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vir-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

__________________________________________________

FORM 10-Q

__________________________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___________to

Commission File Number: 001-39083

__________________________________________________

Vir Biotechnology, Inc.

(Exact Name of Registrant as Specified in Its Charter)

__________________________________________________


Delaware			81-2730369
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
499 Illinois Street, Suite 500, San Francisco, California			94158
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s Telephone Number, Including Area Code: (415) 906-4324

__________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

VIR

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of July 28, 2023, the registrant had 134,251,320 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (unaudited)	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (unaudited)	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 3.	Defaults Upon Senior Securities	84
Item 4.	Mine Safety Disclosures	84
Item 5.	Other Information	84
Item 6.	Exhibits	85
Signatures		86

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, research and development, potential of, and expectations for, our pipeline, planned clinical trials and preclinical studies, technology platforms, the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, the potential benefits of collaborations, projected costs, prospects, plans, objectives of management, expected market growth, the timing of availability of clinical data, program updates and data disclosures, the ability of sotrovimab to treat and/or prevent COVID-19, our plans for sotrovimab, and our plans for our hepatitis B virus, hepatitis D virus, influenza, COVID-19 and human immunodeficiency virus portfolios are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. Other sections of this report may include additional factors that could harm our business and financial performance. Drug development and commercialization involve a high degree of risk, and only a small number of research and development programs result in commercialization of a product. Results in early-stage clinical trials may not be indicative of full results or results from later stage or larger scale clinical trials and do not ensure regulatory approval. You should not place undue reliance on these statements, or the scientific data presented. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the section titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	June 30, 2023		December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	666,949	$	848,631
Short-term investments	1,166,953		1,521,517
Restricted cash and cash equivalents, current	13,163		12,681
Equity investments	13,531		31,892
Prepaid expenses and other current assets	85,736		104,356
Total current assets	1,946,332		2,519,077
Intangible assets, net	25,590		32,755
Goodwill	16,937		16,937
Property and equipment, net	104,126		105,609
Operating right-of-use assets	74,934		82,557
Restricted cash and cash equivalents, noncurrent	6,744		6,656
Long-term investments	52,358		23,927
Other assets	16,853		14,570
TOTAL ASSETS	$	2,243,874	$	2,802,088
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	12,362	$	6,422
Accrued and other liabilities	197,580		489,090
Deferred revenue, current portion	15,681		15,517
Total current liabilities	225,623		511,029
Deferred revenue, noncurrent	53,207		53,207
Operating lease liabilities, noncurrent	117,815		123,837
Contingent consideration, noncurrent	24,927		24,937
Other long-term liabilities	12,094		11,115
TOTAL LIABILITIES	433,666		724,125
Commitments and contingencies (Note 7)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of June 30, 2023 and December 31, 2022; no shares issued and outstanding as of June 30, 2023 and December 31, 2022	—		—
Common stock, $0.0001 par value; 300,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 134,230,494 and 133,236,687 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	13		13
Additional paid-in capital	1,771,536		1,709,835
Accumulated other comprehensive loss	(2,903)		(9,122)
Retained earnings	41,562		377,237
TOTAL STOCKHOLDERS’ EQUITY	1,810,208		2,077,963
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,243,874	$	2,802,088

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Collaboration revenue	$	(13,779)	$	(54,941)	$	32,795	$	1,174,715
Contract revenue	1,057		12,254		1,195		12,536
Grant revenue	16,519		2,058		32,764		4,579
Total revenues	3,797		(40,629)		66,754		1,191,830
Operating expenses:
Cost of revenue	22		27,921		1,929		118,070
Research and development	171,860		115,082		329,503		205,309
Selling, general and administrative	47,101		41,590		93,879		79,845
Total operating expenses	218,983		184,593		425,311		403,224
(Loss) income from operations	(215,186)		(225,222)		(358,557)		788,606
Other income (expense):
Change in fair value of equity investments	(5,086)		(11,390)		(18,189)		(106,429)
Interest income	23,016		2,200		44,323		2,588
Other (expense) income, net	(367)		691		(8,388)		3,421
Total other income (expense)	17,563		(8,499)		17,746		(100,420)
(Loss) income before benefit from (provision for) income taxes	(197,623)		(233,721)		(340,811)		688,186
Benefit from (provision for) income taxes	2,848		157,228		5,080		(246,058)
Net (loss) income	$	(194,775)	$	(76,493)	$	(335,731)	$	442,128
Net loss attributable to noncontrolling interest	$	—	$	—	$	(56)	$	—
Net (loss) income attributable to Vir	$	(194,775)	$	(76,493)	$	(335,675)	$	442,128
Net (loss) income per share attributable to Vir, basic	$	(1.45)	$	(0.58)	$	(2.51)	$	3.34
Net (loss) income per share attributable to Vir, diluted	$	(1.45)	$	(0.58)	$	(2.51)	$	3.28
Weighted-average shares outstanding, basic	134,059,079		132,450,018		133,807,357		132,326,244
Weighted-average shares outstanding, diluted	134,059,079		132,450,018		133,807,357		134,643,840

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net (loss) income	$	(194,775)	$	(76,493)	$	(335,731)	$	442,128
Other comprehensive income (loss):
Unrealized gain (loss) on investments	307		(2,739)		6,201		(6,435)
Amortization of actuarial gain (loss)	9		(9)		18		(19)
Other comprehensive income (loss)	316		(2,748)		6,219		(6,454)
Comprehensive (loss) income	$	(194,459)	$	(79,241)	$	(329,512)	$	435,674
Comprehensive loss attributable to noncontrolling interest	—		—		(56)		—
Comprehensive (loss) income attributable to Vir	$	(194,459)	$	(79,241)	$	(329,456)	$	435,674

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except shares amounts)

(unaudited)


	Vir Stockholders' Equity
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling interest		Total Stockholders' Equity
	Share	Amount
Balance at March 31, 2023	133,930,957	$	13	$	1,737,626	$	(3,219)	$	236,337	$	44	$	1,970,801
Vesting of restricted common stock	100,292	—		—		—		—		—		—
Exercise of stock options	84,342	—		742		—		—		—		742
Issuance of common stock under employee stock purchase plan	114,903	—		2,605		—		—		—		2,605
Stock-based compensation	—	—		30,619		—		—		—		30,619
Other comprehensive income	—	—		—		316		—		—		316
Increase in ownership interest in a subsidiary	—	—		(56)		—		—		(44)		(100)
Net loss	—	—		—		—		(194,775)		—		(194,775)
Balance at June 30, 2023	134,230,494	$	13	$	1,771,536	$	(2,903)	$	41,562	$	—	$	1,810,208

	Vir Stockholders' Equity
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling interest		Total Stockholders' Equity
	Share	Amount
Balance at March 31, 2022	132,353,441	$	13	$	1,625,785	$	(4,805)	$	380,021	$	—	$	2,001,014
Vesting of restricted common stock	53,712	—		—		—		—		—		—
Exercise of stock options	96,484	—		1,074		—		—		—		1,074
Issuance of common stock under employee stock purchase plan	94,175			2,066		—		—		—		2,066
Stock-based compensation	—	—		27,099		—		—		—		27,099
Other comprehensive loss	—	—		—		(2,748)		—		—		(2,748)
Net loss	—	—		—		—		(76,493)		—		(76,493)
Balance at June 30, 2022	132,597,812	$	13	$	1,656,024	$	(7,553)	$	303,528	$	—	$	1,952,012

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except shares amounts)

(unaudited)


	Vir Stockholders' Equity
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling interest		Total Stockholders' Equity
	Share	Amount
Balance at December 31, 2022	133,236,687	$	13	$	1,709,835	$	(9,122)	$	377,237	$	—	$	2,077,963
Vesting of restricted common stock	617,460	—		—		—		—		—		—
Exercise of stock options	261,444	—		3,052		—		—		—		3,052
Issuance of common stock under employee stock purchase plan	114,903	—		2,605		—		—		—		2,605
Stock-based compensation	—	—		56,100		—		—		—		56,100
Other comprehensive income	—	—		—		6,219		—		—		6,219
Contributions from noncontrolling interest owners	—	—		—		—		—		100		100
Increase in ownership interest in a subsidiary	—	—		(56)		—		—		(44)		(100)
Net loss	—	—		—		—		(335,675)		(56)		(335,731)
Balance at June 30, 2023	134,230,494	$	13	$	1,771,536	$	(2,903)	$	41,562	$	—	$	1,810,208

	Vir Stockholders' Equity
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		(Accumulated Deficit) Retained Earnings		Noncontrolling interest		Total Stockholders' Equity
	Share	Amount
Balance at December 31, 2021	131,161,404	$	13	$	1,571,535	$	(1,099)	$	(138,600)	$	—	$	1,431,849
Issuance of common stock in connection with a grant agreement	881,365	—		28,462		—		—		—		28,462
Vesting of restricted common stock	270,598	—		—		—		—		—		—
Exercise of stock options	190,270	—		1,558		—		—		—		1,558
Issuance of common stock under employee stock purchase plan	94,175	—		2,066		—		—		—		2,066
Stock-based compensation	—	—		52,403		—		—		—		52,403
Other comprehensive loss	—	—		—		(6,454)		—		—		(6,454)
Net income	—	—		—		—		442,128		—		442,128
Balance at June 30, 2022	132,597,812	$	13	$	1,656,024	$	(7,553)	$	303,528	$	—	$	1,952,012

