SEC Filing

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

View:

Download DOC

Download PDF

Download XLS

Download XBRL

vir-10q_20200331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2020

☐	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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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. ☐

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

As of May 8, 2020, the registrant had 117,901,827 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 March 31, 2020 (unaudited) and December 31, 2019	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019 (unaudited)	5
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2020 and 2019 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
Signatures		87

SPECIAL 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, 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 and expected market growth, 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. 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.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

	March 31, 2020			December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	168,418		$	109,335
Short-term investments		187,193			274,101
Restricted cash and cash equivalents, current		9,101			6,181
Prepaid expenses and other current assets		12,829			13,378
Total current assets		377,541			402,995
Intangible assets, net		35,388			35,694
Goodwill		16,937			16,937
Property and equipment, net		16,238			16,308
Operating right-of-use assets		16,007			—
Restricted cash and cash equivalents, noncurrent		1,192			7,300
Long-term investments		6,139			24,290
Other assets		7,672			8,547
TOTAL ASSETS	$	477,114		$	512,071
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	18,768		$	5,881
Accrued and other liabilities		21,918			26,495
Deferred revenue, current portion		5,010			6,181
Contingent consideration, current portion		10,700			8,200
Derivative liability		—			12,449
Total current liabilities		56,396			59,206
Deferred revenue, noncurrent		6,562			12,670
Operating lease liabilities, noncurrent		13,531			—
Contingent consideration, noncurrent		14,045			9,380
Deferred tax liability		3,305			3,305
Other long-term liabilities		2,942			3,568
TOTAL LIABILITIES		96,781			88,129
Commitments and contingencies (Note 7)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of March 31, 2020 and December 31, 2019; no shares issued and outstanding as of March 31, 2020 and December 31, 2019		—			—
Common stock, $0.0001 par value; 300,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 108,350,368 and 107,648,925 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively		11			11
Additional paid-in capital		825,833			793,051
Accumulated other comprehensive income (loss)		248			(601	)
Accumulated deficit		(445,759	)		(368,519	)
TOTAL STOCKHOLDERS’ EQUITY		380,333			423,942
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	477,114		$	512,071

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

VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended March 31,
	2020			2019
Revenues:
Grant revenue	$	5,231		$	3,644
Contract revenue		487			17
Total revenue		5,718			3,661
Operating expenses:
Research and development		64,979			25,872
General and administrative		12,649			8,559
Total operating expenses		77,628			34,431
Loss from operations		(71,910	)		(30,770	)
Other income (expense):
Interest income		1,755			2,245
Other income (expense), net		(7,069	)		(145	)
Total other income (expense)		(5,314	)		2,100
Loss before provision for income taxes		(77,224	)		(28,670	)
Provision for income taxes		(16	)		—
Net loss	$	(77,240	)	$	(28,670	)
Net loss per share, basic and diluted	$	(0.71	)	$	(3.19	)
Weighted-average shares outstanding, basic and diluted		108,387,913			9,001,158

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

VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2020			2019
Net loss	$	(77,240	)	$	(28,670	)
Other comprehensive income:
Unrealized gains on investments		844			109
Amortization of actuarial loss		5			—
Other comprehensive income		849			109
Comprehensive loss	$	(76,391	)	$	(28,561	)

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

VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(unaudited)

											Accumulated
									Additional		Other						Total
	Convertible Preferred Stock				Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders'
	Share		Amount		Share		Amount		Capital		Income (Loss)			Deficit			Equity (Deficit)
Balance at December 31, 2019		—	$	—		107,648,925	$	11	$	793,051	$	(601	)	$	(368,519	)	$	423,942
Reclassification of derivative liability to additional paid-in capital		—		—		—		—		29,245		—			—			29,245
Vesting of restricted common stock		—		—		618,079		—		427		—			—			427
Exercise of stock options		—		—		83,364		—		143		—			—			143
Stock-based compensation		—		—		—		—		2,967		—			—			2,967
Other comprehensive income		—		—		—		—		—		849			—			849
Net loss		—		—		—		—		—		—			(77,240	)		(77,240	)
Balance at March 31, 2020		—	$	—		108,350,368	$	11	$	825,833	$	248		$	(445,759	)	$	380,333

