cover all risks[295][297] Risks Related to Regulatory Compliance Addresses evolving regulatory pathways, biosimilar competition, healthcare fraud laws, reimbursement, and legislative reforms - Regulatory pathways for COVID-19 product candidates are evolving, with sotrovimab's EUA deauthorization in the U.S. and no BLA plans, creating uncertainty and potential for unexpected challenges[298] - Biologic product candidates may face competition from biosimilars after regulatory exclusivity periods, and from other products receiving EUA approval, impacting sales[299][302] - Relationships with healthcare professionals and third-party payors are subject to federal and state healthcare fraud and abuse laws, with non-compliance potentially leading to substantial penalties[303][304] - Coverage and adequate reimbursement for approved product candidates are uncertain, and inadequate reimbursement could hinder commercial success[306][308] - Healthcare legislative reforms, such as the Inflation Reduction Act (IRA), could impose price negotiations, rebates, and other cost-containment measures, negatively impacting product pricing and demand[312][314][316] - The company is subject to anti-corruption, anti-bribery, and anti-money laundering laws, with non-compliance potentially leading to criminal/civil liability and reputational harm[319][321] Risks Related to Our Dependence on Third Parties Highlights reliance on third-party CDMOs and CROs for manufacturing and clinical trials, and associated operational risks - Vir relies heavily on third-party CDMOs for process development, manufacturing, storage, and distribution of product candidates, lacking internal full-scale facilities[322] - Dependence on third-party manufacturers carries risks including delays, insufficient capacity, quality control issues, compliance failures (cGMP), and potential for increased costs or supply disruptions[323][324][327] - Reliance on foreign CDMOs exposes the company to trade restrictions, foreign regulatory requirements, and geopolitical risks (e.g., China's regulations, Ukraine-Russia war), which could impact supply and funding[325][326] - The company relies on CROs and clinical trial sites for preclinical studies and clinical trials, with limited influence over their performance, posing risks of delays, data unreliability, and non-compliance with GLPs/GCPs[335][336][337] Risks Related to Our Intellectual Property Covers risks of losing IP rights, inadequate patent protection, infringement claims, and inability to protect trade secrets - Breaching license agreements could lead to loss of intellectual property rights and termination of product development and commercialization efforts for related candidates[341][342] - Failure to obtain and maintain broad or robust patent protection for product candidates and technology could allow competitors to commercialize similar products, adversely affecting Vir's competitive position[343][344][348] - Third parties may allege infringement, misappropriation, or violation of their intellectual property rights, leading to costly litigation, licensing requirements, or injunctions that could block development and commercialization[357][358] - Inability to protect trade secrets, including unpatented know-how and proprietary information, could harm business and competitive position, especially if shared with third parties or independently developed by competitors[376][377][379] - The Bill & Melinda Gates Foundation's non-exclusive licenses to Vir's intellectual property, if exercised, could allow them to develop and commercialize competing products, negatively impacting Vir's market position[384][385] Risks Related to Our Business Operations, Employee Matters and Managing Growth Addresses dependence on key personnel, acquisition risks, growth management, business disruptions, and cybersecurity threats - The company is highly dependent on key personnel, and the loss of management, scientific, or clinical staff, or difficulties in recruiting and retaining talent, could harm business operations and growth strategy[386][388][389] - Acquisitions or investments in other companies/technologies could divert management attention, dilute stockholders, disrupt operations, and may not yield anticipated benefits, potentially leading to impairment charges[391][392][394] - Significant growth in employees and operations, including a hybrid/remote workforce model, presents management challenges, potential for increased costs, and risks to corporate culture and cybersecurity[395][396][402][403] - Business disruptions from natural disasters, geopolitical events (e.g., Ukraine-Russia war), or public health pandemics (e.g., COVID-19) could seriously harm revenue, increase costs, and delay product development[397][398][399][400] - Information system failures or security breaches (e.g., malware, cyber-attacks, user error) could disrupt product development, operations, lead to data loss, unauthorized disclosure of personal information, and incur significant remediation costs[405][406][407][408] - The company is subject to stringent and evolving data privacy and security laws (HIPAA, GDPR, CCPA, CPRA), with non-compliance potentially leading to significant fines, penalties, litigation, and reputational damage[409][411][413][415][420] - Misconduct by employees, principal investigators, consultants, or partners (e.g., fraud, non-compliance with regulations, insider trading) could result in regulatory sanctions, penalties, and reputational harm[421][423] - The ability to use net operating losses (NOLs) to offset future taxable income may be limited by ownership changes (Sections 382/383 of the Code) and changes in tax laws (e.g., Tax Cuts and Jobs Act of 2017)[424][426][427] Risks Related to Ownership of Our Common Stock Discusses stock price volatility, concentrated ownership, dividend policy, and public company compliance costs - Financial condition and operating results are expected to fluctuate significantly due to R&D costs, manufacturing expenses, clinical trial outcomes, competition, regulatory delays, market demand, and global economic/political factors[428][429] - The market price of common stock has been and may remain volatile, influenced by industry trends, economic factors, public statements, and sales by stockholders, potentially leading to substantial losses for investors[430][431][432] - Concentrated ownership by executive officers, directors, and principal stockholders may limit new investors' influence on corporate decisions and could delay or prevent acquisitions[434] - The company does not anticipate paying cash dividends, making capital appreciation the sole source of gain for stockholders in the foreseeable future[436] - Operating as a public company incurs significant increased costs and requires substantial management time for compliance with SEC, Nasdaq, and other regulatory requirements (e.g., Sarbanes-Oxley Act, Dodd-Frank Act, state laws)[437][438][439] - Failure to develop or maintain effective internal control over financial reporting could impair accurate financial statements, erode investor confidence, and lead to stock price decline or regulatory sanctions[440][441] - Provisions in corporate charter documents and Delaware law could make an acquisition more difficult and prevent stockholders from influencing management changes[445] - The exclusive forum provision in the amended and restated certificate of incorporation for Delaware-based disputes may limit stockholders' ability to choose a favorable judicial forum[446][449] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This item is not applicable for the reporting period - This item is marked as 'Not applicable' for the reporting period[450] Item 3. Defaults Upon Senior Securities This item is not applicable for the reporting period - This item is marked as 'Not applicable' for the reporting period[451] Item 4. Mine Safety Disclosures This item is not applicable for the reporting period - This item is marked as 'Not applicable' for the reporting period[452] Item 5. Other Information No Rule 10b5-1 trading arrangements were entered or terminated by directors or officers this quarter - No directors or officers entered into or terminated a Rule 10b5-1 trading arrangement or adopted/terminated a non-Rule 10b5-1 trading arrangement during the quarter ended September 30, 2023[455] - Transactions in company securities by directors and officers must comply with the company's insider trading policy and applicable U.S. federal securities laws[454] Item 6. Exhibits Lists all exhibits filed with Form 10-Q, including corporate governance, agreements, certifications, and XBRL files - Exhibits include Amended and Restated Certificate of Incorporation and Bylaws, Separation Agreement, Other Transaction for Advanced Research (OTAR) with BARDA and its amendment, and certifications from principal executive and financial officers[456] - XBRL Instance, Schema, Calculation, Definition, and Presentation Linkbase Documents are also filed as exhibits[456]