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(335,731)	$	442,128
Adjustments to reconcile net (loss) income to net cash (used in) provided for operating activities:
Change in estimated constraint on profit-sharing amount	(26,285)		397,433
Depreciation and amortization	10,120		2,882
Amortization of intangible assets	266		266
(Accretion of discounts) amortization of premiums on investments, net	(12,366)		1,732
Payment of contingent consideration in excess of acquisition date fair value	—		(93,803)
Noncash lease expense	4,401		4,283
Change in fair value of equity investments	18,189		106,428
Change in estimated fair value of contingent consideration	(10)		5,633
Stock-based compensation	56,100		52,403
In-process research and development impairment	6,899		—
Long-lived assets impairment	5,366		—
Other	172		292
Changes in operating assets and liabilities:
Receivable from collaboration	3,041		433,689
Prepaid expenses and other current assets	27,298		(5,472)
Other assets	(2,283)		(41)
Accounts payable	5,630		2,444
Accrued liabilities and other long-term liabilities	(269,765)		145,381
Operating lease liabilities	(6,235)		(1,012)
Deferred revenue	164		15,559
Net cash (used in) provided by operating activities	(515,029)		1,510,225
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of an equipment	—		11
Purchases of property and equipment	(16,324)		(36,439)
Purchases of investments	(694,289)		(341,293)
Maturities of investments	1,039,007		—
Net cash provided by (used in) investing activities	328,394		(377,721)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock in connection with a grant agreement	—		28,462
Payment of principal on financing lease obligation	(134)		(124)
Proceeds from exercise of stock options	3,052		1,558
Issuance of common stock under ESPP	2,605		2,066
Contributions from noncontrolling interest owners	100		—
Increase in ownership interest in a subsidiary	(100)		—
Payment of contingent consideration	—		(1,197)
Net cash provided by financing activities	5,523		30,765
Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents	(181,112)		1,163,269
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period	867,968		363,415
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	686,856	$	1,526,684
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS TO THE CONDENSED CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	$	666,949	$	1,505,183
Restricted cash and cash equivalents, current	13,163		13,147
Restricted cash and cash equivalents, noncurrent	6,744		8,354
Total cash, cash equivalents and restricted cash and cash equivalents	$	686,856	$	1,526,684

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization

Business Overview

Vir Biotechnology, Inc. (“Vir” or the “Company”) is an immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases. Its current pipeline consists of sotrovimab (where marketing authorization has been granted, marketed under the brand name Xevudy®) and other product candidates targeting hepatitis B virus (“HBV”), hepatitis D virus (“HDV”), influenza A and B virus, human immunodeficiency virus (“HIV”) and coronavirus disease 2019 (“COVID-19”). Vir has several preclinical candidates in its pipeline. Vir has assembled technology platforms that are designed to stimulate and enhance the immune system by exploiting critical observations of natural immune processes.

In January 2023, a majority-owned subsidiary was incorporated in the State of Delaware, Encentrio Therapeutics, Inc. (“Encentrio”). The Company initially owned 80% of Encentrio’s outstanding voting shares. In the three months ended June 30, 2023, the Company increased its ownership of Encentrio's outstanding voting shares to 100%. The primary purpose of Encentrio is to conduct research and development of oncology therapeutics.

Liquidity and Capital Resources

In November 2020, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), under which the Company may from time to time offer and sell shares of its common stock for an aggregate offering price of up to $300.0 million, through or to Cowen, acting as sales agent or principal. The shares will be offered and sold under the Company’s shelf registration statement on Form S-3 and a related prospectus filed with the Securities and Exchange Commission (the “SEC”) on November 10, 2020. The Company will pay Cowen a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Cowen with customary indemnification and contribution rights. As of June 30, 2023, no shares have been sold under the Sales Agreement. The Sales Agreement will expire in November 2023.

As of June 30, 2023, the Company had $1.9 billion in cash, cash equivalents, and investments, which the Company believes will be sufficient to fund its operations for a period through at least twelve months from the issuance date of these unaudited condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. The unaudited condensed consolidated financial statements include the accounts of Vir and its majority-owned subsidiaries. For consolidated entities where Vir owns or is exposed to less than 100.0% of the economics, the Company records net income (loss) attributable to noncontrolling interests, net of tax in its unaudited condensed consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. All intercompany balances and transactions have been eliminated upon consolidation.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial information. The condensed consolidated results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or for any other future annual or interim period.

Certain information and footnote disclosures typically included in the Company’s annual consolidated financial statements have been condensed or omitted. As such, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.

Concentration of Credit Risk, Credit Loss and Other Risks and Uncertainties

Although the Company received Emergency Use Authorization (“EUA”), temporary authorization or marketing approval for sotrovimab (under the brand name Xevudy®), sotrovimab is currently deauthorized in the U.S. and has limitations in use outside of the U.S. In addition, the Company is subject to a number of other challenges and risks similar to other biopharmaceutical companies in the early stage, including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its other product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of sotrovimab and other product candidates and protection of proprietary technology. If the Company does not successfully obtain regulatory approval, commercialize or partner any of its product candidates, it will be unable to generate revenue from product sales or maintain profitability.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and investments. Cash and cash equivalents are deposited in checking and sweep accounts at financial institutions. Such deposits may, at times, exceed federally insured limits. On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. Prior to such events, the Company held cash deposits at SVB in excess of government insured limits. On March 12, 2023, the U.S. Treasury Department, the Federal Reserve and the FDIC jointly announced enabling actions that fully protect all SVB depositors’ insured and uninsured deposits, and that such depositors would have access to all of their funds starting March 13, 2023. On March 13, 2023, the Company was able to access its deposits at the FDIC’s newly created Silicon Valley Bridge Bank, N.A., which was subsequently purchased on March 27, 2023 by First Citizens Bank & Trust Company, a subsidiary of First Citizens BancShares, Inc. As such, no losses have been incurred by the Company on deposits that were held at SVB. Management believes that the Company is not currently exposed to significant credit risk as the Company’s investments are held in custody at a third-party financial institution.

The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and investments, and issuers of the investments to the extent recorded on the unaudited condensed consolidated balance sheets. As of June 30, 2023, the Company has no off-balance sheet concentrations of credit risk.

The Company is exposed to credit losses primarily through receivables from customers and collaborators and through its available-for-sale debt securities. The Company’s expected loss allowance methodology for the receivables is developed using historical collection experience, current and future economic market conditions, a review of the current aging status and financial condition of the entities. Specific allowance amounts are established to record the appropriate allowance for customers that have a higher probability of default. Balances are written off when determined to be uncollectible. The Company’s expected loss allowance methodology for the debt securities is developed by reviewing the extent of the unrealized loss, the size, term, geographical location, and industry of the issuer, the issuers’ credit ratings and any changes in those ratings, as well as reviewing current and future economic market conditions and the issuers’ current status and financial condition. During the six months ended June 30, 2023 and 2022, there was no allowance for losses on available-for-sale debt securities attributable to credit risk.

Investments

Investments include available-for-sale debt securities and equity investments, which are carried at estimated fair value.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Available-for-Sale Debt Securities

The Company’s valuations of marketable securities are generally derived from independent pricing services based on quoted prices in active markets for similar securities at period end. Generally, investments with original maturities beyond three months at the date of purchase and which mature at, or less than 12 months from, the unaudited condensed consolidated balance sheet date are considered short-term investments, with all others considered to be long-term investments. Unrealized gains and losses deemed temporary in nature are reported as a component of accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the unaudited condensed consolidated statements of operations. The cost of securities sold is based on the specific identification method.

Equity Investments

The Company measures its investment in equity securities at fair value at each reporting date based on the market price at period end if it has a readily determinable fair value. Otherwise, the investments in equity securities are measured at cost less impairment, adjusted for observable price changes for identical or similar investments of the same issuer unless the Company has significant influence or control over the investee. Changes in fair value resulting from observable price changes are presented as change in fair value of equity investments, and changes in fair value resulting from foreign currency translation are included in other (expense) income, net on the unaudited condensed consolidated statements of operations.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents represent money market funds to secure standby letters of credit and security deposits with financial institutions, both under office and laboratory space lease agreements. Additionally, funds received from certain grants are restricted as to their use and are therefore classified as restricted cash and cash equivalents.

Revenue Recognition

Collaboration, License and Contract Revenue

Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when the Company’s customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods and services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the Company satisfies a performance obligation.

For collaborative arrangements that fall within the scope of ASC 808, Collaborative Arrangements (“ASC 808”), the Company first determines which elements of the collaboration are deemed to be a performance obligation with a customer within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808 and are not subject to the guidance in ASC 606, the Company applies the revenue recognition model under ASC 606, including the royalty exception guidance and variable consideration guidance under ASC 606 as described below, or other guidance, as deemed appropriate. When the Company is considered an agent in elements of collaboration arrangements within the scope of ASC 808, it records its share of collaboration revenue in the period in which such sales occur. The Company is considered an agent when the collaboration partner controls the product before transfer to the customers and has the ability to direct the use of and obtain substantially all of the remaining benefits from the product. In these instances, collaboration revenue is based upon the net sales reported by the Company's collaboration partners, net of cost of goods sold and allowable expenses (e.g., manufacturing, distribution, medical affairs, selling, and marketing expenses) in the period. In order to record collaboration revenue, the Company utilizes certain information from its collaboration partner, including actual net product sales and costs incurred for sales activities, and makes key judgments based on business updates related to commercial and clinical activities such as expected commercial demand, commercial supply plan, manufacturing commitments, risks related to expired or obsolete inventories, and risks related to potential product returns or contract terminations. The Company uses these estimates to determine whether payments due to it under its collaboration arrangements, such as profit-share payments, should be recognized as revenue in the period that they become due or whether any portion of the payments due should be constrained from revenue recognition because it is not probable that recognizing such amounts would not result in a material reversal of revenues in future reporting periods.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company has entered into a number of license and collaboration agreements that fall within the scope of ASC 606. The Company evaluates the promised goods or services in these agreements to determine which ones represent distinct performance obligations.

Prior to recognizing revenue, the Company makes estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required. These agreements may include the following types of consideration: non-refundable upfront payments, reimbursement for research services, research, development or regulatory milestone payments, profit-sharing arrangements, and royalty and commercial sales milestone payments.

If there are multiple distinct performance obligations, the Company allocates the transaction price to each distinct performance obligation based on their estimated standalone selling prices (“SSP”). The Company estimates the SSP for each distinct performance obligation by considering information such as market conditions, entity-specific factors, and information about its customer that is reasonably available. The Company considers estimation approaches that allow it to maximize the use of observable inputs. These estimation approaches may include the adjusted market assessment approach, the expected cost plus a margin approach or the residual approach. The Company also considers whether to use a different estimation approach or a combination of approaches to estimate the SSP for each distinct performance obligation. Developing certain assumptions (e.g., treatable patient population, expected market share, probability of success and product profitability, discount rate based on weighted-average cost of capital) to estimate the SSP of a distinct performance obligation requires significant judgment.