											Accumulated
									Additional		Other						Total
	Convertible Preferred Stock				Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders'
	Share		Amount		Share		Amount		Capital		Income (Loss)			Deficit			Equity (Deficit)
Balance at December 31, 2018		69,910,520	$	309,137		8,858,799	$	1	$	14,672	$	(14	)	$	(193,836	)	$	(179,177	)
Issuance of Series B convertible preferred stock, net of issuance cost of $165		18,202,213		327,475		—		—		—		—			—			—
Vesting of restricted common stock		—		—		197,983		—		—		—			—			—
Exercise of stock options		—		—		44,372		—		67		—			—			67
Stock-based compensation		—		—		—		—		2,453		—			—			2,453
Other comprehensive income		—		—		—		—		—		109			—			109
Net loss		—		—		—		—		—		—			(28,670	)		(28,670	)
Balance at March 31, 2019		88,112,733	$	636,612		9,101,154	$	1	$	17,192	$	95		$	(222,506	)	$	(205,218	)

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

VIR BIOTECHNOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(77,240	)	$	(28,670	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,000			706
Amortization of intangible assets		306			306
Amortization of premiums (accretion of discounts) on investments, net		562			(662	)
Noncash lease expense		816			—
Change in estimated fair value of contingent consideration		7,165			740
Change in estimated fair value of derivative liability		16,796			—
Change in estimated fair value of convertible preferred stock warrant liability		—			357
Stock-based compensation		2,967			2,453
Other		5			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		549			(367	)
Other assets		(125	)		(188	)
Accounts payable		12,944			1,163
Accrued liabilities and other long-term liabilities		(10,204	)		(1,957	)
Operating lease liabilities		(761	)		—
Deferred revenue		(3,189	)		(3,370	)
Net cash used in operating activities		(48,409	)		(29,489	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1,302	)		(3,476	)
Purchases of investments		(40,472	)		(322,831	)
Maturities of investments		145,813			52,143
Proceeds from disposal of an asset held sale		180			—
Net cash provided by (used in) investing activities		104,219			(274,164	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred stock, net of issuance costs		—			317,342
Payment of principal on financing lease obligations		(58	)		—
Proceeds from exercise of stock options		143			67
Net cash provided by financing activities		85			317,409
Net increase in cash, cash equivalents and restricted cash and cash equivalents		55,895			13,756
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		122,816			59,362
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	178,711		$	73,118
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment purchases included in accounts payable and accrued liabilities	$	521		$	1,373
Reclassification of derivative liability to additional paid-in capital	$	29,245		$	—
Advanced proceeds applied to convertible preferred stock issuance	$	—		$	10,140
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONDENSED CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	$	168,418		$	64,724
Restricted cash and cash equivalents, current		9,101			7,391
Restricted cash and cash equivalents, noncurrent		1,192			1,003
Total cash, cash equivalents and restricted cash	$	178,711		$	73,118

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

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1.	Organization

Vir Biotechnology, Inc. (“Vir” or the “Company”) is a clinical-stage immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases. Vir has assembled four technology platforms that are designed to stimulate and enhance the immune system by exploiting critical observations of natural immune processes. Its current development pipeline consists of product candidates targeting hepatitis B virus (“HBV”), influenza A, severe acute respiratory syndrome coronavirus 2 (“SARS-CoV-2”), human immunodeficiency virus (“HIV”), and tuberculosis (“TB”).

