What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-03 compared with 2023-11-03 · 107 added, 160 removed, 142 unchanged (65% of the section changed)

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and its consolidated subsidiaries.

We are an immunology company focused on combining cutting-edge technologies to treat and prevent serious infectious diseases and other serious conditions.

Infectious diseases are among the leading causes of death worldwide and can cause direct and indirect economic burden each year – as evidenced by the coronavirus disease 2019, or COVID-19, pandemic.

We believe that now is the time to apply advances in immunology to combat current and prepare for future infectious disease threats.

Our approach begins with identifying the limitations of the immune system in combating a particular pathogen, the vulnerabilities of that pathogen and the reasons why previous approaches have failed.

We then bring to bear powerful technologies that we believe, individually or in combination, will lead to effective therapies.

Our current clinical development pipeline consists of product candidates targeting hepatitis B virus, or HBV, hepatitis delta virus, or HDV and human immunodeficiency virus, or HIV.

We also have several preclinical candidates in our pipeline, including those targeting influenza A and B, COVID-19, respiratory syncytial virus and human metapneumovirus, or RSV and MPV, respectively, and human papillomavirus, or HPV.

We have assembled two technology platforms that are designed to stimulate and enhance the immune system by exploiting observations of natural immune processes and have built an industry-leading team that has deep experience in immunology, infectious diseases, and product development and commercialization.

Given the global impact of infectious diseases and other serious conditions, we are committed to developing cost-effective treatments that can be delivered at scale.

We manufacture product candidates from our technology platforms.

We have established our own internal process development, manufacturing and quality capabilities and are working with contract development and manufacturing organizations, or CDMOs, to supply our early- and late-stage product candidates.

We continue to expand our internal capabilities and resources in process development, analytical development, quality, manufacturing and supply chain, which are supported by our San Francisco, California, and Portland, Oregon facilities that include laboratories for process development, production of human cytomegalovirus, or HCMV, research viral seed stock and selected quality control testing for our product candidates.

We have established relationships with multiple CDMOs and have produced material to support preclinical studies and Phase 1 through Phase 3 clinical trials.

Material for Phase 3 clinical trials and commercial supply will generally require large-volume, low-cost-of-goods production.

We are an immunology company focused on combining cutting-edge technologies to treat and prevent serious infectious diseases and other serious conditions, including viral-associated diseases.

At Vir, we have a bold vision – powering the immune system to transform lives.

We aim to achieve this in two fundamental ways – first through developing powerful antibody therapeutics and second by generating unique T cell responses in vivo through our T cell-based viral vector platform.

Our growth and pursuit of scientific innovation is fueled by our world-class leading monoclonal antibody (mAb) platform that has a proven track record and is further strengthened by our artificial intelligence-led mAb optimization and engineering capabilities.

Our current clinical development pipeline consists of product candidates targeting hepatitis delta virus (HDV), hepatitis B virus (HBV), and human immunodeficiency virus (HIV).

The most advanced preclinical candidates in our pipeline include those targeting influenza A and B, coronavirus disease 2019 (COVID-19), respiratory syncytial virus (RSV) and human metapneumovirus (MPV), and human papillomavirus (HPV).

We have assembled two technology platforms that modulate the immune system by exploiting critical observations of natural immune processes— a mAb discovery platform and a T cell-based viral vector platform.

Additionally, Vir is evaluating a small interfering RNA (siRNA) through a collaboration with Alnylam in our hepatitis clinical trials.

We have established our own internal process development, analytical development, manufacturing, supply chain and quality capabilities and work with contract development and manufacturing organizations (CDMOs) to develop, manufacture, test and supply our early- and late-stage product candidates.

We have an industry-leading management team and board of directors with significant immunology and infectious diseases experience, including a proven track record of progressing product candidates from early-stage research through clinical development, and worldwide regulatory approval and commercialization experience.

Given the global impact of infectious diseases and other serious conditions, we are committed to providing broad access to our therapeutics.

Significant Developments

Following is a summary of selected significant developments affecting our business that occurred since the filing of our Quarterly Report on Form 10-Q for the period ended June 30, 2023 .

Chronic Hepatitis B (CHB) & Chronic Hepatitis Delta (CHD)

VIR-2218 is an investigational HBV-targeting siRNA.