For performance obligations satisfied over time, the Company estimates the efforts needed to complete the performance obligation and recognizes revenue by measuring the progress towards complete satisfaction of the performance obligation using an input measure.

For arrangements that include sales-based royalties, including commercial milestone payments based on pre-specified level of sales, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon the performance of the licensee.

Grant Revenue

Grants received, including cost reimbursement agreements, are assessed to determine if the agreement should be accounted for as an exchange transaction or a contribution. An agreement is accounted for as a contribution if the resource provider does not receive commensurate value in return for the assets transferred. Contributions are recognized as grant revenue when all donor-imposed conditions have been met.

Contingent Consideration Obligations

Contingent consideration obligations incurred in connection with a business combination are recorded at their fair values on the acquisition date, are remeasured each subsequent reporting period until the related contingencies are resolved and are classified as contingent consideration on the unaudited condensed consolidated balance sheets. The changes in fair values of contingent consideration related to the achievement of various milestones are recorded within research and development expenses or selling, general and administrative expenses based on the nature of the relevant underlying activities.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

3. Fair Value Measurements

The Company determines the fair value of financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

•Level 1: Inputs which include quoted prices in active markets for identical assets and liabilities.

•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of the Company’s financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.

Cash Equivalents and Available-for-Sale Securities

The following tables summarize the Company’s Level 1 and Level 2 financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2023 and December 31, 2022:


		June 30, 2023
	Valuation Hierarchy	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Aggregate Fair Value

		(in thousands)
Assets:
Money market funds(1)	Level 1	$	425,881	$	—	$	—	$	425,881
U.S. government treasuries	Level 2	1,284,324		12		(1,978)		1,282,358
U.S. government agency bonds and discount notes	Level 2	125,880		8		(237)		125,651
Equity securities	Level 1	N/A		N/A		N/A		13,531
Total financial assets		$	1,836,085	$	20	$	(2,215)	$	1,847,421

______________________________________________

(1)Includes $19.9 million of restricted cash equivalents.


		December 31, 2022
	Valuation Hierarchy	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Aggregate Fair Value

		(in thousands)
Assets:
Money market funds(1)	Level 1	$	909,342	$	—	$	—	$	909,342
U.S. government treasuries	Level 2	1,493,841		—		(8,396)		1,485,445
Equity securities	Level 1	N/A		N/A		N/A		31,892
Total financial assets		$	2,403,183	$	—	$	(8,396)	$	2,426,679

______________________________________________

(1)Includes $19.3 million of restricted cash equivalents.

Accrued interest receivable excluded from both the fair value and amortized cost basis of the available-for-sale debt securities are presented within prepaid expenses and other current assets, and other assets in the unaudited condensed consolidated balance sheets. Accrued interest receivable amounted to $1.9 million and $2.5 million as of June 30, 2023 and

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2022, respectively. The Company did not write off any accrued interest receivable during the six months ended June 30, 2023 and 2022.

The Company recognized total net unrealized loss of $2.2 million and $8.4 million in accumulated other comprehensive loss as of June 30, 2023 and December 31, 2022, respectively. The gross unrealized losses related to U.S. government treasuries as of June 30, 2023 and December 31, 2022 were due to changes in interest rates. As of June 30, 2023, there were no investments that have been in a continuous material unrealized loss position for longer than 12 months. The Company determined that the gross unrealized losses on our investments as of June 30, 2023 were temporary in nature. The Company currently does not intend, and it is highly unlikely that it will be required, to sell these securities before recovery of their amortized cost basis. As of June 30, 2023, no securities have contractual maturities of longer than 2 years.

As of June 30, 2023, the Company's equity investment consisted solely of ordinary shares of Brii Biosciences Limited (“Brii Bio Parent”). The equity securities of Brii Bio Parent are listed on the Stock Exchange of Hong Kong Limited and are considered to be marketable equity securities and subsequently remeasured at fair value at each reporting date. As of June 30, 2023, the Company remeasured the equity investment at a fair value of $13.5 million. The Company recognized an unrealized loss of $5.1 million and $11.4 million, for the three months ended June 30, 2023 and 2022, respectively, and an unrealized loss of $18.2 million and $106.4 million, for the six months ended June 30, 2023 and 2022, respectively, as other income (expense) in the unaudited condensed consolidated statement of operations. For the three and six months ended June 30, 2023 and 2022, the unrealized losses related to foreign currency translation for the respective periods were immaterial.

Contingent Consideration Obligations

Contingent consideration obligations include potential milestone payments in connection with the acquisitions of Humabs Biomed SA (“Humabs”). The Company classifies the contingent consideration as Level 3 financial liabilities within the fair value hierarchy as of June 30, 2023 and December 31, 2022.

The estimated fair value of the contingent consideration related to the Humabs acquisition was determined by calculating the probability-weighted clinical, regulatory and commercial milestone payments based on the assessment of the likelihood and estimated timing that certain milestones would be achieved. As of June 30, 2023, the Company calculated the estimated fair value of the remaining clinical and regulatory milestones related to VIR-3434, an investigational subcutaneously administered HBV-neutralizing monoclonal antibody, or mAb, using the following significant unobservable inputs:


Unobservable input						Range (Weighted-Average)1
Discount rates						13.1% - 14.1% (13.5%)
Probability of achievement						14.4% - 60.0% (42.4%)

______________________________________________

(1)Unobservable inputs were weighted based on the relative fair value of the clinical and regulatory milestone payments.

For the commercial milestones, the Company used a Monte Carlo simulation because of the availability of discrete revenue forecasts. As of June 30, 2023, the Monte Carlo simulation assumed a commercial product launch and associated discrete revenue forecasts, as well as the following significant unobservable inputs for the remaining commercial milestones related to VIR-3434:


Unobservable input						Value
Volatility						75.0%
Discount rate						11.0%
Probability of achievement						28.7%

The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due. As of June 30, 2023 and December 31, 2022, the estimated fair value of the contingent consideration related to the Humabs acquisition was $23.8 million and $23.4 million, respectively, with changes in the estimated fair value recorded in research and development expenses in the unaudited condensed consolidated statements of operations.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The estimated fair value of the contingent consideration related to the Humabs acquisition involves significant estimates and assumptions that give rise to measurement uncertainty.

The following table sets forth the changes in the estimated fair value of the Company’s contingent consideration obligations (in thousands):


	Contingent Consideration
Balance at December 31, 2022	$	24,937
Changes in fair value	(10)
Balance at June 30, 2023	$	24,927

4. Grant Agreements

Bill & Melinda Gates Foundation Grants

The Company has entered into various grant agreements with the Bill & Melinda Gates Foundation, under which it was awarded grants totaling up to $65.7 million to support its HIV vaccine program, tuberculosis vaccine program, HIV vaccinal antibody program and malaria vaccinal antibody program. The term of the grant agreements will expire at various dates through June 2027, unless terminated earlier by the Bill & Melinda Gates Foundation for the Company’s breach, failure to progress the funded project, in the event of the Company’s change of control, change in the Company’s tax status, or significant changes in the Company’s leadership that the Bill & Melinda Gates Foundation reasonably believes may threaten the success of the projects.

Concurrently with the execution of the grant agreement for the vaccinal antibody program, the Company entered into a stock purchase agreement with the Bill & Melinda Gates Foundation, under which the Bill & Melinda Gates Foundation purchased 881,365 shares of the Company’s common stock on January 13, 2022, at a price per share of $45.38, for an aggregate purchase price of approximately $40.0 million. The fair market value of the common stock issued to the Bill & Melinda Gates Foundation was $28.5 million, based on the closing stock price of $37.65 per share on the closing date and taking into account a discount for the lack of marketability due to the restrictions in place on the underlying shares, resulting in a $11.3 million premium received by the Company. The Company accounted for the common stock issued to the Bill & Melinda Gates Foundation based on its fair market value on the closing date and determined that the premium paid by the Bill & Melinda Gates Foundation should be included in the deferred revenue from the vaccinal antibody grant.

Payments received in advance that are related to future research activities along with the aforementioned premium received are deferred and recognized as revenue when the donor-imposed conditions are met, which is as the research and development activities are performed. The premium received by the Company is deferred and recognized over the same period as the grant proportionally. The Company recognized grant revenue of $4.7 million and $2.1 million for the three months ended June 30, 2023 and 2022, respectively, and $6.6 million and $4.6 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, the Company had deferred revenue of $15.7 million and $15.5 million, respectively. As of June 30, 2023 and December 31, 2022, the Company had $7.6 million and $7.7 million, respectively, within accrued and other liabilities, which may need to be refunded to the Bill & Melinda Gates Foundation.

Biomedical Advanced Research and Development Authority

In September 2022, the Company entered into an other transaction for advanced research agreement (the “BARDA Agreement”) with the Biomedical Advanced Research and Development Authority (“BARDA”), part of the U.S. Department of Health and Human Services’ Administration for Strategic Preparedness and Response. Under the BARDA Agreement, the Company may receive up to an estimated $1.0 billion to advance the development of a full portfolio of innovative solutions to address influenza and potentially other infectious disease threats. The Base Period (as defined below) for the BARDA Agreement includes government funding of approximately $55.0 million to reimburse a portion of expenses incurred by the Company to support the development of VIR-2482, an investigational prophylactic monoclonal antibody designed with the aim to protect against seasonal and pandemic influenza, including expenses related to the Phase 2 pre-exposure prophylaxis trial of VIR-2482. The BARDA Agreement also provides for additional BARDA funding after the exercise by BARDA of up to twelve options to further support the development of pre-exposure prophylactic antibodies

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

including and beyond VIR-2482 for the prevention of influenza illness or possibly supporting medical countermeasures for other pathogens of pandemic potential. The BARDA Agreement has an initial term that commenced on September 30, 2022 and extends through January 2026 (“Base Period”), which may be extended by mutual written agreement of the Company and BARDA if certain conditions are met or if BARDA exercises any of its options, as described above, and is terminable by the Company and BARDA at any time under specified circumstances, including for convenience.

