What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-08-11 · 203 added, 161 removed, 778 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

CURRENT ASSETS:

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Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized as of June 30,

10,000,000 shares authorized as of September 30,

2020 and December 31, 2019;

no shares issued and outstanding as of June 30,

no shares issued and outstanding as of September 30,

2020 and December 31, 2019

Common stock, $ 0.0001 par value;

300,000,000 shares authorized as of June 30,

300,000,000 shares authorized as of September 30,

2020 and December 31, 2019;

126,991,631 and 107,648,925 shares issued and

outstanding as of June 30, 2020 and December 31, 2019, respectively

outstanding as of September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Grant revenue

11 unchanged sentences

Total other income (expense)

Loss before provision for income taxes

Provision for income taxes

Loss before benefit from (provision for) income taxes

Benefit from (provision for) income taxes

Net loss per share, basic and diluted

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Other comprehensive income (loss):

12 unchanged sentences

Equity (Deficit)

Balance at March 31, 2020

Issuance of common stock in connection with the achievement of a milestone

Issuance of common stock in connection with a collaboration agreement

Issuance of common stock for cashless exercise of warrant

Balance at June 30, 2020

Issuance of common stock in connection with a follow-on offering, net of issuance costs of $ 21,786

Vesting of restricted common stock

2 unchanged sentences

Other comprehensive loss

Balance at June 30, 2020

Balance at September 30, 2020

Convertible Preferred Stock

3 unchanged sentences

Equity (Deficit)

Balance at March 31, 2019

Balance at June 30, 2019

Issuance of common stock in connection with a license agreement

Repayment of promissory notes, net of unvested common stock

Vesting of restricted common stock

1 unchanged sentence

Stock-based compensation

Other comprehensive income

Balance at June 30, 2019

Other comprehensive loss

Balance at September 30, 2019

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

12 unchanged sentences

Issuance of common stock for cashless exercise of warrant

Issuance of common stock in connection with a follow-on offering, net of issuance costs of $ 21,786

Vesting of restricted common stock

2 unchanged sentences

Other comprehensive income

Balance at June 30, 2020

Balance at September 30, 2020

Convertible Preferred Stock

4 unchanged sentences

Balance at December 31, 2018

Issuance of Series B convertible preferred stock, net of issuance cost of $ 165

Issuance of Series B convertible preferred stock, net of issuance costs of $ 165

Issuance of common stock in connection with a license agreement

Repayment of promissory notes, net of unvested common stock

Vesting of restricted common stock

2 unchanged sentences

Other comprehensive income

Balance at June 30, 2019

Balance at September 30, 2019

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

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Amortization of intangible assets

Impairment of intangible assets

Amortization of premiums (accretion of discounts) on investments, net

4 unchanged sentences

Change in estimated fair value of convertible preferred stock warrant liability

Common stock issued in connection with license agreement

Stock-based compensation

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Maturities of investments

Proceeds from disposal of an asset held sale

Net cash provided by (used in) investing activities

Proceeds from disposal of an asset held for sale

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock in connection with a collaboration agreement

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of convertible preferred stock, net of issuance costs

Payment of contingent consideration

Payment of principal on financing lease obligations

Proceeds received from financing lease obligation

Payment of principal on financing lease obligation

Payment of offering costs related to initial public offering

Proceeds from repayment of promissory notes

Proceeds from exercise of stock options

6 unchanged sentences

Reclassification of derivative liability to additional paid-in capital

Operating lease liabilities obtained in exchange of right-of-use asset

Deferred offering costs in accounts payable and accrued liabilities

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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 severe acute respiratory syndrome coronavirus 2 (“SARS-CoV-2”), hepatitis B virus (“HBV”), influenza A, human immunodeficiency virus (“HIV”), and tuberculosis (“TB”).

Its current development pipeline consists of product candidates targeting severe acute respiratory syndrome coronavirus 2 (“SARS-CoV-2”), hepatitis B virus (“HBV”), influenza A virus, human immunodeficiency virus (“HIV”), and tuberculosis (“TB”).

Reverse Stock Split

7 unchanged sentences

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.

Follow-On Offering

On July 10, 2020, the Company issued and sold 8,214,285 shares of the Company’s common stock pursuant to a registration statement on Form S-1 (File No.

333-239689) and a registration statement on Form S-1 filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (File No.

333-239747) (collectively, the “Registration Statements”).

The Registration Statements became effective on July 7, 2020.

The price of the shares sold in the follow-on offering was $ 42.00 per share and the Company received total gross proceeds from the offering of approximately $ 345.0 million.

After deducting underwriting discounts and commissions of $ 20.7 million and offering expenses of $ 1.1 million, the net proceeds were $ 323.2 million.

Need for Additional Capital

The Company has incurred net losses since inception and expects such losses to continue over the next several years.

As of June 30, 2020, the Company had an accumulated deficit of $ 476.9 million.

As of September 30, 2020, the Company had an accumulated deficit of $ 561.5 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, $ 552.4 million of cash, cash equivalents, and short-term investments at June 30, 2020.

In July 2020, the Company completed a follow-on offering of its common stock and issued 8,214,285 shares of its common stock for net proceeds of $ 323.2 million, after deducting underwriting discounts, commissions and offering expenses.

Based on the Company’s business plans, management believes that its cash, cash equivalents, and short-term investments as of June 30, 2020 together with the net proceeds from its July 2020 follow-on offering will be sufficient to fund its operations for at least the next 12 months from the issuance date of these condensed consolidated financial statements.

The Company had, excluding restricted cash, $ 826.6 million of cash, cash equivalents, and short-term investments at September 30, 2020.

Based on the Company’s business plans, management believes that its cash, cash equivalents, and short-term investments as of September 30, 2020 will be sufficient to fund its operations for at least the next 12 months from the issuance date of these condensed consolidated financial statements.

Summary of Significant Accounting Policies

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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, 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.

The condensed consolidated results of operations for the nine months ended September 30, 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.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Certain information and footnote disclosures typically included in the Company’s annual consolidated financial statements have been condensed or omitted.

As such, t hese 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 .