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

• Phase 2 MARCH Part B 24-week End of Treatment data for VIR-3434 and VIR-2218 with and without peginterferon alpha in chronic hepatitis B and initial data from the Phase 2 SOLSTICE trial evaluating VIR-3434 and VIR-2218 as monotherapy and in combination for the once or twice monthly chronic treatment of people living with CHD to be presented at the American Association for the Study of Liver Diseases (“AASLD”) on November 13, 2023.

• The Phase 2 PREVAIL platform trial and its THRIVE/STRIVE sub-protocols are ongoing.

The platform is evaluating combinations of VIR-3434, VIR-2218 and/or peginterferon alpha in two CHB patient populations with the potential to evaluate other populations in the future.

Initial data from this platform trial are expected in the first half of 2024.

Following is a summary of selected significant developments affecting our business that occurred since the filing of our Annual Report on Form 10-K for the year ended December 31, 2023 .

Pipeline Programs

Chronic Hepatitis Delta (CHD)

• On March 5, 2024, we announced our Phase 2 chronic hepatitis delta SOLSTICE trial completed enrollment of its current cohorts one month ahead of schedule with over 60 participants enrolled in two additional cohorts.

◦ The trial is evaluating the safety, tolerability and efficacy of tobevibart and elebsiran for the treatment of people living with chronic hepatitis delta.

◦ One cohort is evaluating the combination of tobevibart and elebsiran given every 4 weeks with a second cohort evaluating tobevibart monotherapy given every 2 weeks.

◦ Approximately 50% of participants have compensated cirrhosis.

• We will report data on a subset of SOLSTICE participants in a late breaker poster presentation at the European Association for the Study of the Liver (EASL) Congress 2024.

This includes additional 12-week treatment data on approximately 30 participants (~15 per regimen) and 24-week treatment data on approximately 20 participants (~10 per regimen).

• Additional follow-up data for the initial six SOLSTICE trial participants will also be shared at the EASL Congress 2024.

• Complete 24-week treatment data is expected in the fourth quarter of 2024.

Chronic Hepatitis B (CHB)

• Two abstracts have been accepted for poster presentation at the EASL Congress 2024.

• The Phase 2 MARCH Part B trial is fully enrolled with 48-week end of treatment data expected in the fourth quarter of 2024.

The trial is evaluating the safety, tolerability and antiviral activity of the combination of tobevibart and elebsiran with and without peginterferon alpha.

• Initial data from the Phase 2 PREVAIL platform trial and its THRIVE/STRIVE sub-protocols is expected in the first half of 2025.

These trials are evaluating combinations of tobevibart, elebsiran and/or peginterferon alpha in two patient populations:

immune-active but treatment-naïve and inactive carriers.

Human Immunodeficiency Virus (HIV)

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

• In September 2023, we announced the initiation of the Phase 1 trial of VIR-1388, an investigational novel T cell vaccine for the prevention of HIV.

• Part A of the Phase 1 trial of VIR-1388, an investigational novel T cell vaccine for the prevention of HIV, is fully enrolled with initial immunogenicity data expected in the second half of 2024.

◦ The trial is supported by the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, and the Bill & Melinda Gates Foundation, and is being conducted by the HIV Vaccine Trials Network.

◦ Initial data from the trial is expected in the second half of 2024.

VIR-7229 is an investigational severe acute respiratory syndrome coronavirus 2, or SARS-CoV-2, neutralizing mAb that incorporates Xencor’s Xtend ™ technology .

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

• In October 2023, we announced we were awarded approximately $50 million in new funding from the Biomedical Advanced Research and Development Authority (“BARDA”), part of the Administration for Strategic Preparedness and Response within the U.S.

Department of Health and Human Services (“HHS”).

◦ $40 million of the total funds is part of Project NextGen, the Biden administration's program to accelerate the development of next-generation COVD-19 vaccines and treatments, and will support the development of VIR-7229 through Phase 1.

It also supports developing alternative mAb delivery technologies, including RNA-delivered mAbs.

We expect to initiate a Phase 1 clinical trial in 2024 and are exploring partner opportunities for post phase 1 development.

The Phase 1 trial is expected to be completed in the second half of 2025.