The Company recognized grant revenue under the BARDA Agreement of $11.8 million and $26.1 million for the three and six months ended June 30, 2023, respectively, and an other receivable in prepaid expenses and other current assets of $13.0 million as of June 30, 2023. As of June 30, 2023, $2.5 million of potential future reimbursement remains available out of $55.0 million for the Base Period.

5. Collaboration and License Agreements

Collaboration Agreements with GSK

2020 GSK Agreement

In 2020, the Company, Glaxo Wellcome UK Limited and Beecham S.A. entered into a collaboration agreement (the “2020 GSK Agreement”). Subsequently, Beecham S.A. assigned and transferred all its rights, title, interest, and benefit in the 2020 GSK Agreement to GlaxoSmithKline Biologicals S.A. (Glaxo Wellcome UK Limited and GlaxoSmithKline Biologicals S.A., referred to, individually and together, as “GSK”). Under the terms of the 2020 GSK Agreement, the Company and GSK agreed to collaborate to research, develop and commercialize products for the prevention, treatment and prophylaxis of diseases caused by SARS-CoV-2, the virus that causes COVID-19, and potentially other coronaviruses. The collaboration initially focused on the development and commercialization of three programs: (1) antibodies targeting SARS-CoV-2 and potentially other coronaviruses (the “Antibody Program”); (2) vaccines targeting SARS-CoV-2 and potentially other coronaviruses (the “Vaccine Program”), and (3) products based on genome-wide CRISPR screening of host targets expressed in connection with exposure to SARS-CoV-2 and potentially other coronaviruses (the “Functional Genomics Program”).

On February 8, 2023, the Company and GSK entered into Amendment No. 2 and Amendment No. 3 to the 2020 GSK Agreement. Pursuant to Amendment No. 2, the Company and GSK agreed to remove the Vaccine Program from the 2020 GSK Agreement, and to wind down and terminate the cost-sharing arrangements and all ongoing activities in relation to the Vaccine Program. As of the effective date of Amendment No. 2, the Vaccine Program had not yet advanced to its predefined development candidate stage. The Company retains the right to progress development of vaccine products directed to SARS-CoV-2 and other coronaviruses independently (including with or for third parties) outside the scope of the 2020 GSK Agreement, subject to the payment of tiered royalties to GSK on net sales of any vaccine products covered by certain GSK intellectual property rights in the low single digits. Pursuant to Amendment No. 3, the Company and GSK agreed to modify the Antibody Program to remove from the collaboration all coronavirus antibodies other than sotrovimab and VIR-7832, and certain variants thereof. Sotrovimab and VIR-7832, and certain variants thereof, remain subject to the terms of the 2020 GSK Agreement, and the Company retains the sole right to progress the development and commercialization of the terminated antibody products independently (including with or for third parties), subject to the payment of tiered royalties to GSK on net sales of such terminated antibody products at percentages ranging from the very low single digits to the mid-single digits, depending on the nature of the antibody product being commercialized.

Subject to an opt-out mechanism, the parties share all development costs, manufacturing costs, and costs and expenses for the commercialization of the collaboration products, with the Company bearing 72.5% of such costs for the antibody products, except that GSK has the sole right to develop (including to seek, obtain or maintain regulatory approvals), manufacture and commercialize sotrovimab in and for mainland China, Hong Kong, Macau and Taiwan at GSK's sole cost and expense, and equal sharing of such costs for the functional genomics products.

The 2020 GSK Agreement will remain in effect with respect to each collaboration program for as long as there is a collaboration product being developed or commercialized by the lead party, or the non-opt-out party, in such program. Either party has the right to terminate the 2020 GSK Agreement in the case of the insolvency of the other party, an uncured material breach of the other party with respect to a collaboration program or collaboration product, or as mutually agreed by the parties.

In May 2021, the U.S. Food and Drug Administration (“FDA”) granted an EUA in the United States for sotrovimab, the first collaboration product under the Antibody Program. In April 2022, the FDA excluded the use of sotrovimab in all U.S.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants. As the lead party for all manufacturing and commercialization activities, GSK incurs all of the manufacturing, sales and marketing expenses and is the principal on sales transactions with third parties. As described in Note 2—Summary of Significant Accounting Policies, the Company’s accounting policy related to the profit-share is to consider the agreed-upon share of the profit-sharing amounts each quarter and evaluate whether those amounts are subject to potential future adjustments based on the latest available facts and circumstances. As the Company is the agent, the Company recognizes its contractual share of the profit-sharing amounts or royalties (in case of an opt-out) as revenue, based on sales net of various estimated deductions such as rebates, discounts, chargebacks, credits and returns, less cost of sales and allowable expenses (including manufacturing, distribution, medical affairs, selling, and marketing expenses) in the period the sale occurs. Manufacturing costs include inventory revaluation adjustments, lower of cost or market inventory adjustments, inventory write-downs and write-offs, and binding purchase commitments with a third-party manufacturer among other manufacturing costs. In periods when allowable expenses exceed amounts recognized for net product sales of sotrovimab, negative revenue would be reported in our consolidated statements of operations. The Company’s contractual share of the profit-sharing amounts is subject to potential future adjustments to allowable expenses, which represents a form of variable consideration. At each reporting period, the Company evaluates the latest available facts and circumstances to determine whether any portion of profit-sharing amounts should be constrained.

As of June 30, 2023, GSK continue to have certain potentially excess binding supply manufacturing commitments of sotrovimab and certain binding reserved manufacturing capacity not expected to be utilized, which have not yet been fully reported to the Company as allowable manufacturing expenses for the cumulative profit-sharing amounts to date. The Company expects GSK to continue to adjust allowable manufacturing expenses for the Company’s share of the excess supply write-offs and unused binding manufacturing capacity and report to the Company as cost-sharing amounts in future periods. In June 2023, the Company paid $273.6 million to GSK primarily related to excess supply write-offs and unused binding manufacturing capacity previously reserved. The Company evaluated the latest available facts and circumstances to update its evaluation of profit-sharing amounts to be constrained. The Company re-assesses these estimates each reporting period.

During the three and six months ended June 30, 2023 and 2022, the Company recorded profit-sharing amounts and profit-sharing amounts constrained, released as components of collaboration revenue in the unaudited condensed consolidated statements of operations, as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Collaboration revenue, net
Profit-sharing amount	$	(8,396)	$	342,492	$	(1,160)	$	1,572,148
Profit-sharing amount constrained	(5,383)		(397,433)		—		(397,433)
Profit-sharing amount previously constrained, released	—		—		33,955		—
Total collaboration revenue, net	$	(13,779)	$	(54,941)	$	32,795	$	1,174,715

Costs associated with co-development activities performed under the 2020 GSK Agreement are included in research and development expenses on the unaudited condensed consolidated statements of operations, with any reimbursement of costs by GSK reflected as a reduction of such expenses. Under the 2020 GSK Agreement, the Company recognized additional net research and development expenses of $5.3 million and $7.1 million during the three months ended June 30, 2023 and 2022, respectively, and $12.5 million and $13.6 million during the six months ended June 30, 2023 and 2022, respectively.

2021 Expanded GSK Collaboration

In 2021, the Company and GSK entered into a collaboration agreement (the “2021 GSK Agreement”) under which the parties agreed to expand the 2020 GSK Agreement to collaborate on three separate programs: (1) a program to research, develop and commercialize monoclonal antibodies (“mAbs”) for the prevention, treatment or prophylaxis of the influenza virus (the “Influenza Program”), excluding VIR-2482 unless GSK exercises its option as described below; (2) an expansion of the parties’ current Functional Genomics Program to focus on functional genomics screens directed to targets associated with respiratory viruses (the “Expanded Functional Genomics Program”); and (3) additional programs to develop

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

neutralizing mAbs directed to up to three non-influenza target pathogens selected by GSK (the “Selected Pathogens” and such programs, the “Additional Programs”).

Under the Influenza Program, the parties collaborate to research, develop and commercialize mAbs for the prevention, treatment or prophylaxis of influenza, including the Company’s influenza mAbs (with respect to VIR-2482, only if GSK exercises its option). The Company conducts the development and clinical manufacturing activities for VIR-2482 up to the completion of a Phase 2 clinical trial. Provided that the Company conducts and completes a Phase 2 clinical trial for VIR-2482, GSK has the exclusive option to obtain exclusive rights to co-develop and commercialize VIR-2482 under the Influenza Program (the “VIR-2482 Option”). As of June 30, 2023, GSK had not exercised the VIR-2482 Option. On July 20, 2023, the Company announced that the VIR-2482 Phase 2 Prevention of Illness Due to Influenza A, or PENINSULA, trial evaluating the prevention of symptomatic influenza A illness did not meet primary or secondary efficacy endpoints. GSK is the lead party for development, clinical and commercial manufacturing and commercialization activities for products under the Influenza Program (other than VIR-2482 unless and until GSK exercises the VIR-2482 Option, if applicable). The parties mutually agree upon the allocation of responsibility for the development of products under the Expanded Functional Genomics Program, and for the development and early-stage manufacturing of products under the Additional Programs if and when GSK decides which Selected Pathogens to pursue. GSK is primarily responsible for commercial manufacturing and commercialization activities for products under the Expanded Functional Genomics Program and Additional Programs, if and when selected by GSK. For each collaboration program, the Company granted or will grant GSK certain license rights related to the development, manufacturing and commercialization of products arising from the program. GSK selected respiratory syncytial virus (“RSV”) as its first pathogen under the Additional Programs.

The parties share 50% of all development costs in accordance with the budget for each of the collaboration programs (other than for VIR-2482, unless GSK exercises the VIR-2482 Option). The parties also share 50% of all profits and losses arising from any collaboration product.