Use of Estimates

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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.

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 United States, 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.

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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 June 30, 2020, the Company has no off-balance sheet concentrations of credit risk.

As of September 30, 2020, the Company has no off-balance sheet concentrations of credit risk.

Investments include available-for-sale securities and are carried at estimated fair value.

2 unchanged sentences

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.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in other income (expense), net and interest income, respectively, on the condensed consolidated statements of operations.

VIR BIOTECHNOLOGY, INC.

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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.

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Contingent consideration obligations incurred in connection with the business combination are recorded at their fair values on the acquisition date and are remeasured each subsequent reporting period until the related contingencies are resolved and are classified as contingent consideration on the condensed consolidated balance sheets.

The changes in fair values of contingent consideration related to achievement of various milestones related to product candidates are recorded within research and development expense.

When the Company determines that assets acquired do not meet the definition of a business under the acquisition method of accounting, the transaction is accounted for as an acquisition of assets.

1 unchanged sentence

Any contingent consideration is recognized only when it becomes payable or is paid.

The changes in fair values of contingent consideration related to achievement of various milestones related to product candidates are recorded within research and development expense.

Embedded Derivatives

The Company evaluates certain of its acquisitions, collaborative arrangements and other business development transactions to determine if embedded components of these contracts meet the definition of a derivative under Topic ASC 815, Derivatives and Hedging.

The Company evaluates its acquisitions, collaborative arrangements and other business development transactions to determine if embedded components of these contracts meet the definition of a derivative under ASC 815, Derivatives and Hedging.

In general, embedded derivatives are required to be bifurcated from the host instrument if (i) the embedded feature is not clearly and closely related to the host contract and (ii) the embedded feature, if considered a freestanding instrument, meets the definition of a derivative.

The embedded derivatives are reported on the condensed consolidated balance sheets at their estimated fair values.

Specifically, any contingent consideration related to an asset acquisition that meets the definition of an embedded derivative are classified as contingent consideration on the condensed consolidated balance sheets.

Embedded derivatives are reported on the condensed consolidated balance sheets at their estimated fair values.

Contingent consideration related to asset acquisitions that meet the definition of an embedded derivative are classified as contingent consideration on the condensed consolidated balance sheets.

Any change in estimated fair values, as determined at each measurement period, are recorded in the condensed consolidated statements of operations based on the nature of the related contingencies.

The changes in fair values of an embedded derivative related to achievement of various milestones related to product candidates are recorded within research and development expense.

Otherwise, the changes in fair values are recorded within other income (expense), net.

Changes in fair values of embedded derivatives related to achievement of various milestones for product candidates are recorded within research and development expense.

Otherwise, changes in fair values are recorded within other income (expense), net.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

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The Company early adopted the standard on January 1, 2020 using the optional modified retrospective transition method by recognizing a cumulative effect adjustment to the opening balance of accumulated deficit as of that date.

Results for the three and six months ended June 30, 2020 are presented under ASC 842.

Results for the three and nine months ended September 30, 2020 are presented under ASC 842.

The prior period amounts were not adjusted and continue to be reported in accordance with previous lease guidance, ASC 840, Leases.

The Company elected the package of practical expedients allowed under ASC 842, which permits the Company to account for its existing operating leases as operating leases under the new guidance, without reassessing the Company’s prior conclusions about lease identification, lease classification and initial direct cost.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Adoption of ASC 842 resulted in the recognition of operating lease ROU assets and operating lease liabilities of $ 16.8 million and $ 17.5 million, respectively, on the Company’s condensed consolidated balance sheet as of January 1, 2020.

1 unchanged sentence

The adoption of the new standard did not have an impact on the Company's beginning accumulated deficit or statement of operations.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset.

23 unchanged sentences

The new guidance is effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

The Company adopted ASU 2018-18 as of January 1, 2020 and the adoption of ASU 2018-18 had no impact on the consolidated financial statements.

The Company adopted ASU 2018-18 as of January 1, 2020 and the adoption had no impact on the consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

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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:

June 30, 2020

September 30, 2020

(in thousands)

11 unchanged sentences

Includes $ 24.3 million classified as long-term investments.

As of June 30, 2020, there were no investments that have been in a continuous unrealized loss position for longer than 12 months.

Total net unrealized gains of $ 0.4 million were recorded in accumulated other comprehensive income (loss) at June 30, 2020.

As of June 30, 2020, no securities have contractual maturities of longer than one year .

As of September 30, 2020, there were no investments that have been in a continuous unrealized loss position for longer than 12 months.

Total net unrealized gains of $ 0.2 million were recorded in accumulated other comprehensive income (loss) at September 30, 2020.

As of September 30, 2020, no securities have contractual maturities of longer than one year .

Level 3 liabilities consist of contingent consideration and derivative liability as of December 31, 2019.

As of June 30, 2020, Level 3 liabilities consist of contingent consideration.

As of September 30, 2020, Level 3 liabilities consist of contingent consideration.

Contingent Consideration

7 unchanged sentences

As such, the Company paid $ 10.0 million related to this milestone event in June 2020.

As of June 30, 2020, the Company calculated the estimated fair value of the remaining clinical and regulatory milestones using the following significant unobservable inputs:

In October 2020, the Company achieved another specified clinical milestone for the SARS-CoV-2 product and paid $ 10.0 million.

See Note 15—Subsequent Event.

As of September 30, 2020, the Company calculated the estimated fair value of the remaining clinical and regulatory milestones using the following significant unobservable inputs:

Unobservable input

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As of December 31, 2019, the Company calculated the estimated fair value of the clinical and regulatory milestones using discount rates ranging from 7.7 % to 11.1 %.

For the commercial milestones, the Company used a Monte Carlo simulation upon the availability of a discrete revenue forecast and the increased likelihood that the clinical trials would commence.

As of June 30, 2020, the Monte Carlo simulation assumed a commercial product launch and associated discrete revenue forecast, as well as the following significant unobservable inputs:

For the commercial milestones, the Company used a Monte Carlo simulation because of the availability of a discrete revenue forecast and the increased likelihood that the clinical trials would commence.