◦ $10 million of the total funds will support the discovery of new mAbs against a second pathogen of pandemic potential in the context of further advancing alternative mAb delivery technologies.

This effort is receiving support from BARDA's Division of Chemical, Biological, Radiological and Nuclear Medical Countermeasures.

• On August 30 2023, Nature published in vivo research findings that showed the role effector function plays in sotrovimab’s ability to activate the immune system and clear SARS-CoV-2.

• Sotrovimab currently has emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy ® ) for early treatment of COVID-19.

It has been supplied to more than 40 countries and remains in use outside of the U.S.

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

• The full analysis of data from the Phase 2 PENINSULA trial is expected in Q1 2024.

Initial post-hoc analyses have yielded the following conclusions:

◦ VIR-2482’s ability to reduce cases of symptomatic flu improves to 57% for the 1,200 mg dose when the case definition (how symptomatic is defined) includes fever.

◦ This relative risk reduction increases further to 65% when excluding the confirmed flu cases that occurred within a few days of dosing.

• On April 4, 2024, we published the full data analysis from the Phase 2 PENINSULA trial evaluating VIR-2482 on medRxiv.

Preclinical Pipeline Candidates

• We are continuing to advance next-generation mAbs based on our proprietary platform and enabled by artificial intelligence (“AI”) and machine-learning to deliver high-quality drug

candidates more efficiently.

We expect the filing of multiple n ew investigational new drugs (“ INDs ” ) in the next 12-24 months, including:

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

◦ VIR-8190, an investigational mAb against respiratory syncytial virus ( “ RSV ” ) and human metapneumovirus.

◦ VIR-1949, an investigational therapeutic T cell vaccine based on our HCMV vector platform that is designed to treat precancerous lesions caused by human papillomavirus.

• We are continuing to advance next-generation antibodies using our proprietary platform, which leverages dAIsY™ ( d ata AI s tructure and antibod y ), our proprietary AI engine, enabling us to bring high-quality drug candidates to the clinic more efficiently.

• We expect the filing of multiple investigational new drug applications within the next 18 months, including:

◦ VIR-1949, an investigational therapeutic T cell vaccine based on our human cytomegalovirus (HCMV) vector platform that is designed to treat precancerous lesions caused by the human papillomavirus.

◦ VIR-7229, a next-generation COVID monoclonal antibody candidate that has been AI-engineered to have increased potency, breadth and resistance to viral escape.

The development of VIR-7229 has been supported in part with federal funds from the Department of Health and Human Services (HHS);

Administration for Strategic Preparedness and Response (ASPR);

Biomedical Advanced Research and Development Authority (BARDA), under Other Transaction Number:

75A50122C00081.

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

◦ VIR-8190 and other investigational monoclonal antibodies against respiratory syncytial virus and/or metapneumovirus as part of the collaboration established with GSK in May of 2021.

Corporate Update

• In October 2023, we announced the appointment of Jennifer Towne, Ph.D., as Executive Vice President and Chief Scientific Officer, effective November 6, 2023.

Towne joins us from The Janssen Pharmaceutical Companies of Johnson & Johnson, where she spent nine years holding immunology research leadership roles of increasing responsibility within Research and Development.

Prior to Janssen, Dr.

Towne held a variety of scientific roles during her 13 years at Amgen.

During the course of her career, Dr.

Towne led the development of 16 drug candidates from preclinical research to IND and early clinical development.

• Effective May 3, 2024, Sung Lee, Executive Vice President and Chief Financial Officer will be stepping down from his role to pursue another career opportunity.

We have initiated a search for a successor.

Our Collaboration, License and Grant Agreements

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Although certain countries outside the U.S.

continue to maintain access to 500 mg IV while noting that the clinical efficacy is unknown or uncertain against existing and emerging Omicron variants, we cannot predict whether other countries will further limit the use of sotrovimab.

continue to maintain access to 500 mg IV while noting that the clinical efficacy is unknown or uncertain against existing and emerging variants, we cannot predict whether other countries will further limit the use of sotrovimab.

Due to the evolving COVID-19 landscape and based on discussions with the FDA, we and GSK do not plan to file a Biologics License Application, or BLA, for sotrovimab at this time.