If GSK exercises the VIR-2482 Option, GSK will pay the Company an option exercise fee of $300.0 million unless certain agreed product criteria for VIR-2482 are not met, in which case the parties will negotiate an alternative option exercise fee. Upon achievement of a pre-defined regulatory milestone for the first product in the Influenza Program, which may be (i) VIR-2482 (if GSK exercised the VIR-2482 Option), (ii) a next-generation mAb, or (iii) any other influenza mAb approved by the Joint Steering Committee to be included in the collaboration, arising from the Influenza Program, GSK will make a milestone payment to the Company of up to $200.0 million.

As of June 30, 2023, the total unrecognized transaction price of $51.7 million is classified as noncurrent deferred revenue on the Company's unaudited condensed consolidated balance sheets related to the remaining performance obligations, being the remaining two material rights resulting from the Selected Pathogen Rights.

Costs associated with co-development activities performed under the 2021 GSK Agreement are included in research and development expenses in the unaudited condensed consolidated statements of operations, with any reimbursement of costs by GSK reflected as a reduction of such expenses. Under the 2021 GSK Agreement, the Company recognized additional net research and development expenses of $0.9 million and $0.9 million during the three months ended June 30, 2023 and 2022, respectively, and $1.3 million and $1.0 million during the six months ended June 30, 2023 and 2022, respectively.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

6. Balance Sheet Components

Property and Equipment, net

Property and equipment, net consists of the following:


	June 30, 2023		December 31, 2022

	(in thousands)
Laboratory equipment	$	44,221	$	36,533
Computer equipment	2,653		2,545
Furniture and fixtures	2,935		2,852
Leasehold improvements	80,210		84,422
Construction in progress	6		—
Property and equipment, gross	130,025		126,352
Less accumulated depreciation	(25,899)		(20,743)
Total property and equipment, net	$	104,126	$	105,609

Depreciation expenses were $4.6 million and $10.1 million for the three and six months ended June 30, 2023, respectively, and $1.5 million and $2.9 million for the three and six months ended June 30, 2022, respectively.

Accrued and Other Liabilities

Accrued and other liabilities consist of the following:


	June 30, 2023		December 31, 2022

	(in thousands)
Net profit-sharing amount	$	78,073	$	357,762
Research and development expenses	53,297		48,880
Payroll and related expenses	19,698		28,286
Accrued income taxes	15,498		15,228
Operating lease liabilities, current	13,536		4,137
Excess funds payable under grant agreements	7,611		7,652
Other professional and consulting expenses	5,108		3,987
Other accrued expenses	4,355		12,711
Accrued royalties	404		10,447
Total accrued and other liabilities	$	197,580	$	489,090

7. Commitments and Contingencies

Manufacturing and Supply Agreements

In December 2022, the Company and a third-party contract development manufacturing organization (the “CDMO”) entered into a master service agreement, and subsequently various scopes of work with respect to the manufacturing of VIR-2482 (collectively, the “VIR-2482 Agreements”). As of June 30, 2023, the Company has a balance of unpaid noncancellable commitments under the VIR-2482 Agreements up to approximately $36 million in the aggregate. On July

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

20, 2023, the Company announced that the VIR-2482 Phase 2 Prevention of Illness Due to Influenza A, or PENINSULA, trial evaluating the prevention of symptomatic influenza A illness did not meet primary or secondary efficacy endpoints.

Legal Proceedings

The Company may from time to time be party to claims and legal proceedings that arise in the normal course of its business and that may or may not have, individually or in the aggregate, a material adverse effect on its results of operations, financial condition or liquidity.

Indemnification

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Under such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. In addition, the Company has entered into indemnification agreements with its directors and certain officers that may require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. To date, no demands have been made upon the Company to provide indemnification under these agreements, and thus, there are no indemnification claims that the Company is aware of that could have a material effect on the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of operations, or unaudited condensed consolidated statements of cash flows.

8. Related Party Transaction

The Company holds a minority equity interest in Brii Biosciences Offshore Limited through Brii Bio Parent. As of June 30, 2023, one member of the Company’s board of directors serves on Brii Bio Parent’s board of directors.

9. Stock-Based Awards

The Company has maintained a stock incentive plan for the issuance of incentive stock options (“ISO”), non-qualified stock options (“NSO”), stock appreciation rights (“SARs”), restricted stock, other stock awards and performance cash awards, to employees, non-employee directors, and consultants. The Company also has an employee stock purchase plan (“ESPP”) for its employees or employees of any of the Company’s designated affiliates.

Stock Options Granted to Employees

The fair value of stock options granted to employees was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Expected term of options (in years)	5.5 - 6.1	5.3 - 6.1	5.5 - 6.1	5.3 - 6.1
Expected stock price volatility	99.6% - 101.5%	103.8% - 110.5%	99.6% - 101.5%	103.8% - 111.2%
Risk-free interest rate	3.5% - 3.9%	2.8% - 3.3%	3.4% - 4.1%	1.6% - 3.3%
Expected dividend yield	—	—	—	—

The valuation assumptions for stock options were determined as follows:

Expected Term — The expected term represents the period that the stock options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

Expected Volatility — Expected volatility is determined by using a blended approach of the Company and its industry peers’ historical volatilities.

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Risk-Free Interest Rate — The Company based the risk-free interest rate over the expected term of the stock options based on the constant maturity rate of U.S. Treasury securities with similar maturities as of the date of the grant.

Expected Dividend Rate — The expected dividend is zero as the Company has not paid nor does it anticipate paying any dividends on its profit interest units in the foreseeable future.

Stock-Based Compensation Expense

Stock-based compensation is recognized on a straight-line basis over the requisite service period, which is generally the vesting period. The following table sets forth the total stock-based compensation expense for all awards granted to employees and non-employees and the ESPP in the unaudited condensed consolidated statements of operations:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Research and development	$	17,112	$	14,069	$	30,465	$	27,184
Selling, general and administrative	13,507		13,030		25,635		25,219
Total stock-based compensation	$	30,619	$	27,099	$	56,100	$	52,403

10. Net (Loss) Income Per Share

Basic net (loss) income per common share is computed by dividing the net (loss) income attributable to Vir by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) attributable to Vir by the sum of the weighted-average number of common shares outstanding during the period plus any potential dilutive effects of common stock equivalents outstanding during the period calculated in accordance with the treasury stock method. For periods that the Company was in a net loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common securities outstanding would have been anti-dilutive. The following is a calculation of the basic and diluted net income (loss) per share (in thousands, except share and per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net (loss) income attributable to Vir	$	(194,775)	$	(76,493)	$	(335,675)	$	442,128

Weighted-average shares outstanding, basic	134,059,079		132,450,018		133,807,357		132,326,244
Weighted-average effect of dilutive securities:
Options to purchase common stock	—		—		—		2,270,834
Restricted shares subject to future vesting	—		—		—		44,028
Shares to purchase under Employee Stock Purchase Plan	—		—		—		2,734
Weighted-average shares outstanding, diluted	134,059,079		132,450,018		133,807,357		134,643,840

Net (loss) income attributable to Vir per share, basic	$	(1.45)	$	(0.58)	$	(2.51)	$	3.34
Net (loss) income attributable to Vir per share, diluted	$	(1.45)	$	(0.58)	$	(2.51)	$	3.28

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VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Options issued and outstanding	10,223,201	11,595,683	10,419,357	8,607,499
Restricted shares subject to future vesting	3,622,091	2,787,894	3,066,323	2,695,168
Total	13,845,292	14,383,577	13,485,680	11,302,667

11. Income Taxes

The table below presents our (loss) income before benefit from (provision for) income taxes, benefit from (provision for) income taxes and effective tax rate for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
(Loss) income before benefit from (provision for) income taxes	$	(197,623)		$	(233,721)		$	(340,811)		$	688,186
Benefit from (provision for) income taxes	$	2,848		$	157,228		$	5,080		$	(246,058)
Effective tax rate	1.4		%	67.3		%	1.5		%	35.8		%

The Company is subject to income taxes in the United States and foreign jurisdictions. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, the Company's effective tax rates will vary depending on the relative proportion of foreign to United States income/loss, the utilization of net operating loss and tax credit carry forwards and carrybacks, changes in jurisdictional mix of income and expense, changes in management’s assessment of matters such as the ability to realize deferred tax assets, and changes in tax laws.

The benefit from income taxes for the three and six months ended June 30, 2023 was primarily due to a pre-tax loss and the Company's ability to carry-back the research and development credit to 2022.

Unrecognized tax benefits were $12.1 million and $10.6 million as of June 30, 2023 and December 31, 2022, respectively, and if recognized, would favorably affect the effective tax rate in future periods.

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Item 2. 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 unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included as part of our Annual Report on Form 10-K for the year ended December 31, 2022. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company”, “Vir,” “we,” “us” and “our” refer to Vir Biotechnology, Inc. and its consolidated subsidiaries.

Overview

We are an 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 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 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 pipeline consists of sotrovimab (and where marketing authorization has been granted, marketed under the brand name Xevudy®) and other product candidates targeting hepatitis B virus, or HBV, hepatitis D virus, or HDV, influenza A and B virus, human immunodeficiency virus, or HIV, and COVID-19. We have assembled technology platforms, focused on antibodies and T cells. We have built an industry-leading team that has deep experience in immunology, infectious diseases, and product development and commercialization. Given the global impact of infectious diseases, we are committed to developing cost-effective treatments that can be delivered at scale.

We are currently manufacturing product candidates from all of our platforms. We have established our own internal process development, manufacturing and quality capabilities and are working with contract development and manufacturing organizations, or CDMOs, to supply our early- and late-stage product candidates in the near term. We continue to expand our internal capabilities and resources in process development, analytical development, quality, manufacturing and supply chain, which are supported by our San Francisco, California, and Portland, Oregon facilities that include laboratories for process development, production of human cytomegalovirus, or 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 through Phase 3 clinical trials. Material for Phase 3 clinical trials and commercial supply will generally require large-volume, low-cost-of-goods production. For example, for sotrovimab, we and our collaborator GSK have executed manufacturing agreements with CDMOs having large-scale capacity to support a potential need for a future scale-up and product supply, particularly for potential commercialization.

Chronic Hepatitis B (CHB)

VIR-2218 is an investigational HBV-targeting siRNA. VIR-3434 is an investigational HBV-neutralizing monoclonal antibody, or mAb, that incorporates Xencor, Inc.’s, or Xencor, XtendTM and other Fc technologies.