As of September 30, 2020, the Monte Carlo simulation assumed a commercial product launch and associated discrete revenue forecast, as well as the following significant unobservable inputs:

Unobservable input

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The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due.

As of June 30, 2020 and December 31, 2019, the estimated fair value of the contingent consideration related to the Humabs acquisition was $ 23.2 million and $ 14.9 million, respectively, with changes in the estimated fair value recorded in research and development expense in the condensed consolidated statements of operations.

As of September 30, 2020 and December 31, 2019, the estimated fair value of the contingent consideration related to the Humabs acquisition was $ 42.5 million and $ 14.9 million, respectively, with changes in the estimated fair value recorded in research and development expense in the condensed consolidated statements of operations.

The estimated fair value of the contingent consideration related to the TomegaVax acquisition was determined by using a Monte Carlo simulation model which included estimates of both the probability and timing to achieve the required per share price of the Company’s common stock, and incorporates assumptions as to expected volatility and discount rate.

The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due.

Although the TomegaVax acquisition was accounted for as an asset acquisition, such contingent consideration met the definition of an embedded derivative financial instruments.

As of June 30, 2020, the fair value of the contingent consideration was estimated using the following significant unobservable inputs:

Although the TomegaVax acquisition was accounted for as an asset acquisition, such contingent consideration met the definition of an embedded derivative financial instrument.

As of September 30, 2020, the fair value of the contingent consideration was estimated using the following significant unobservable inputs:

Unobservable input

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As of December 31, 2019, the fair value of the contingent consideration was estimated using expected volatility of 81 %, and discount rates ranging from 1.6 % to 1.7 %.

As of June 30, 2020 and December 31, 2019, the estimated fair value of the contingent consideration related to the TomegaVax acquisition was $ 12.2 million and $ 2.7 million, respectively, with changes in the estimated fair value recorded in other income (expense), net in the condensed consolidated statements of operations.

As of September 30, 2020 and December 31, 2019, the estimated fair value of the contingent consideration related to the TomegaVax acquisition was $ 9.5 million and $ 2.7 million, respectively, with changes in the estimated fair value recorded in other income (expense), net in the condensed consolidated statements of operations.

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

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capital upon achievement of development milestone

Balance at June 30, 2020

Balance at September 30, 2020

Acquisition of TomegaVax

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The payments under the TomegaVax Letter Agreement can be made in cash or shares of the Company’s common stock, at the discretion of the Company’s board of directors.

The Company determined that the future milestone payments contain net settlement provisions and therefore, they were required to be accounted for as embedded derivatives under the relevant accounting guidance.

As of September 30, 2020, the estimated fair value of the embedded derivative was $ 9.5 million.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

As of June 30, 2020, the estimated fair value of the embedded derivative was $ 12.2 million.

Acquisition of Humabs

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(i) up to $ 135.0 million upon the achievement of clinical, regulatory and commercial milestones for an HBV product;

and (ii) up to $ 105.0 million upon the achievement of clinical, regulatory and commercial milestones for another product.

and (ii) up to $ 105.0 million upon the achievement of clinical, regulatory and commercial milestones for another product, which the Company elected as a SARS-CoV-2 product.

In May 2020, the Company achieved one of the specified clinical milestones for the HBV product.

As such, the Company paid $ 10.0 million related to this milestone event in June 2020.

The estimated fair value of the remaining contingent consideration was $ 23.2 million as of June 30, 2020.

The estimated fair value of the remaining contingent consideration was $ 42.5 million as of September 30, 2020.

In October 2020, the Company achieved another specified clinical milestone for the SARS-CoV-2 product and paid $ 10.0 million related to this milestone event.

See Note 15—Subsequent Event.

Acquisition of Agenovir

In January 2018, the Company entered into an agreement and plan of merger (the “Agenovir Merger Agreement”) with Agenovir, under which the Company purchased all equity interests of Agenovir.

In January 2018, the Company entered into an agreement and plan of merger (the “Agenovir Merger Agreement”) with Agenovir Corporation (“Agenovir”), under which the Company purchased all equity interests of Agenovir.

The primary assets purchased in the acquisition were in-process research and development programs in human papillomavirus (“HPV”) and HBV using CRISPR/Cas9.

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The Company terminated the HPV program in February 2020 and no longer has any further obligations related to this program under the Agenovir Merger Agreement.

None of the milestones have been achieved as of June 30, 2020, therefore no amounts were recognized relating to the contingent consideration.

None of the milestones have been achieved as of September 30, 2020, therefore no amounts were recognized relating to the contingent consideration.

Goodwill and Intangible Assets

Goodwill of $ 16.9 million represents the excess of the purchase price over the estimated fair value of the net assets acquired from Humabs.

The Company tests goodwill for impairment on an annual basis or sooner, if deemed necessary.

There was no impairment for the three and nine months ended September 30, 2020 and 2019.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Intangible Assets

The following table summarizes the carrying amount of the Company’s finite-lived intangible assets (in thousands):

September 30,

(in thousands)

Developed technology

Less accumulated amortization

Less impairment of intangible assets

Developed technology, net

Finite-lived intangible assets are carried at cost less accumulated amortization.

Of the total cost of developed technology, $ 4.8 million and $ 2.2 million resulted from the acquisitions of Humabs and Statera Health, LLC, respectively.

Amortization expense related to finite-lived intangible assets, included in research and development expenses in the consolidated statements of operations, totaled $ 0.3 million and $ 0.9 million for the three and nine months ended September 30, 2020, respectively, and $ 0.3 million and $ 0.9 million for the three and nine months ended September 30, 2019, respectively.

Management reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, like that of property and equipment.

During the quarter ended September 30, 2020, as a result of the availability of other research and analytics platforms, the Company abandoned certain of its acquired developed technologies and concluded that the full remaining book values of the assets were impaired.

Therefore, $ 0.8 million was written off as an impairment charge which was classified as research and development expenses.

Indefinite-Lived Intangible Assets

As of September 30, 2020, the Company had indefinite-lived intangible assets of $ 31.2 million related to the purchased IPR&D from the Humabs acquisition.