In light of these developments, we cannot predict whether (if at all) or to what extent sotrovimab may be reauthorized for use by the FDA in any U.S.

region in the future.

region in the future, and we do not expect meaningful collaboration revenue in the future from the sale of sotrovimab for the treatment of COVID-19 even if it were reauthorized by the FDA.

In addition, we have not obtained regulatory approval for any other product candidates, and we do not expect to generate any significant revenue from the sale of our other product candidates until we complete clinical development, submit regulatory filings and receive approvals from the applicable regulatory bodies for such product candidates, if ever.

Our revenues consist of the following:

Collaboration revenue

Collaboration revenue includes recognition of our profit-share from the sales of sotrovimab pursuant to the 2020 GSK Agreement.

Our contractual share of 72.5% from the sales of sotrovimab is applied to the net sales reported in the period by GSK, net of cost of goods sold and allowable expenses from both GSK and us (e.g., manufacturing, distribution, medical affairs, selling, and marketing expenses).

demand, commercial supply plan, manufacturing commitments, risks related to expired or obsolete inventories, and risks related to potential product returns or contract terminations.

In order to record collaboration revenue, we utilize certain information from our collaboration partner, including actual net product sales and costs incurred for sales activities, and make key judgments based on business updates related to commercial and clinical activities, such as expected commercial demand, commercial supply plan, manufacturing commitments, risks related to expired or obsolete inventories, and risks related to potential product returns or contract terminations.

In 2024, we expect a nominal amount of collaboration revenue, if any, from our 2020 GSK Agreement, and we may incur negative collaboration revenue related to costs for ongoing required support efforts that our partner GSK leads.

Constraint on variable consideration

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Our contractual share of the profit-sharing amounts is subject to potential future adjustments to allowable expenses, which we account for as a form of variable consideration.

In 2023, GSK reported to us certain allowable manufacturing expenses related to excess sotrovimab supply and binding reserved manufacturing capacity not utilized, which we had previously reserved as constraint on our cumulative profit-sharing amounts.

In 2023, GSK reported to us certain allowable manufacturing expenses related to excess sotrovimab supply and binding reserved manufacturing capacity not utilized, which we had previously reserved as a constraint on our cumulative profit-sharing amounts.

GSK may continue to adjust allowable manufacturing expenses for our share of the excess supply write-offs and unused binding manufacturing capacity and report to us as cost-sharing amounts in future periods.

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We re-assess these estimates at each reporting period.

Actual results could materially differ from this estimate.

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

Actual results could materially differ from estimates.

Contract revenue

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

Grant revenue

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

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Cost of Revenue

Cost of revenue currently represents royalties earned by third-party licensors on net sales of sotrovimab by us or our collaborators.

Cost of revenue currently represents royalties earned by third-party licensors on net sales of sotrovimab.

We recognize these royalties as cost of revenue when we recognize the corresponding revenue that gives rise to payments due to our licensors.

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• other allocated expenses, including expenses for rent and facilities maintenance, and depreciation and amortization.

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our product candidates into and through preclinical studies and clinical trials and pursue regulatory approval of our product candidates.

We expect our research and development expenses to increase substantially in absolute dollars over time as we advance our product candidates into and through preclinical studies and clinical trials and pursue regulatory approval of our product candidates.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming.

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the safety and efficacy of our product candidates, early clinical data, investment in our clinical programs, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability.

To date, sotrovimab has been granted emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy ® ), and has been supplied in more than 40 countries.

While we have an EUA from the FDA for sotrovimab, the FDA has excluded the use of sotrovimab in all U.S.

regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants.

With this EUA revision, sotrovimab is not currently authorized for use in any U.S.

region, and we cannot predict whether (if at all) or to what extent sotrovimab may be reauthorized for use by the FDA in any U.S.

region in the future.

In addition, due to the evolving COVID-19 landscape and based on discussions with the FDA, we and GSK do not plan to file a BLA for sotrovimab at this time.

Although certain countries outside the U.S.

Furthermore, COVID-19 treatment standards are susceptible to rapid changes in epidemiology and the emergence of new variants or subvariants, which may render sotrovimab inferior or obsolete in the future.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate significant revenue from the commercialization and sale of any of our product candidates.