•Multiple trials evaluating the potential for VIR-2218 and VIR-3434 to achieve a functional cure for CHB are on track with data expected in Q4 2023.

•In June 2023, we presented new data from our CHB portfolio at the EASL™ (European Association for the Study of the Liver) Congress.

•In May 2023, we announced the initiation of the Phase 2 PREVAIL platform trial and our THRIVE/STRIVE sub-protocols. The platform is evaluating combinations of VIR-2218, VIR-3434 and/or PEG-IFN-α in two CHB patient populations with the potential to evaluate other populations in the future. Initial data from this platform trial are expected in the first half of 2024.

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Chronic Hepatitis Delta (CHD)

•The Phase 2 SOLSTICE trial evaluating VIR-2218 and VIR-3434 as monotherapy and in combination for the treatment of people living with CHD, the most aggressive form of viral hepatitis, remains on track with initial data expected in Q4 2023.

•In June 2023, we presented preclinical in vivo and in vitro data demonstrating the antiviral properties of VIR-2218 and VIR-3434 against hepatitis delta virus at the EASL Congress. These data further support the clinical development of these investigational medicines as a treatment for the chronic suppression of hepatitis delta virus.

Influenza

VIR-2482 is an investigational mAb designed for the prevention of influenza A that incorporates Xencor’s Xtend technology.

•In July 2023, we reported that the Phase 2 Prevention of Illness Due to Influenza A (PENINSULA) trial evaluating VIR-2482 for the prevention of symptomatic influenza A illness did not meet primary or secondary efficacy endpoints.

•We continue to analyze the data and plan to share additional findings once available.

Human Immunodeficiency Virus (HIV)

VIR-1111 is an investigational HIV T cell vaccine based on HCMV. VIR-1388 is a preclinical HIV T cell vaccine based on HCMV.

•We expect the Phase 1 trial for VIR-1388, a novel T cell vaccine for the prevention of HIV, to begin dosing in Q3 2023. Our T cell platform utilizes human cytomegalovirus (HCMV) as a vector, which has the potential to induce high frequencies of antigen-specific, tissue-localizing effector memory T cells. The trial will be supported by the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, and the Bill & Melinda Gates Foundation, and will be conducted by the HIV Vaccine Trials Network. NIAID has provided funding throughout the product development lifecycle of VIR-1388.

COVID-19

Sotrovimab is an investigational severe acute respiratory syndrome coronavirus 2, or SARS-CoV-2, neutralizing mAb that incorporates Xencor’s Xtend™ technology.

•Sotrovimab currently has emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®) for early treatment of COVID-19. It has been supplied to more than 40 countries and remains in use outside of the U.S.

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Preclinical Pipeline Candidates

•We are continuing to advance next-generation monoclonal antibodies (mAb) based on its proprietary platform and enabled by AI and machine-learning capabilities to deliver high-quality solutions more efficiently. These include:

◦VIR-2981, an investigational neuraminidase-targeting mAb against both influenza A and B viruses.

◦VIR-8190, a mAb against respiratory syncytial virus (RSV) and human metapneumovirus (hMPV).

◦VIR-7229, a next-generation COVID-19 mAb that has been shown in laboratory studies to have high potency against a broad spectrum of historical and currently circulating variants.

•Additionally, we are advancing VIR-1949, a therapeutic T cell vaccine for control of precancerous lesions caused by human papilloma virus (HPV) based on our HCMV vector platform.

Corporate Update

•In July 2023, we made the decision to increase focus on our proprietary antibody platform and discontinue our innate immunity small molecule platform.

•In June 2023, Sasha Damouni Ellis joined us as Executive Vice President and Chief Corporate Affairs Officer. Previously, she was Senior Vice President, Corporate Affairs and Investor Relations of Marinus Pharmaceuticals.

•In May 2023, Jeff Calcagno, M.D., joined us as Executive Vice President and Chief Business Officer. He joined us from Johnson & Johnson (J&J), where he spent more than 12 years holding leadership roles of increasing responsibility within all three divisions of J&J Innovation (JJI), including as Global Transactions Lead for Infectious Diseases & Vaccines and as Head of JLABS Bay Area.

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 Note 4—Grant Agreements and Note 5—Collaboration and License Agreements to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and Note 7—Collaboration and License Agreements to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission, or SEC, on February 28, 2023.

Components of Operating Results

Revenues

To date, sotrovimab has been granted emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®), and has been supplied in more than 40 countries. Although we have previously recognized revenue from our profit-share under our definitive collaboration agreement with GSK executed in June 2020, or the 2020 GSK Agreement, related to sotrovimab, we may continue to incur net operating losses for at least the next several years as the extent of future revenue from the sale of sotrovimab remains uncertain. While we have an EUA from the U.S. Food and Drug Administration, or FDA, for sotrovimab, the FDA has excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants. With this EUA revision, sotrovimab is not currently authorized for use in any U.S. region. Although certain countries outside the U.S. continue to maintain access to 500 mg IV while noting that the clinical efficacy is unknown or uncertain against existing and emerging Omicron variants, we cannot predict whether other countries will further limit the use of sotrovimab. Due to the evolving COVID-19 landscape and based on discussions with the FDA, we and GSK do not plan to file a Biologics License Application, or BLA, for sotrovimab at this time. In light of these developments, we cannot predict whether (if at all) or to what extent sotrovimab may be reauthorized for use by the FDA in any U.S. region in the future. In addition, we have not obtained regulatory approval for any other product candidates, and we do not expect to generate any significant revenue

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from the sale of our other 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 revenues consist of the following:

Collaboration revenue includes recognition of our profit-share from the sales of sotrovimab pursuant to the 2020 GSK Agreement. Our contractual share of 72.5% from the sales of sotrovimab is applied to the net sales reported in the period by GSK, net of cost of goods sold and allowable expenses from both GSK and us (e.g., manufacturing, distribution, medical affairs, selling, and marketing expenses). In order to record collaboration revenue, we utilize certain information from our collaboration partner, including actual net product sales and costs incurred for sales activities, and make key judgments based on business updates related to commercial and clinical activities such as expected commercial demand, commercial supply plan, manufacturing commitments, risks related to expired or obsolete inventories, and risks related to potential product returns or contract terminations.

Constraint on variable consideration

In May 2021, the FDA granted an EUA in the U.S. for sotrovimab. In April 2022, the FDA excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants. As the lead party for all manufacturing and commercialization activities, GSK incurs all of the manufacturing, sales and marketing expenses and is the principal on sales transactions with third parties. Our accounting policy related to the profit-share is to consider the agreed-upon share of the profit-sharing amounts each quarter and evaluate whether those amounts are subject to potential future adjustments based on the latest available facts and circumstances, subject to the terms of the 2020 GSK Agreement.

As we are the agent under the 2020 GSK Agreement, we recognize our contractual share of the profit-sharing amounts or royalties (in case of an opt-out) as revenue, based on sales net of various estimated deductions such as rebates, discounts, chargebacks, credits and returns, less cost of sales and allowable expenses (including manufacturing, distribution, medical affairs, selling, and marketing expenses) in the period the sale occurs. Manufacturing costs include inventory revaluation adjustments, lower of cost or market inventory adjustments, inventory write-downs and write-offs, and binding purchase commitments with a third-party manufacturer, among other manufacturing costs. Our contractual share of the profit-sharing amounts is subject to potential future adjustments to allowable expenses, which we account for as a form of variable consideration.

GSK holds certain potentially excess binding supply manufacturing commitments of sotrovimab and reserved certain binding manufacturing capacity potentially not expected to be utilized, which have not yet been fully reported to us as allowable manufacturing expenses for the cumulative profit-sharing amounts to date. We expect GSK to adjust allowable manufacturing expenses for our share of the potential charge for excess supply write-offs and unused binding manufacturing capacity and report to us as cost-sharing amounts in future periods. We evaluate the latest available facts and circumstances to update our evaluation of whether any portion of profit-sharing amounts should continue to be constrained. We re-assess these estimates at each reporting period. Actual results could materially differ from this estimate.

Contract revenue includes recognition of revenue generated from research and development services under third-party contracts, and from a third-party clinical supply agreement.

Grant revenue is comprised of revenue derived from grant agreements with government-sponsored and private organizations.

Operating Expenses

Cost of Revenue

Cost of revenue currently represents royalties earned by third-party licensors on net sales of sotrovimab by us or our collaborators. We recognize these royalties as cost of revenue when we recognize the corresponding revenue that gives rise to payments due to our licensors.

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

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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 all research and development expenses by product candidate.

Research and development expenses consist primarily of costs incurred for our product candidates in development and prior to regulatory approval, which include:

•expenses related to license and collaboration agreements, and change in fair value of certain contingent consideration obligations arising 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. To date, sotrovimab has been granted emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®), and has been supplied in more than 40 countries. While we have an EUA from the FDA for sotrovimab, the FDA has excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants. With this EUA revision, sotrovimab is not currently authorized for use in any U.S. region, and we cannot predict whether (if at all) or to what extent sotrovimab may be reauthorized for use by the FDA in any U.S. region in the future. In addition, due to the evolving COVID-19 landscape and based on discussions with the FDA, we and GSK do not plan to file a BLA for sotrovimab at this time. Although certain countries outside the U.S. continue to maintain access to 500 mg IV while noting that the clinical efficacy is unknown or uncertain against existing and emerging Omicron variants, we cannot predict whether other countries will further limit the use of sotrovimab. Furthermore, COVID-19 treatment standards are susceptible to rapid changes in epidemiology and the emergence of new variants or subvariants, which may render sotrovimab inferior or obsolete in the future.

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 significant revenue from the commercialization and sale of any 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, our existing collaborators have significant discretion in determining the efforts and resources that they will apply to our collaborations and may not pursue further development and commercialization of products resulting from our collaboration arrangements or may elect to not to continue or renew research and development programs, which would delay the development and may increase the cost of developing our product candidates and may result in a need for additional capital or a suitable replacement collaborator. For those product candidates where there is not a current collaboration arrangement in place, 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;

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•the number of trials required for approval;

•the number of sites included in the trials;

•enrollment and retention of patients in trials in countries disrupted by geopolitical events, including civil or political unrest;

•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.