No impairment losses were recorded for the three and nine months ended September 30, 2020 and 2019.

Grant Agreements

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The 2017 Grant expired on May 31, 2019 .

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Payments received in advance that were related to future research activities were deferred and recognized as revenue when the donor-imposed conditions were met, which was as the research and development activities were performed.

The Company recognized $ 0.4 million and $ 0.9 million for the three and six months ended June 30, 2019, respectively.

No revenue was recognized for the three and six months ended June 30, 2020.

The Company recognized grant revenue of zero and $ 0.9 million for the three and nine months ended September 30, 2019, respectively.

No revenue was recognized for the three and nine months ended September 30, 2020.

Human Immunodeficiency Virus (“HIV”) Grant

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Payments received in advance that are related to future research activities are deferred and recognized as revenue when the donor-imposed conditions are met, which is as the research and development activities are performed.

The Company recognized grant revenue of $ 0.5 million and $ 5.4 million for the three and six months ended June 30, 2020, respectively, and $ 0.8 million and $ 2.9 million for the three and six months ended June 30, 2019, respectively.

The Company recognized grant revenue of $ 0.8 million and $ 6.2 million for the three and nine months ended September 30, 2020, respectively, and $ 0.5 million and $ 3.4 million for the three and nine months ended September 30, 2019, respectively.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Tuberculosis (“TB”) Grant

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The parties amended the agreement in May 2020 under which the grant term was extended to February 28, 2021, unless earlier terminated 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 project.

The Company currently estimated that $ 3.7 million of the funds received in advance and previously recorded as deferred revenue would not be earned by February 2021 and is therefore included within accrued and other liabilities as of June 30, 2020.

The Company currently estimated that $ 3.8 million of the funds received in advance and previously recorded as deferred revenue would not be earned by February 2021 and is therefore included within accrued and other liabilities as of September 30, 2020.

The Company recognized grant revenue of nil and $ 0.1 million for the three and six months ended June 30, 2020, respectively, and $ 0.5 million and $ 1.3 million for the three and six months ended June 30, 2019, respectively.

The Company recognized grant revenue of $ 0.9 million and $ 1.0 million for the three and nine months ended September 30, 2020, respectively, and $ 0.4 million and $ 1.8 million for the three and nine months ended September 30, 2019, respectively.

National Institutes of Health

As part of the Company’s acquisition of TomegaVax in September 2016, the Company acquired grant agreements related to TomegaVax’s research effort in infectious diseases and cancer that entitled them to several awards under the Small Business Innovation Research Program from the National Institutes of Health (“NIH”).

Through June 30, 2020, the Company has acquired or been awarded grants from NIH totaling $ 5.1 million.

Through September 30, 2020, the Company has acquired or been awarded grants from NIH totaling $ 5.1 million.

These grants are cost plus fixed fee agreements under which the Company is reimbursed for its direct and indirect costs.

Only costs that are allowable under certain government regulations and NIH’s supplemental policy and procedure manual may be claimed for reimbursement, subject to a government audit.

The Company recognized grant revenue of $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2020, respectively, and $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2019, respectively.

The Company recognized grant revenue of $ 0.1 million and $ 0.5 million for the three and nine months ended September 30, 2020, respectively, and $ 0.2 million and $ 0.7 million for the three and nine months ended September 30, 2019, respectively.

Collaboration and License Agreements

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After receipt of antitrust clearance on April 22, 2020, the Preliminary Agreement became effective as of April 29, 2020, which was also the closing date for the associated Stock Purchase Agreement between the parties (“Effective Date”).

Under the terms of the GSK Agreement, the Company and GSK agreed to collaborate to research, develop and commercialize products for the

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

prevention, treatment and prophylaxis of diseases caused by SARS-CoV-2, the virus that causes COVID-19, and potentially other coronaviruses.

Under the terms of the 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 is focused on the development and commercialization of three types of collaboration products under three programs:

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Subject to an opt-out mechanism, the parties will 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, 27.5 % of such costs for the vaccine products, and equal sharing of such costs for the functional genomics products.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

On a collaboration product-by-collaboration product basis, each party will have the one-time right, at specified points in development, to opt- out of its co-funding obligations, and the other party may, at its election, either pursue such program unilaterally, or also cease research and development activities and funding of such collaboration product.

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All other elements of the GSK Agreement including the research and development activities, and participation in the JSC and subcommittees for each collaboration program were not determined to be distinct performance obligations with a customer.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The transaction price for the Antibody License at inception was determined to be $ 43.3 million, representing the premium on the sale of common stock to GSK.

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The remaining units of account of the GSK Agreement were determined to be within the scope of ASC 808 as the Company and GSK are both active participants in the development, manufacturing and commercialization activities and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement.

Furthermore, the Company and GSK participate in the the commercial profit and loss sharing arrangement for each program commensurate with each party’s cost-sharing responsibilities during research and development.

Furthermore, the Company and GSK participate in the commercial profit and loss sharing arrangement for each program commensurate with each party’s cost-sharing responsibilities during research and development.

Because ASC 808 does not provide recognition and measurement guidance, the Company determined that the guidance in ASC 730, Research and Development, was appropriate to analogize to based on the nature of the cost-sharing provisions of the agreement.

1 unchanged sentence

The Company also concluded that any payments from GSK related to the profit and loss sharing arrangement (including royalties) contingent upon the commercialization of the products under the Vaccine and Functional Genomics Programs will be analogized to ASC 606 and therefore, will be recognized when the related sales occur.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Costs associated with co-development activities performed under the agreement are included in research and development expenses in the condensed consolidated statements of operations, with any reimbursement of costs by GSK reflected as a reduction of such expenses.

During the three and six months ended June 30, 2020, the Company recognized $ 3.8 million as a reduction of research and development expense under the GSK Agreement.

As such, the Company has a receivable from GSK of $ 3.8 million included in prepaid expenses and other current assets as of June 30, 2020.

During the three and nine months ended September 30, 2020, the Company recognized $ 1.2 million as additional research and development expense and $ 2.6 million as a reduction of research and development expense, respectively, under the GSK Agreement.