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In addition, our existing collaborators have significant discretion in determining the efforts and resources that they will apply to our collaborations and may not pursue further development and commercialization of products resulting from our collaboration arrangements or may elect to not to continue or renew research and development programs, which would delay the development and may increase the cost of developing our product candidates and may result in a need for additional capital or a suitable replacement collaborator.

For those product candidates where there is not a current collaboration arrangement in place, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured (if at all) and to what degree such arrangements would affect our development plans and capital requirements.

For those product candidates where there is not a current collaboration arrangement in place, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured (if at all) and to what degree such arrangements will affect our development plans and capital requirements.

Our clinical development costs may vary significantly based on factors such as:

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Personnel-related expenses consist of salaries, benefits and stock-based compensation.

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

We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

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

Change in Fair Value of Equity Investments

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

Other Income (Expense), Net

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

Benefit from (Provision for) Income Taxes

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

Other Expense, Net

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

(Provision for) Benefit from Income Taxes

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

Net Loss Attributable to Noncontrolling Interest

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Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

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

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 Change 2023 2022 Change

(in thousands)

2024 2023 Change

Collaboration revenue $ (987) $ 46,574 $ (47,561)

Contract revenue 52,191 138 52,053

License revenue from a related party — 22,289 (22,289) — 22,289 (22,289)

Grant revenue 5,172 16,245 (11,073)

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Total operating expenses 136,457 206,328 (69,871)

(Loss) income from operations (186,732) 194,964 (381,696) (545,289) 983,570 (1,528,859)

Other income (expense):

Loss from operations (80,081) (143,371) 63,290

Other income:

Change in fair value of equity investments (5,915) (13,103) 7,188

Interest income 21,283 21,307 (24)

Other income (expense), net 882 27,026 (26,144) (7,506) 30,447 (37,953)

Total other income (expense) 20,106 22,768 (2,662) 37,852 (77,652) 115,504

(Loss) income before benefit from (provision for) income taxes (166,626) 217,732 (384,358) (507,437) 905,918 (1,413,355)

Benefit from (provision for) income taxes 3,213 (42,420) 45,633 8,293 (288,478) 296,771

Net (loss) income $ (163,413) $ 175,312 $ (338,725) $ (499,144) $ 617,440 $ (1,116,584)

Other expense, net (287) (8,021) 7,734

Total other income 15,081 183 14,898

Loss before (provision for) benefit from income taxes (65,000) (143,188) 78,188

(Provision for) benefit from income taxes (276) 2,232 (2,508)

Net loss (65,276) (140,956) 75,680

Net loss attributable to noncontrolling interest — (56) 56

Net (loss) income attributable to Vir $ (163,413) $ 175,312 $ (338,725) $ (499,088) $ 617,440 $ (1,116,528)

The decrease in collaboration revenue for the three and nine months ended September 30, 2023 compared to the same periods in 2022 was primarily due to lower profit-sharing amounts from sales of sotrovimab as part of the 2020 GSK Agreement.

Collaboration revenue for the three months ended September 30, 2023 consisted of $6.0 million negative revenue due to profit-sharing loss from the sale of sotrovimab under the 2020 GSK Agreement partially offset by $1.7 million release of profit-sharing amount previously constrained.

Collaboration revenue for the nine months ended September 30, 2023 consisted of $7.2 million negative revenue due to profit-sharing loss from the sale of sotrovimab under the 2020 GSK Agreement partially offset by $35.6 million release of profit-sharing amount previously constrained.

The release of profit-sharing constraint was primarily driven by favorable changes in excess manufacturing commitments of sotrovimab.

The decrease in contract revenue for the three and nine months ended September 30, 2023 compared to the same periods in 2022 was primarily due to $39.8 million of revenue recognized for the GSK's selection of RSV as a first pathogen under the 2021 GSK Agreement during the third quarter of 2022.

The decrease in license revenue from a related party for the three and nine months ended September 30, 2023 compared to the same periods in 2022 was due to certain revenues recognized under the collaboration with Brii Bio Parent in the third quarter of 2022.

The increase in grant revenue for the three and nine months ended September 30, 2023 compared to the same periods in 2022 was primarily due to $2.9 million and $29.0 million for the three and nine months ended September 30, 2023, respectively, in accordance with our agreement with BARDA.