Reverse Stock Split

On September 16, 2019, the Company’s board of directors approved an amendment to the Company’s amended and restated certificate of incorporation to effect a 1-for-4.5 reverse split (“Reverse Split”) of shares of the Company’s common and convertible preferred stock, which was effected on September 27, 2019. The par value per share and authorized shares of common stock and convertible preferred stock were not adjusted as a result of the Reverse Split. All of the share and per share information included in the accompanying condensed consolidated financial statements has been adjusted to reflect the Reverse Split.

Initial Public Offering

On October 10, 2019, the Company completed its initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company issued and sold 7,142,858 shares of its common stock at a price of $20.00 per share. As a result of the IPO, the Company received $126.4 million in net proceeds, after deducting underwriting discounts, commissions and offering expenses. At the closing of the IPO, 88,112,733 shares of outstanding convertible preferred stock were automatically converted into 88,112,733 shares of common stock and a warrant to purchase 244,444 shares of convertible preferred stock was converted into a warrant to purchase 244,444 shares of common stock.

Need for Additional Capital

The Company has incurred net losses since inception and expects such losses to continue over the next several years. At March 31, 2020, the Company had an accumulated deficit of $445.8 million. Management expects to incur additional losses in the future to conduct research and development and recognizes the need to raise additional capital to fully implement its business plan. The Company had, excluding restricted cash, $361.8 million of cash, cash equivalents, and investments at March 31, 2020. Based on the Company’s business plans, management believes that its cash, cash equivalents, and short and long-term investments as of March 31, 2020 will be sufficient to meet its obligations for at least the next 12 months from the issuance date of these condensed consolidated financial statements.

2.	Summary of Significant Accounting Policies

Basis of Presentation

The Company’s 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 Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the accounts of Vir and its wholly-owned subsidiaries. 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 three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 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 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, 2019, filed with the SEC on March 26, 2020.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Use of Estimates

The preparation of the 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 condensed consolidated financial statements and the reported amounts of revenue and expense 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 and Other Risks and Uncertainties

With the global spread of the ongoing COVID-19 pandemic in the first quarter of 2020, the Company has implemented a number of plans and policies designed to address and mitigate the impact of the COVID-19 pandemic on its business. The Company anticipates that the COVID-19 pandemic will have an impact on the clinical development timelines for some of its clinical programs. The extent to which the COVID-19 pandemic impacts the Company’s business, clinical development and regulatory efforts, corporate development objectives and the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease.

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 product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s products 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 achieve profitability. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and short and long-term investments. Cash and cash equivalents are deposited in checking and sweep accounts at a financial institution. Such deposits may, at times, exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.

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 condensed consolidated balance sheets. As of March 31, 2020, the Company has no off-balance sheet concentrations of credit risk.

Investments

Investments include available-for-sale securities and are carried at estimated fair value. 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 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 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 condensed consolidated statements of operations.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company, through its investment in Brii Biosciences Limited, holds privately held equity securities in which the Company does not have a controlling interest or significant influence. The Company’s investment in Brii Biosciences Limited is recorded at cost and adjusted for impairments and observable price changes with the same or similar security from the same issuer. The valuation of the Company’s investment in Brii Biosciences Limited utilizes significant unobservable inputs or data in an inactive market and the valuation requires the Company’s judgment due to the absence of market prices and inherent lack of liquidity. Additionally, the determination of whether an orderly transaction is for the same or similar investment requires significant management judgment including the nature of the rights and obligations of its investments, the extent to which differences in those rights and obligations would affect the fair values of those investments, and the impact of any differences based on the stage of operational development of the investee. See Note 5—Grant, License and Collaboration Agreements for additional information on the Company’s investment in Brii Biosciences Limited.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents represent money market funds to secure a standby letter of credit and a security deposit with financial institutions, both pursuant to office and laboratory space lease agreements; and a holdback retained by the Company pursuant to the acquisition of Agenovir Corporation (“Agenovir”) in 2018, which was paid to Agenovir in the second quarter of 2019. Additionally, funds received from certain grants are restricted as to their use and are therefore classified as restricted cash and cash equivalents.

Revenue Recognition