Selling, General and Administrative

Our selling, general and administrative expenses consist primarily of personnel-related expenses for personnel in executive, finance and other administrative functions, facilities and other allocated expenses, other expenses for outside professional services, including legal, audit and accounting services, insurance costs and change in fair value of certain contingent consideration obligations arising from business acquisitions. Personnel-related expenses consist of salaries, benefits and stock-based compensation.

We expect our selling, general and administrative expenses to increase substantially in absolute dollars in the foreseeable future as we continue to support our research and development activities, and commercialization activities for any of our product candidates, if approved, and to grow our business. 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.

Change in Fair Value of Equity Investments

Change in fair value of equity investments consists of the remeasurement of our investment in Brii Biosciences Limited’s, or Brii Bio Parent, ordinary shares based on the quoted market price at each reporting date.

Interest Income

Interest income consists of interest earned on our cash, cash equivalents and investments.

Other (Expense) Income, Net

Other (expense) income, net consists of gains and losses from foreign currency transactions and the remeasurement of our contingent consideration obligation.

Benefit from (Provision for) Income Taxes

Benefit from (provision for) income taxes consists primarily of income taxes on our domestic and foreign operations.

Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest consists of net loss attributable to the noncontrolling interest owners of Encentrio Therapeutics, Inc., our subsidiary, during the three months ended March 31, 2023.

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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the periods presented:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023		2022		Change		2023		2022		Change

	(in thousands)
Revenues:
Collaboration revenue	$	(13,779)	$	(54,941)	$	41,162	$	32,795	$	1,174,715	$	(1,141,920)
Contract revenue	1,057		12,254		(11,197)		1,195		12,536		(11,341)
Grant revenue	16,519		2,058		14,461		32,764		4,579		28,185
Total revenues	3,797		(40,629)		44,426		66,754		1,191,830		(1,125,076)
Operating expenses:
Cost of revenue	22		27,921		(27,899)		1,929		118,070		(116,141)
Research and development	171,860		115,082		56,778		329,503		205,309		124,194
Selling, general and administrative	47,101		41,590		5,511		93,879		79,845		14,034
Total operating expenses	218,983		184,593		34,390		425,311		403,224		22,087
(Loss) income from operations	(215,186)		(225,222)		10,036		(358,557)		788,606		(1,147,163)
Other income (expense):
Change in fair value of equity investments	(5,086)		(11,390)		6,304		(18,189)		(106,429)		88,240
Interest income	23,016		2,200		20,816		44,323		2,588		41,735
Other (expense) income, net	(367)		691		(1,058)		(8,388)		3,421		(11,809)
Total other income (expense)	17,563		(8,499)		26,062		17,746		(100,420)		118,166
(Loss) income before benefit from (provision for) income taxes	(197,623)		(233,721)		36,098		(340,811)		688,186		(1,028,997)
Benefit from (provision for) income taxes	2,848		157,228		(154,380)		5,080		(246,058)		251,138
Net (loss) income	$	(194,775)	$	(76,493)	$	(118,282)	$	(335,731)	$	442,128	$	(777,859)
Net loss attributable to noncontrolling interest	$	—	$	—	$	—	$	(56)	$	—	$	(56)
Net (loss) income attributable to Vir	$	(194,775)	$	(76,493)	$	(118,282)	$	(335,675)	$	442,128	$	(777,803)

Revenues

Collaboration revenue for the three months ended June 30, 2023 was $(13.8) million, compared to $(54.9) million for the same period in 2022. The change was primarily due to lower profit-sharing amount constrained under the 2020 GSK Agreement, partially offset by lower profit-sharing amount. Collaboration revenue for the three months ended June 30, 2023 consisted of $(8.4) million of profit-sharing amount from the sale of sotrovimab under the 2020 GSK Agreement and $(5.4) million of profit-sharing amount constrained. Our contractual share of 72.5% from the sales of sotrovimab is applied to the profit-sharing amounts, based on sales net of various estimated deductions such as rebates, discounts, chargebacks, credits and returns, less cost of sales and allowable expenses (including manufacturing, distribution, medical affairs, selling, and marketing expenses) in the period the sale occurs. The $(5.4) million profit-sharing amount constrained was primarily driven by unfavorable changes in excess manufacturing commitments of sotrovimab.

The decrease in collaboration revenue for the six months ended June 30, 2023 compared to the same period in 2022 was primarily due to a lower profit-sharing amount from sales of sotrovimab as part of the 2020 GSK Agreement. Collaboration revenue for the six months ended June 30, 2023 consisted of $(1.2) million of profit-sharing amount from the sale of sotrovimab under the 2020 GSK Agreement and $34.0 million release of profit-sharing amount previously constrained. The $34.0 million release of profit-sharing constraint was primarily driven by a $34.1 million decrease in excess manufacturing commitments of sotrovimab, partially offset by $0.1 million of other unfavorable changes in estimate under the profit-sharing constraint.

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The decrease in contract revenue for the three and six months ended June 30, 2023 compared to the same periods in 2022 was primarily due to $7.0 million related to the additional license granted to GSK applicable in mainland China, Hong Kong, Macau and Taiwan upon execution of the Amendment No. 1 to the 2020 GSK Agreement in the second quarter of 2022.

The increase in grant revenue for the three and six months ended June 30, 2023 compared to the same periods in 2022 was primarily due to $11.8 million and $26.1 million for the three and six months ended June 30, 2023, respectively, in accordance with our agreement with BARDA.

Cost of Revenue

The decrease in cost of revenue for the three and six months ended June 30, 2023 compared to the same periods in 2022 was primarily due to lower third-party royalties owed based on the sales of sotrovimab under the 2020 GSK Agreement.

Research and Development Expenses

The following table shows the primary components of our research and development expenses for the periods presented:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023		2022		Change		2023		2022		Change

	(in thousands)
Licenses, collaborations and contingent consideration	$	7,551	$	27,907	$	(20,356)	$	15,297	$	35,063	$	(19,766)
Personnel	50,089		39,112		10,977		94,033		77,846		16,187
Contract manufacturing	28,242		9,232		19,010		65,795		16,558		49,237
Clinical costs	43,881		15,224		28,657		83,719		31,903		51,816
Other	42,097		23,607		18,490		70,659		43,939		26,720
Total research and development expenses	$	171,860	$	115,082	$	56,778	$	329,503	$	205,309	$	124,194

The increase in research and development expenses for the three and six months ended June 30, 2023 compared to the same periods in 2022 was primarily due to the following factors:

•the increase in clinical costs was primarily attributable to the Company's Phase 2 PENINSULA trial evaluating VIR-2482 for the prevention of symptomatic influenza A illness;

•the increase in contract manufacturing expenses was primarily related to an increase in manufacturing activities in preparation for potential Phase 3 studies involving VIR-2482 and, to a lesser extent, VIR-2218 and VIR-3434;

•the increase in personnel-related expenses was primarily attributable to an increase in our personnel to support the advancement of our clinical programs; and

•the increase in other research and development expenses was primarily attributable to the allocation of facilities, including depreciation, and other costs due to an increase in our personnel and a non-recurring impairment charge associated with certain non-prioritized in-process research and development assets.

partially offset by

•the decrease in licenses, collaborations and contingent consideration expenses primarily attributable to the change in fair value of the contingent consideration from our acquisition of Humabs BioMed SA, or Humabs, and $7.0 million recognized in the same period of 2022 in connection with the termination of our development and manufacturing collaboration agreement with WuXi Biologics (Hong Kong) Limited, or WuXi Biologics.

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Selling, General and Administrative Expenses

The increase in selling, general and administrative expenses for the three and six months ended June 30, 2023 compared to the same periods in 2022 was primarily due to higher personnel-related costs to support the growth of the Company.

Change in Fair Value of Equity Investments

In July 2021, Brii Bio Parent became a publicly traded company on the Stock Exchange of Hong Kong Limited. In connection with the initial public offering, our investment in shares of Brii Bio Parent became a marketable equity investment and subsequently remeasured to fair value at each reporting period. For the three and six months ended June 30, 2023, we recognized an unrealized loss of $5.1 million and $18.2 million, respectively, due to the change in fair value, compared to an unrealized loss of $11.4 million and $106.4 million, respectively, for the same periods in 2022.

Interest Income

The increase in interest income for the three and six months ended June 30, 2023 was primarily due to higher interest rates as well as higher balances of short-term and long-term investments compared to the same periods in 2022.

Other (Expense) Income, Net

The decrease in other (expense) income, net for the three and six months ended June 30, 2023 compared to the same periods in 2022 was primarily due to loss from foreign exchange measurement related to the accrued liability recognized in connection with the profit-sharing amount constrained under the 2020 GSK Agreement.

Benefit from (Provision for) Income Taxes

The decrease in benefit from income taxes for the three months ended June 30, 2023 compared to the same period in 2022 was primarily due to the Company's ability to realize a tax benefit associated with the net loss and changes to valuation allowances on deferred tax assets for the three months ended June 30, 2022. The benefit from income taxes for the three months ended June 30, 2023 was primarily due to a pre-tax loss and our ability to carry-back the research and development credit to 2022.

The benefit from income taxes for the six months ended June 30, 2023 was primarily due to a pre-tax loss and our ability to carry-back the research and development credit to 2022. The provision for income taxes for the six months ended June 30, 2022 was primarily due to taxable income for 2022 attributable to significant collaboration revenue from the sale of sotrovimab.

Liquidity, Capital Resources and Capital Requirements

Sources of Liquidity

To date, we have financed our operations primarily through sales of our equity securities and payments received under our grant and collaboration agreements. As of June 30, 2023, we had $1.9 billion in cash, cash equivalents, and investments. As of June 30, 2023, we had retained earnings of $41.6 million. We entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, in 2020 pursuant to which we may from time to time offer and sell shares of our common stock for an aggregate offering price of up to $300.0 million, through or to Cowen, acting as sales agent or principal. We will pay Cowen a commission of up to 3% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Cowen with customary indemnification and contribution rights. As of June 30, 2023, no shares have been sold under the Sales Agreement, which will expire in November 2023.