Net loss attributable to Vir $ (65,276) $ (140,900) $ 75,624

The decrease in collaboration revenue for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to lower revenues from the release of profit-sharing amount previously constrained and from the sales of sotrovimab under the 2020 GSK Agreement.

The negative collaboration revenue for the three months ended March 31, 2024 consisted of $0.3 million profit-sharing loss from the sale of sotrovimab and $0.7 million profit-sharing amount constrained.

The increase in contract revenue for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to $51.7 million of deferred revenue recognized during the three months ended March 31, 2024 as GSK’s rights to select up to two additional non-influenza target pathogens under the 2021 GSK Agreement expired on March 25, 2024.

The decrease in grant revenue for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to lower revenue recognized in accordance with our agreement with BARDA.

Cost of Revenue

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

The decrease in cost of revenue for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to lower third-party royalties owed based on the sales of sotrovimab under the 2020 GSK Agreement.

Research and Development Expenses

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 Change 2023 2022 Change

(in thousands)

2024 2023 Change

Licenses, collaborations and contingent consideration $ 5,696 $ 7,746 $ (2,050)

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Total research and development expenses $ 100,125 $ 157,643 $ (57,518)

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

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

• the increase in contract manufacturing expenses was primarily related to the cancellation of preparation costs of Phase 3 studies involving VIR-2482 and, to a lesser extent, VIR-2218, VIR-3434, and VIR-7229.

VIR-2482 manufacturing cancellation costs for phase 3 activities were $21.9 million in the third quarter of 2023;

• the increase in clinical costs was primarily attributable to the Company's Phase 2 PENINSULA trial evaluating VIR-2482 for the prevention of symptomatic influenza A illness and, to a lesser extent, the advancement of the Company's Phase 2 clinical trials evaluating the potential for VIR-2218 and VIR-3434 for treatment of chronic hepatitis B and chronic hepatitis delta, partially offset by lower costs associated with clinical trials for sotrovimab;

• the increase in other research and development expenses was primarily attributable to the allocation of facilities, including depreciation, and other costs due to an increase in our personnel and an impairment charge in the third quarter of 2023 associated with certain equipment used in the small molecule platform that was discontinued.

The increase in other research and development expenses for the nine months ended September 30, 2023 was also partially attributable to an impairment charge associated with certain non-prioritized in-process research and development assets in the second quarter of 2023.

partially offset by

• the decrease in licenses, collaborations and contingent consideration expenses primarily attributable to the lower expenses associated with the change in fair value of the contingent consideration obligation from our acquisition of Humabs Biomed SA, and lower costs under our collaboration arrangements with GSK and other R&D collaborators.

The decrease in licenses, collaborations and contingent consideration expenses for the nine months ended September 30, 2023 was also attributable to $7.0 million expenses recognized in the second quarter of 2022 in

connection with the termination of our development and manufacturing collaboration agreement with WuXi Biologics (Hong Kong) Limited.

The decrease in research and development expenses for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to lower clinical costs and contract manufacturing costs associated with the wind down of the Company’s Phase 2 PENINSULA trial evaluating VIR-2482.

Selling, General and Administrative Expenses

The selling, general and administrative expenses for the three months ended September 30, 2023 remained flat compared to the same period in 2022.

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

The decrease in selling, general and administrative expenses for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to cost saving initiatives implemented during the second half of 2023.

Change in Fair Value of Equity Investments

Our investment consisted solely of shares of Brii Bio Parent is a marketable equity investment and remeasured to fair value at each reporting period.

For the three and nine months ended September 30, 2023, we recognized an unrealized loss of $2.7 million and $20.9 million, respectively, due to the change in fair value, compared to an unrealized loss of $13.6 million and $120.0 million, respectively, for the same periods in 2022.

For the three months ended March 31, 2024, we recognized an unrealized loss of $5.9 million due to the change in fair value, compared to an unrealized loss of $13.1 million for the same period in 2023.

Interest Income

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

Other Income (Expense), Net

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

Benefit from (Provision for) Income Taxes

The benefit from income taxes for the three and nine months ended September 30, 2023 was primarily due to a pre-tax loss and our ability to carry-back the research and development credit to 2022.