The Company has a payable to GSK of $ 2.6 million included in accrued liabilities as of September 30, 2020.

Brii Biosciences

5 unchanged sentences

As a result of Brii Bio’s right to exercise one of its options for the Company’s HBV siRNA program, under the terms of the Alnylam Agreement, as amended, the Company transferred to Alnylam a specified percentage of such equity consideration allocable to such program as discussed below.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

With respect to programs for which Brii Bio exercises its options, Brii Bio will be required to pay the Company an option exercise fee for each such Vir program ranging from the mid-single-digit millions up to $ 20.0 million, determined based on the commercial potential of the licensed program.

11 unchanged sentences

Royalty rates are subject to specified reductions and offsets.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The Brii Agreement will remain in force until the expiration of all options or, if any option is exercised, expiration of all royalty payment obligations for all licensed products within such licensed program, unless terminated in its entirety or on a program-by-program basis by either party.

11 unchanged sentences

Under the share transfer agreement, the Company transferred a portion of its ordinary shares held in Brii Bio Parent to Alnylam in connection with the execution of the Brii Agreement.

As of June 30, 2020 and December 31, 2019, the carrying value of the investment in Brii Bio was $ 5.7 million and $ 6.6 million, respectively, which is included in other assets on the condensed consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, the carrying value of the investment in Brii Bio was $ 5.7 million and $ 6.6 million, respectively, which is included in other assets on the condensed consolidated balance sheets.

The Company’s maximum exposure to loss under the Brii Agreement is represented by options to acquire licenses to develop and commercialize potential products and future milestone payments.

The ultimate expense that the Company incurs under the Brii Agreement cannot be quantified at this time as the amount will vary based on the timing and outcome of research activities.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Option Exercise by Brii Bio

11 unchanged sentences

The Company will re-evaluate the transaction price in each reporting period.

During the three and six months ended June 30, 2020, the Company recognized the $ 22.7 million as license revenue from a related party.

During the three months ended June 30, 2020, the Company recognized the $ 22.7 million as license revenue from a related party.

The Company separately paid $ 10.0 million, half of the option exercise proceeds, to Alnylam in June 2020 in connection with the Alnylam Agreement that was recognized as research and development expense during the three months ended June 30, 2020.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

October 2017 Agreement

8 unchanged sentences

If Alnylam exercises a profit-sharing option for a product, the Company will negotiate the terms of such profit-sharing agreement, which will include sharing equally with Alnylam all subsequent costs associated with the development of such product, as well as the profits and losses in connection with such product, subject to reimbursement by Alnylam of a portion of specified development costs in certain circumstances.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Pursuant to the Alnylam Agreement, the Company paid Alnylam an upfront fee of $ 10.0 million and issued to Alnylam 1,111,111 shares of the Company’s common stock.

12 unchanged sentences

Either party may terminate the agreement for cause for the other party’s uncured material breach on 60 days’ written notice (or 30 days’ notice for payment breach), or if the other party challenges the validity or enforceability of any patent licensed to it under the Alnylam Agreement on 30 days’ notice.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

At the inception of the Alnylam Agreement, the Milestone Shares did not meet the net settlement criteria to be accounted for as an embedded derivative.

11 unchanged sentences

In March 2020, the Company and Alnylam entered into a second amendment to the Alnylam Agreement (as amended, the “Amended Alnylam Agreement”) to expand the parties’ existing collaboration to include the development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the virus that causes the disease COVID-19, and potentially other related coronaviruses, utilizing Alnylam’s recent advances in lung delivery of novel conjugates of siRNA – the molecules that mediate RNAi (the “COV Products”).

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Pursuant to the Amended Alnylam Agreement, the parties will each be responsible for pre-clinical development costs incurred by such party in performing its allocated responsibilities under an agreed-upon initial pre-clinical development plan for COV Products.

The parties will equally share costs incurred in connection with the manufacture of non-GMP drug product required for pre-clinical development prior to filing of an investigational new drug application for the first COV Product in the coronavirus program.

The parties will equally share certain costs incurred in connection with the manufacture of non-GMP drug product required for pre-clinical development prior to filing of an investigational new drug application for the first COV Product in the coronavirus program.

Following the completion of initial pre-clinical development activities, if the Company exercises its option to progress one or more candidates from the coronavirus program into further development, the Company will be responsible for conducting all development, manufacturing and commercialization activities for COV Products, at its sole expense, subject to Alnylam’s right to opt-in, during a specified period, to share equally with the Company the profits and losses in connection with development and commercialization of COV Products.

2 unchanged sentences

Third Amendment

On April 1, 2020, the Company and Alnylam entered into a third amendment to the Alnylam Agreement to expand the parties’ existing collaboration to include the development and commercialization of RNAi therapeutics targeting up to three human host factor targets relating to susceptibility to coronaviruses, for use in connection with the treatment, palliation, diagnosis or prevention of COVID-19, and other diseases caused by coronaviruses.

On April 1, 2020, the Company and Alnylam entered into a third amendment to the Alnylam Agreement to further expand the parties’ existing collaboration to include the development and commercialization of RNAi therapeutics targeting up to three human host factor targets relating to susceptibility to coronaviruses, for use in connection with the treatment, palliation, diagnosis or prevention of COVID-19, and other diseases caused by coronaviruses.

The products arising from the activities directed to the host factor targets may utilize Alnylam’s recent advances in lung delivery of novel conjugates of siRNA – the molecules that mediate RNAi (the “Host Factor Products”).

Pursuant to this amendment, the parties will each be responsible for pre-clinical development costs incurred by such party in performing its allocated responsibilities under an agreed-upon initial pre-clinical development plan for Host Factor Products.

The parties will equally share costs incurred in connection with the manufacture of non-GMP drug product required for pre-clinical development prior to the filing of an investigational new drug application for the first Host Factor Product in the coronavirus program.

The parties will equally share certain costs incurred in connection with the manufacture of non-GMP drug product required for pre-clinical development prior to the filing of an investigational new drug application for the first Host Factor Product in the coronavirus program.