Funding Requirements and Commitments

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 clinical trials, and to a lesser extent, selling, general and administrative expenditures.

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We have not obtained regulatory approval for any product candidates other than sotrovimab, and we do not expect to generate significant revenue from the sale of our other product candidates until we complete clinical development, submit regulatory filings and receive approvals from the applicable regulatory bodies for such product candidates, if ever. We may continue to incur net losses for the foreseeable future. Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments as of June 30, 2023 as noted above will enable us to fund our operations for at least the next 12 months.

However, our operating plan may change as a result of many factors currently unknown to us, and we may need to raise additional capital to complete the development and commercialization of our product candidates and fund certain of our existing manufacturing and other commitments. We expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. See the sections titled “Risk Factors—Risks Related to Our Financial Position and Capital Needs—Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.” and Risk Factors—Risks Related to Our Financial Position and Capital Needs—We may require substantial additional funding to finance our operations. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate certain of our development programs or other operations” for a description of the risks that may be associated with any future capital raises.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. See the section titled “Risk Factors—Risks Related to Our Financial Position and Capital Needs” for a description of certain risks that will affect our future capital requirements.

We have various operating lease arrangements for office and laboratory spaces located in California, Oregon, Missouri and Switzerland with contractual lease periods expiring between 2022 and 2033. As of June 30, 2023, we expect to make total lease payments of $166.8 million through 2033.

To date, we have entered into collaboration, license and acquisition agreements where the payment obligations are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones, and we are required to make royalty payments in connection with the sale of products developed under those agreements. For additional information regarding these agreements, including our payment obligations thereunder, see Note 5—Collaboration and License Agreements to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and Note 7—Collaboration and License Agreements to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023. For information related to our future commitments under our facilities and manufacturing agreements. see Note 9—Commitments and Contingencies to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.

In December 2022, we and a third-party contract development manufacturing organization (the "CDMO") entered into a master service agreement, and subsequently various scopes of work with respect to manufacturing of VIR-2482 (collectively, "VIR-2482 Agreements"). As of June 30, 2023, we have a balance of unpaid noncancellable commitments under the VIR-2482 Agreements up to approximately $36 million in an aggregate.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements.

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Cash Flows

The following table summarizes our cash flows for the periods indicated:


	Six Months Ended June 30,
	2023		2022

	(in thousands)
Net cash (used in) provided by:
Operating activities	$	(515,029)	$	1,510,225
Investing activities	328,394		(377,721)
Financing activities	5,523		30,765
Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents	$	(181,112)	$	1,163,269

Operating Activities

During the six months ended June 30, 2023, net cash used in operating activities was $515.0 million. This consisted primarily of a net loss of $335.7 million, partially offset by non-cash charges of $62.9 million, and an increase in our net operating assets of $242.2 million. The non-cash charges of $62.9 million primarily consisted of $56.1 million for stock-based compensation expense and an unrealized loss of $18.2 million on our equity investment, partially offset by $26.3 million related to a change in estimated profit-sharing constraint from the 2020 GSK Agreement. The change in our net operating assets of $242.2 million was primarily due to a $269.8 million decrease in accrued liabilities and other long-term liabilities due to partial settlement of profit-sharing constraint.

During the six months ended June 30, 2022, net cash provided by operating activities was $1.5 billion. This consisted primarily of net income of $442.1 million, non-cash charges of $477.5 million, and a decrease in our net operating assets of $590.5 million. The change in our net operating assets of $590.5 million was primarily due to a decrease in collaboration receivable by $433.7 million resulting from our profit share from the sale of sotrovimab, an increase in accrued liabilities and other long-term liabilities by $145.4 million due to timing of payments and an increase in deferred revenue by $15.6 million primarily driven by the grants received from Bill & Melinda Gates Foundation. The non-cash charges of $477.5 million primarily consisted of $397.4 million for change in estimated constraint on profit-sharing amount, an unrealized loss of $106.4 million on our equity investment, $52.4 million for stock-based compensation expense, $5.6 million for revaluation of contingent consideration, $4.3 million for noncash lease expense and $2.9 million for depreciation and amortization expense, partially offset by $93.8 million for payment for contingent consideration in excess of acquisition date fair value.

Investing Activities

During the six months ended June 30, 2023, net cash provided by investing activities was $328.4 million. This consisted primarily of $1.0 billion in proceeds received from investments that matured during the period, partially offset by purchases of investments of $694.3 million and property and equipment of $16.3 million.

During the six months ended June 30, 2022, net cash used in investing activities was $377.7 million. This consisted primarily of purchases of investments of $341.3 million and property and equipment of $36.4 million.

Financing Activities

During the six months ended June 30, 2023, net cash provided by financing activities was $5.5 million. This consisted primarily of proceeds from exercises of stock options of $3.1 million and from the issuance of common stock under our employee stock purchase plan of $2.6 million.

During the six months ended June 30, 2022, net cash provided by financing activities was $30.8 million. This consisted primarily of proceeds from the issuance of our common stock to the Bill & Melinda Gates Foundation of $28.5 million under the stock purchase agreement, from the issuance of common stock under our employee stock purchase plan of $2.1 million, and from exercises of stock options of $1.6 million, partially offset by $1.2 million for payment of contingent consideration.

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Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our unaudited condensed consolidated financial statements requires us to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

There have been no significant changes in our critical accounting policies during the six months ended June 30, 2023, as compared with those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rate and market price sensitivities.

Interest Rate Risk

We had cash, cash equivalents and restricted cash and cash equivalents of $686.9 million as of June 30, 2023, which primarily consisted of money market funds. We also had short-term and long-term investments of $1.2 billion as of June 30, 2023. The primary objective of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. Because our investments are primarily short-term in duration and our holdings in U.S. government treasury bonds mature prior to our expected need for liquidity, we believe that our exposure to interest rate risk is not significant, and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We had no debt outstanding as of June 30, 2023.

Foreign Currency

The functional currency of our foreign subsidiaries is the U.S. dollar. Monetary assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at period-end exchange rates and non-monetary assets and liabilities are translated to U.S. dollars using historical exchange rates. Revenue and expenses are translated at average rates throughout the respective periods. As of the date of this Quarterly Report on Form 10-Q, we are exposed to foreign currency risk primarily related to the operations of our Swiss and Australian subsidiaries and our collaboration with GSK and consequently the Swiss Franc, Australian dollar and British pound. Transaction gains and losses are included in other income (expenses), net on the unaudited condensed consolidated statements of operations and were not material for the six months ended June 30, 2023 and 2022.

Equity Investment Risk

We hold ordinary shares of Brii Bio Parent, which we acquired in connection with our collaboration, option and license agreement. These equity securities are measured at fair value with any changes in fair value recognized in our unaudited condensed consolidated statements of operations. The fair value of these equity securities was approximately $13.5 million as of June 30, 2023. Changes in the fair value of these equity securities are impacted by the volatility of the stock market and changes in general economic conditions, among other factors. A hypothetical 10% increase or decrease in the stock price of these equity securities would increase or decrease their fair value as of June 30, 2023 by approximately $1.4 million.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on

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that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results or financial condition.

Item 1A. Risk Factors.

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following risk factors as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and/or prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report on Form 10-Q and those we may make from time to time. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. You should consider all of the risk factors described when evaluating our business.

Risk Factors Summary

Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common stock. These risks include, among others, the following:

•We have incurred net losses and anticipate that we will continue to incur net losses in the foreseeable future.

•Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

•We may require substantial additional funding to finance our operations. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate certain of our development programs or other operations.

•Although we have an Emergency Use Authorization, or EUA, from the U.S. Food and Drug Administration, or FDA, for sotrovimab for the early treatment of COVID-19, the disease caused by the virus SARS-CoV-2, the FDA has excluded the use of sotrovimab in all U.S. regions, and sotrovimab has limitations on its use in some countries outside of the U.S. We do not expect meaningful sales of sotrovimab without the FDA reauthorizing the use of sotrovimab in the U.S.

•Market demand and utilization of any of our COVID-19 product candidates has been, and may continue to be, adversely impacted by factors such as the development of monoclonal antibodies, or mAbs, of other third parties, the rollout of oral antivirals and vaccines, the emergence of new variants or subvariants and the current challenges in the delivery and administration of mAbs to patients.

•Our future success is substantially dependent on the successful clinical development, regulatory approval and commercialization of our product candidates in a timely manner. If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates and our ability to generate product revenue will be adversely affected.

•Success in preclinical studies or earlier clinical trials may not be indicative of results in future clinical trials and we cannot assure you that any ongoing, planned or future clinical trials will lead to results sufficient for the necessary regulatory approvals and marketing authorizations. We have and may continue to commit substantial financial resources with respect to clinical trials that may not be successful, and we may not be able to recoup those investments.

•Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be delayed, made more difficult or rendered impossible by multiple factors outside our control.

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•We are a party to strategic collaboration and license agreements pursuant to which we are obligated to make substantial payments upon achievement of milestone events and, in certain cases, have relinquished important rights over the development and commercialization of certain current and future product candidates. We also intend to explore additional strategic collaborations, which may never materialize or may require that we relinquish rights to and control over the development and commercialization of our product candidates.

•We rely on third parties to produce clinical and commercial supplies of our product candidates.

•If we are unable to obtain and maintain patent protection for our product candidates and technology, or if the scope of the patent protection obtained is not sufficiently broad or robust, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our product candidates and technology may be adversely affected.

•We are highly dependent on our key personnel, and if we are not able to retain these members of our management team or recruit and retain additional management, clinical and scientific personnel, our business will be harmed.

•If our information systems, or those maintained on our behalf, fail or suffer security breaches, such events could result in, without limitation, the following: a significant disruption of our product development programs; an inability to operate our business effectively; unauthorized access to or disclosure of the personal information we process; and other adverse effects on our business, financial condition, results of operations and prospects.

•The market price of our common stock has been, and in the future, may be, volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock.

Risks Related to Our Financial Position and Capital Needs