The provision for income taxes for the three and nine months ended September 30, 2022 was primarily due to taxable income for 2022 attributable to significant collaboration revenue from the sales of sotrovimab.

The decrease in interest income for the three months ended March 31, 2024 compared to the same period in 2023 was not material.

Other Expense, Net

The decrease in other expense, net for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to a decrease in foreign exchange measurement loss related to the accrued liability recognized in connection with the profit-sharing amount constrained under the 2020 GSK Agreement.

(Provision for) Benefit from Income Taxes

The provision for income taxes for the three months ended March 31, 2024 was not material.

The benefit from income taxes for the three months ended March 31, 2023 was primarily due to a pre-tax loss and the Company’s ability to carry back the research and development credit to 2022.

Liquidity, Capital Resources and Capital Requirements

Sources of Liquidity

To date, we have financed our operations primarily through sales of our equity securities and payments received under our grant and collaboration agreements.

As of September 30, 2023, we had $1.7 billion in cash, cash equivalents, and investments.

As of September 30, 2023, we had accumulated deficit of $121.9 million.

We entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or TD Cowen, in 2020 pursuant to which we may from time to time offer and sell shares of our common stock for an aggregate offering price of up to $300.0 million, through or to TD Cowen, acting as sales agent or principal.

To date, we have financed our operations primarily through sales of our common stock from our initial public offering and subsequent follow-on offering, sales of our convertible preferred securities, and payments received under our grant and collaboration agreements.

As of March 31, 2024, we had $1.51 billion in cash, cash equivalents, and investments.

As of March 31, 2024, we had accumulated deficit of $303.1 million.

We entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or TD Cowen, in November 2023 pursuant to which we may from time to time offer and sell shares of our common stock for an aggregate offering price of up to $300.0 million, through or to TD Cowen, acting as sales agent or principal.

The shares will be offered and sold under the shelf registration statement on Form S-3 and a related prospectus that we filed with the SEC on November 3, 2023.

We will pay TD Cowen a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide TD Cowen with customary indemnification and contribution rights.

As of September 30, 2023, no shares have been sold under the Sales Agreement, which will expire in November 2023.

We are in the process of signing a new sales agreement with TD Cowen which is expected to be completed during the fourth quarter of 2023 before the Sales Agreement expires.

Funding Requirements and Commitments

As of March 31, 2024, no shares have been sold under the Sales Agreement.

Funding Requirements and Conditions

Our primary use of our capital resources is to fund our operating expenses, which consist primarily of expenditures related to identifying, acquiring, developing, manufacturing and in-licensing our technology platforms and product candidates, and conducting preclinical studies and clinical trials, and to a lesser extent, selling, general and administrative expenditures.

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We may continue to incur net losses for the foreseeable future.

Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments as of September 30, 2023 as noted above will enable us to fund our operations for at least the next 12 months.

Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments as of March 31, 2024 as noted above will enable us to fund our operations for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q.

However, our operating plan may change as a result of many factors currently unknown to us, and we may need to raise additional capital to complete the development and commercialization of our product candidates and fund certain of our existing manufacturing and other commitments.

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We have various operating lease arrangements for office and laboratory spaces located in California, Oregon, Missouri and Switzerland with contractual lease periods expiring between 2024 and 2034.

As of September 30, 2023, we expect to make total lease payments o f $161.1 million throu gh 2033.

As of March 31, 2024, we expect to make total lease payments of $152.1 million through 2034.

To date, we have entered into collaboration, license and acquisition agreements where the payment obligations are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones, and we are required to make royalty payments in connection with the sale of products developed under those agreements.

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see Note 10—Commitments and Contingencies to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024.

In the first quarter of 2024, the Company and a third-party contract development manufacturing organization entered into various scopes of work with respect to the manufacturing of tobevibart (the Tobevibart Agreements).

As of March 31, 2024, the Company had a balance of unpaid commitments of approximately $20 million under the Tobevibart Agreements.