Following the completion of initial pre-clinical development activities, if the Company exercises its option to progress one or more candidates arising from the coronavirus program into further development, the Company will be responsible for conducting all development, manufacturing and commercialization activities for Host Factor Products, at its sole expense, subject to Alnylam’s right to opt-in, during a specified period, to share equally with the Company the profits and losses in connection with development and commercialization of Host Factor Products.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

If the Company exercises its program option for the coronavirus program, and successfully develops one or more Host Factor Products arising from such program, then unless Alnylam exercises its profit-sharing option, the Company will be required to pay Alnylam up to $ 15.0 million in the aggregate for the achievement of specified development milestones for the Host Factor Products.

1 unchanged sentence

Research and Development Expenses Recognized for the Period

In addition to the Milestone Shares and $ 15.0 million milestone payable to Alnylam in the first quarter of 2020, and the $ 10.0 million payment resulting from Brii Bio’s option exercise in the second quarter of 2020, the Company incurred expenses under the Alnylam Agreement of $ 2.5 million and $ 4.8 million during the three and six months ended June 30, 2020, respectively.

During the three and six months ended June 30, 2019, the Company incurred expenses under the Alnylam Agreement of $ 1.6 million and $ 3.1 million, respectively.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

In addition to the Milestone Shares and $ 15.0 million milestone payable to Alnylam in the first quarter of 2020, and the $ 10.0 million payment resulting from Brii Bio’s option exercise in the second quarter of 2020, the Company incurred expenses under the Alnylam Agreement of $ 0.8 million and $ 5.6 million during the three and nine months ended September 30, 2020, respectively.

During the three and nine months ended September 30, 2019, the Company incurred expenses under the Alnylam Agreement of $ 7.5 million and $ 10.7 million, respectively.

WuXi Biologics

12 unchanged sentences

Pursuant to the Rockefeller Agreement, Rockefeller granted the Company a worldwide exclusive license under certain patent rights, and a worldwide non-exclusive license under certain materials and know-how covering certain antibody variants relating to a specified mutation leading to enhanced antibody function and utility, to develop, manufacture and commercialize infectious disease products covered by the licensed patents, or that involve the use or incorporation of the licensed materials and know-how, in each case for all uses and purposes for infectious diseases.

The Company uses technology licensed under the Rockefeller Agreement in the Company’s antibody platform and in the Company’s product candidate VIR-3434.

The Company uses technology licensed under the Rockefeller Agreement in the Company’s antibody platform and in the Company’s product candidates VIR-3434 and VIR-7832.

The Company paid Rockefeller an upfront fee of $ 0.3 million for entry into the Rockefeller Agreement, and is required to pay annual license maintenance fees of $ 1.0 million, which will be creditable against royalties following commercialization.

3 unchanged sentences

The Company’s obligation to pay royalties to Rockefeller will terminate, on a product-by-product and jurisdiction-by-jurisdiction basis, upon the latest of the expiration of the last valid claim of a licensed patent in such jurisdiction, the expiration of all regulatory exclusivity in such jurisdiction or 12 years following the first commercial sale of the applicable licensed product in such jurisdiction.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

In May 2020, the Company achieved one of the specified development milestones related to the HBV program.

The Company recognized $ 1.3 million related to this milestone event and annual license maintenance fees as research and development expense during the three and six months ended June 30, 2020.

For the three and six months ended June 30, 2019, the Company recognized $ 1.0 million of license maintenance fees as research and development expense.

The Company recognized $ 1.3 million related to this milestone event and annual license maintenance fees as research and development expense during the nine months ended September 30, 2020.

For the nine months ended September 30, 2019, the Company recognized $ 1.0 million of license maintenance fees as research and development expense.

No expenses were recognized during the three months ended September 30, 2020 and 2019.

The Rockefeller Agreement will remain in force, absent earlier termination, until the expiration of all of the Company’s obligations to pay royalties to Rockefeller in all jurisdictions.

2 unchanged sentences

Rockefeller may also terminate the Rockefeller Agreement if the Company ceases to carry on business with respect to the rights granted to the Company under the agreement.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

In September 2018, the Company entered into a license agreement (“2018 MedImmune Agreement”) with MedImmune, LLC (“MedImmune”), pursuant to which the Company obtained a worldwide, exclusive license to develop and commercialize half-life extended versions of two specified antibodies under development by MedImmune that target influenza A and influenza B, respectively, for all uses in humans and animals.

15 unchanged sentences

These technologies are used in the Company’s VIR-2482 and VIR-3434 product candidates.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

In consideration for the grant of the license, the Company paid Xencor an upfront fee, which was recognized as research and development expenses in the third quarter of 2019.

7 unchanged sentences

The milestone payments are expensed to research and development.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 2020 License Agreement

11 unchanged sentences

Property and equipment, net consists of the following:

September 30,

(in thousands)

7 unchanged sentences

Total property and equipment, net

Depreciation and amortization expenses was $ 1.1 million and $ 2.1 million for the three and six months ended June 30, 2020, respectively, and $ 0.8 million and $ 1.5 million for the three and six months ended June 30, 2019, respectively.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Depreciation and amortization expenses was $ 1.1 million and $ 3.2 million for the three and nine months ended September 30, 2020, respectively, and $ 0.9 million and $ 2.4 million for the three and nine months ended September 30, 2019, respectively.

Sale-Leaseback Transaction

2 unchanged sentences

Therefore, the Company accounted for the transaction as a failed sale-leaseback whereby the Company continues to depreciate the assets and recorded a financing obligation for the consideration received from the buyer-lessor.

As of June 30, 2020, the current and long-term portions of the financing obligation were $ 0.2 million and $ 0.8 million, respectively.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

As of September 30, 2020, the current and long-term portions of the financing obligation were $ 0.3 million and $ 0.7 million, respectively.

Accrued and Other Liabilities

Accrued and other liabilities consist of the following:

September 30,

(in thousands)

18 unchanged sentences

These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred.

The following table contains a summary of the lease costs recognized under ASC 842 and additional information related to operating leases for the three and six months ended June 30, 2020:

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table contains a summary of the lease costs recognized under ASC 842 and additional information related to operating leases for the three and nine months ended September 30, 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

June 30, 2020

September 30, 2020

Operating lease cost

5 unchanged sentences

Weighted average incremental borrowing rate

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Cash paid for amounts included in the measurement of operating lease liabilities for the six months ended June 30, 2020 was $ 2.2 million and was included in net cash used in operating activities in the Company's condensed consolidated statement of cash flows.

The maturity of the Company’s operating lease liabilities as of June 30, 2020 was as follows (in thousands):

2020 (excluding the six months ended June 30, 2020)

Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2020 was $ 3.4 million and was included in net cash used in operating activities in the Company's condensed consolidated statement of cash flows.

The maturity of the Company’s operating lease liabilities as of September 30, 2020 was as follows (in thousands):

2020 (excluding the nine months ended September 30, 2020)

Total lease payments

1 unchanged sentence

Present value of operating lease liabilities

The following amounts were recorded in the condensed consolidated balance sheet as of June 30, 2020 (in thousands):

The following amounts were recorded in the condensed consolidated balance sheet as of September 30, 2020 (in thousands):

Operating Leases

3 unchanged sentences

Total operating lease liabilities

Rent expense under ASC 840 was $ 1.0 million and $ 2.0 million for the three and six months ended June 30, 2019, respectively.

Rent expense under ASC 840 was $ 1.2 million and $ 3.2 million for the three and nine months ended September 30, 2019, respectively.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Manufacturing and Supply Letter Agreements

Letter Agreement with Samsung

Letter Agreement, Assignment and Master Services Agreement with Samsung

On April 9, 2020, the Company and Samsung Biologics Co., Ltd.

(“Samsung”) entered into a binding letter agreement (the “Samsung Letter Agreement”), pursuant to which Samsung will perform development and manufacturing services for the Company’s SARS-CoV-2 antibody program.

Under the terms of the Samsung Letter Agreement, the Company has committed to purchase a firm and binding capacity reservation for a specified number of manufacturing slots in 2021 and 2022.

The Company is obligated to pay a total of approximately $ 362 million for such capacity reservation on a take-or-pay basis regardless of whether such manufacturing slots are utilized by the Company, subject to annual adjustment based on the Korean Consumer Price Index, which also includes certain fees relating to project management and technology transfer.

Under the terms of the Samsung Letter Agreement, the Company had committed to purchase a firm and binding capacity reservation for a specified number of manufacturing slots in 2021 and 2022.

The Company was obligated to pay a total of approximately $ 362 million for such capacity reservation on a take-or-pay basis regardless of whether such manufacturing slots are utilized by the Company, subject to annual adjustment based on the Korean Consumer Price Index, which also includes certain fees relating to project management and technology transfer.

The amounts will be payable during 2021 and 2022 and invoiced on a per-batch basis, with shortfalls invoiced at the end of the year in which such shortfall occurs.

The parties will continue to negotiate additional terms in a definitive agreement (the “Samsung Definitive Agreement”) and will use best efforts to execute the Samsung Definitive Agreement before July 31, 2020.

The Samsung Letter Agreement will terminate upon the execution of the Samsung Definitive Agreement or mutual written agreement by the parties.

Letter of Intent with WuXi Biologics

On August 4, 2020, the Company, GlaxoSmithKline Trading Services Limited (“GSKTSL”) and Samsung entered into an Assignment and Novation Agreement effective as of July 31, 2020 pursuant to which the Company assigned and transferred to GSKTSL all of the Company’s right, title, and interest in, to and under the Samsung Letter Agreement, and GSKTSL became the Company’s successor in interest in and to all of the Company’s rights, duties, and obligations in, to and under the Samsung Letter Agreement.

On August 4, 2020, GSKTSL entered into a Master Services Agreement with Samsung effective as of July 31, 2020 (the “Samsung MSA”), thereby superseding the Samsung Letter Agreement, and pursuant to which, among other things, Samsung will perform development and manufacturing services for clinical and commercial supply of antibody products under the Company’s SARS-CoV-2 antibody program.

Letter Agreement, Assignment and Master Services Agreement with WuXi Biologics

On June 15, 2020, the Company and WuXi Biologics entered into a binding letter of intent (the “WuXi Biologics Letter Agreement”), pursuant to which WuXi Biologics will perform certain development and manufacturing services for the Company’s SARS-CoV-2 antibody program.

Under the terms of the WuXi Biologics Letter Agreement, the Company has committed to purchase a firm and binding capacity reservation for the manufacture of a specified number of batches of drug substance of the Company’s SARS-CoV-2 antibody in 2020 and 2021.

In addition, the Company has the right to order an additional specified number of batches of drug substance, provided it makes such election by a specified date in the fourth calendar quarter in 2020.

Under the terms of the WuXi Biologics Letter Agreement, the Company had committed to purchase a firm and binding capacity reservation for the manufacture of a specified number of batches of drug substance of the Company’s SARS-CoV-2 antibody in 2020 and 2021.

In addition, the Company had the right to order an additional specified number of batches of drug substance, provided it makes such election by a specified date in the fourth calendar quarter in 2020.

WuXi Biologics is obligated to reserve such manufacturing slots on a non-cancellable basis, and will manufacture the agreed number of batches of drug substance in accordance with an agreed manufacturing schedule.

The Company is obligated to pay a total of approximately $ 130.0 million for such capacity reservation, if all batches are manufactured, inclusive of estimated raw material costs, with between 70 % and 80 % of the

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

batch production fees owed to WuXi Biologics on a take-or-pay basis regardless of whether such manufacturing slots are utilized by the Company.

The Company was obligated to pay a total of approximately $ 130.0 million for such capacity reservation, if all batches are manufactured, inclusive of estimated raw material costs, with between 70 % and 80 % of the batch production fees owed to WuXi Biologics on a take-or-pay basis regardless of whether such manufacturing slots are utilized by the Company.

The amounts will be payable during 2020 and 2021 and invoiced on a per-batch basis.