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

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

Nine Months Ended September 30,

(in thousands)

The following table summarizes our cash flows for the periods indicated (in thousands):

Three Months Ended March 31,

Net cash (used in) provided by:

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Financing activities 152 2,344

Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents $ (395,618) $ 620,551

Net decrease in cash, cash equivalents and restricted cash and cash equivalents $ (80,818) $ (25,359)

Operating Activities

During the nine months ended September 30, 2023, net cash used in operating activities was $670.9 million.

This consisted primarily of a net loss of $499.1 million, an increase in our net operating assets of $271.8 million, partially offset by non-cash charges of $100.1 million.

The non-cash charges of $100.1 million primarily consisted of $83.0 million for stock-based compensation expense and an unrealized loss of $20.9 million on our equity investment, partially offset by $28.1 million gain related to a change in estimated profit-sharing constraint from the 2020 GSK Agreement.

The change in our net operating assets of $271.8 million was primarily due to a $316.9 million decrease in accrued liabilities and other long-term liabilities related to settlement of profit-sharing constraint.

During the nine months ended September 30, 2022, net cash provided by operating activities was $1.6 billion.

This consisted primarily of net income of $617.4 million, non-cash charges of $475.1 million, and an increase in our net operating assets of $535.5 million.

The change in our net operating assets of $535.5 million was primarily due to a decrease in collaboration receivable by $491.9 million resulting from our profit-share from the sales of sotrovimab and an increase in accrued liabilities and other long-term liabilities by $65.1 million due to timing of payments, partially offset by a $24.5 million decrease in deferred revenue primarily driven by GSK's first option exercise under the 2021 GSK Agreement and Brii Bio's exercise for VIR-3434, partially offset by the grants received from Bill & Melinda Gates Foundation.

The non-cash charges of $475.1 million primarily consisted of $353.5 million for change in estimated constraint on profit-sharing amount, an unrealized loss of $120.0 million on our equity investment, $77.2 million for stock-based compensation expense, $7.9 million for revaluation of contingent consideration, $6.5 million for noncash lease expense and $4.4 million for depreciation and amortization expense, partially offset by $93.8 million for payment for contingent consideration in excess of acquisition date fair value.

Cash used in operating activities is derived by adjusting our net loss for non-cash items and changes in operating assets and liabilities.

Cash used in operating activities during the three months ended March 31, 2024 decreased compared to the same period in 2023 primarily due to lower clinical development and contract manufacturing activities related to the wind down of the Phase 2 PENINSULA trial evaluating VIR-2482, lower payments for third-party royalties based on the sales of sotrovimab under the 2020 GSK Agreement, and higher interest receipts, partially offset by lower receipts for grant and collaboration revenues.

Investing Activities

During the nine months ended September 30, 2023, net cash provided by investing activities was $269.4 million.

This consisted primarily of $1.5 billion in proceeds received from investments that matured during the period, partially offset by purchases of investments of $1.2 billion and property and equipment of $20.0 million.

During the nine months ended September 30, 2022, net cash used in investing activities was $1.0 billion.

This consisted primarily of purchases of investments of $1.1 billion and property and equipment of $55.4 million, partially offset by $84.8 million in proceeds received from investments that matured during the period.

Cash provided by investing activities during the three months ended March 31, 2024 decreased compared to the same period in 2023 primarily due to lower proceeds from investments maturities and sales net of investments purchases.

Financing Activities

During the nine months ended September 30, 2023, net cash provided by financing activities was $5.8 million.

This consisted primarily of proceeds from exercises of stock options of $3.4 million and from the issuance of common stock under our employee stock purchase plan of $2.6 million.

During the nine months ended September 30, 2022, net cash provided by financing activities was $32.8 million.

This consisted primarily of proceeds from the issuance of our common stock to the Bill & Melinda Gates Foundation of $28.5 million under the stock purchase agreement, from exercises of stock options of $3.6 million, and from issuance of common stock under our employee stock purchase plan of $2.1 million, partially offset by $1.2 million for payment of contingent consideration.

Cash provided by financing activities during the three months ended March 31, 2024 decreased compared to the same period in 2023 primarily due to lower proceeds from the exercises of stock options.

Critical Accounting Policies and Estimates

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Actual results may differ from these estimates.

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

There have been no significant changes in our critical accounting policies during the three months ended March 31, 2024, as compared with those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024.

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 2. Management’s Discussion and Analysis