The SARS-CoV-2 antibody drug substance contemplated to be manufactured in accordance with the terms of the WuXi Biologics Letter Agreement will be utilized in connection with progressing the development and commercialization of the SARS-CoV-2 antibody product under the Company’s collaboration with GSK.

The parties will continue to negotiate additional terms in a definitive commercial manufacturing and supply agreement (the “WuXi Biologics Definitive Agreement”) and will use their respective commercially reasonable efforts to execute the WuXi Biologics Definitive Agreement before July 30, 2020.

The WuXi Biologics Letter Agreement will terminate upon the execution of the WuXi Biologics Definitive Agreement or mutual written agreement by the parties.

On August 4, 2020, the Company, GSKTSL and WuXi Biologics entered into an Assignment and Novation Agreement effective as of July 29, 2020 pursuant to which the Company assigned and transferred to GSKTSL all of the Company’s right, title, and interest in, to and under the WuXi Biologics Letter Agreement, and GSKTSL became the Company’s successor in interest in and to all of the Company’s rights, duties, and obligations in, to and under the WuXi Biologics Letter Agreement.

On August 4, 2020, GSKTSL entered into a non-exclusive Master Services Agreement for Commercial Manufacture of Drug Substance with WuXi Biologics effective as of July 29, 2020 (the “WuXi Biologics MSA”), thereby superseding the WuXi Biologics Letter Agreement, and pursuant to which, among other things, WuXi Biologics will perform development and manufacturing services for clinical and commercial supply of antibody products under the Company’s SARS-CoV-2 antibody program.

GSKTSL entered into the WuXi Biologics MSA and Samsung MSA in connection with the performance of the obligations of the Company and GSK, pursuant to the GSK Agreement.

In accordance with the terms of the GSK Agreement, the Company will continue to be responsible for 72.5 % of the costs under each of the WuXi Biologics MSA and Samsung MSA, and GSK will bear 27.5 % of such costs under each of the Samsung MSA and the WuXi Biologics MSA, subject to certain conditions and exceptions.

VIR BIOTECHNOLOGY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Indemnification

32 unchanged sentences

Outstanding at December 31, 2019

Outstanding at June 30, 2020

Vested and expected to vest at

June 30, 2020

Vested and exercisable at June 30, 2020

As of June 30, 2020, the Company expects to recognize the remaining unamortized stock-based compensation expense of $ 78.2 million related to stock options, over an estimated weighted average period of 2.7 years.

Outstanding at September 30, 2020

Vested and expected to vest at September 30, 2020

Vested and exercisable at September 30, 2020

As of September 30, 2020, the Company expects to recognize the remaining unamortized stock-based compensation expense of $ 107.9 million related to stock options, over an estimated weighted average period of 2.7 years.

Stock Options Granted to Employees

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Expected term of options (in years)

2 unchanged sentences

88.8% - 108.6%

88.5% - 89.4%

Risk-free interest rate

13 unchanged sentences

Unvested as of December 31, 2019

Unvested as of June 30, 2020

Unvested as of September 30, 2020

The shares of restricted stock have not been included in the shares issued and outstanding.

4 unchanged sentences

In August 2019, under the terms of the notes, the Company received $ 3.3 million as repayment of the outstanding promissory notes and accrued interest.

The Company has a liability of $ 0.5 million for the portion of the promissory note repayment which relates to restricted common stock subject to future vesting as of June 30, 2020.

The Company has a liability of $ 0.1 million for the portion of the promissory note repayment which relates to restricted common stock subject to future vesting through October 31, 2020.

The Company will reduce the restricted stock liability as the common stock vests.

As of June 30, 2020, there was $ 0.5 million of total unrecognized compensation cost related to unvested restricted stock, all of which is expected to be recognized over a remaining weighted-average period of 0.4 years.

As of September 30, 2020, there was $ 0.2 million of total unrecognized compensation cost related to unvested restricted stock, all of which is expected to be recognized over a remaining weighted-average period of 0.6 years.

Stock-Based Compensation Expense

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

6 unchanged sentences

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

As of June 30,

As of September 30,

Convertible preferred stock

4 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

Subsequent Events

Follow-on Offering

On July 10, 2020, the Company issued and sold 8,214,285 shares of the Company’s common stock pursuant to a registration statement on Form S-1 (File No.

333-239689) and a registration statement on Form S-1 filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (File No.

333-239747) (collectively, the “Registration Statements”).

The Registration Statements became effective on July 7, 2020.

The price of the shares sold in the follow-on offering was $ 42.00 per share and the Company received total gross proceeds from the offering of approximately $ 345.0 million.

After deducting underwriting discounts and commissions of $ 20.7 million and offering expenses of $ 1.1 million, the net proceeds were $ 323.2 million.

WuXi Biologics and Samsung Letter Agreement Assignments and Master Services Agreements

On August 4, 2020, the Company, GlaxoSmithKline Trading Services Limited (“GSKTSL”) and WuXi Biologics entered into an Assignment and Novation Agreement effective as of July 29, 2020 pursuant to which the Company assigned and transferred to GSKTSL all of the Company’s right, title, and interest in, to and under the WuXi Biologics Letter Agreement, and GSKTSL became the Company’s successor in interest in and to all of the Company’s rights, duties, and obligations in, to and under the WuXi Biologics Letter Agreement.

On August 4, 2020, the Company, GSKTSL and Samsung entered into an Assignment and Novation Agreement effective as of July 31, 2020 pursuant to which the Company assigned and transferred to GSKTSL all of the Company’s right, title, and interest in, to and under the Samsung Letter Agreement, and GSKTSL became the Company’s successor in interest in and to all of the Company’s rights, duties, and obligations in, to and under the Samsung Letter Agreement.

GSKTSL entered into the WuXi Biologics MSA and Samsung MSA in connection with the performance of the obligations of the Company and GSK, pursuant to the GSK Agreement.

Subsequent Event

Milestone Payment to Humabs

In October 2020, the Company achieved one of the specified clinical milestones for the SARS-CoV-2 product under its acquisition agreement with Humabs and paid $ 10.0 million related to this milestone event.

See Note 4—Acquisitions for additional information on the Company’s acquisition agreement with Humabs.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements