Vir Biotechnology, Inc. 10-Q

Item 1. Financial Statements. VIR BIOTECHNOLOGY, INC. Condensed Consolidated Balance Sheets (in thousands, except share and per share data) (unaudited) June 30, 2024 December 31, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 296,864 $ 241,576 Short-term investments 849,833 1,270,980 Restricted cash and cash equivalents, current 13,946 13,268 Equity investments 4,368 9,853 Prepaid expenses and other current assets 40,729 52,549 Total current assets 1,205,740 1,588,226 Intangible assets, net 18,899 22,565 Goodwill 16,937 16,937 Property and equipment, net 66,063 96,018 Operating lease right-of-use assets 62,266 71,182 Restricted cash and cash equivalents, noncurrent 6,366 6,448 Long-term investments 279,992 105,275 Other assets 13,292 12,409 TOTAL ASSETS $ 1,669,555 $ 1,919,060 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 4,389 $ 6,334 Accrued and other liabilities 75,321 104,220 Deferred revenue, current 16,702 64,853 Total current liabilities 96,412 175,407 Operating lease liabilities, noncurrent 95,018 111,673 Contingent consideration, noncurrent 30,600 25,960 Other long-term liabilities 13,855 15,784 TOTAL LIABILITIES 235,885 328,824 Commitments and contingencies (Note 8) STOCKHOLDERS’ EQUITY: Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized as of June 30, 2024 and December 31, 2023; no shares issued and outstanding as of June 30, 2024 and December 31, 2023 — — Common stock, $ 0.0001 par value; 300,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 136,590,097 and 134,781,286 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 14 13 Additional paid-in capital 1,878,013 1,828,862 Accumulated other comprehensive loss ( 2,879 ) ( 815 ) Accumulated deficit ( 441,478 ) ( 237,824 ) TOTAL STOCKHOLDERS’ EQUITY 1,433,670 1,590,236 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,669,555 $ 1,919,060 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents VIR BIOTECHNOLOGY, INC. Condensed Consolidated Statements of Operations ( in thousands, except share and per share data ) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues: Collaboration revenue $ 55 $ ( 13,779 ) $ ( 932 ) $ 32,795 Contract revenue 886 1,057 53,077 1,195 Grant revenue 2,134 16,519 7,306 32,764 Total revenues 3,075 3,797 59,451 66,754 Operating expenses: Cost of revenue 52 22 111 1,929 Research and development 105,113 168,083 205,238 325,726 Selling, general and administrative 30,265 45,512 66,586 92,290 Restructuring, long-lived assets impairment and related charges 26,275 5,366 26,227 5,366 Total operating expenses 161,705 218,983 298,162 425,311 Loss from operations ( 158,630 ) ( 215,186 ) ( 238,711 ) ( 358,557 ) Other income: Change in fair value of equity investments 429 ( 5,086 ) ( 5,486 ) ( 18,189 ) Interest income 18,846 23,016 40,129 44,323 Other expense, net ( 535 ) ( 367 ) ( 822 ) ( 8,388 ) Total other income 18,740 17,563 33,821 17,746 Loss before benefit from income taxes ( 139,890 ) ( 197,623 ) ( 204,890 ) ( 340,811 ) Benefit from income taxes 1,512 2,848 1,236 5,080 Net loss ( 138,378 ) ( 194,775 ) ( 203,654 ) ( 335,731 ) Net loss attributable to noncontrolling interest — — — ( 56 ) Net loss attributable to Vir $ ( 138,378 ) $ ( 194,775 ) $ ( 203,654 ) $ ( 335,675 ) Net loss per share attributable to Vir, basic and diluted $ ( 1.02 ) $ ( 1.45 ) $ ( 1.50 ) $ ( 2.51 ) Weighted-average shares outstanding, basic and diluted 136,233,725 134,059,079 135,757,187 133,807,357 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents VIR BIOTECHNOLOGY, INC. Condensed Consolidated Statements of Comprehensive Loss ( in thousands) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss $ ( 138,378 ) $ ( 194,775 ) $ ( 203,654 ) $ ( 335,731 ) Other comprehensive (loss) income: Unrealized (loss) gain on investments ( 491 ) 307 ( 1,902 ) 6,201 Amortization of actuarial gain (loss) 9 9 ( 162 ) 18 Total other comprehensive (loss) income ( 482 ) 316 ( 2,064 ) 6,219 Comprehensive loss ( 138,860 ) ( 194,459 ) ( 205,718 ) ( 329,512 ) Comprehensive loss attributable to noncontrolling interest — — — ( 56 ) Comprehensive loss attributable to Vir $ ( 138,860 ) $ ( 194,459 ) $ ( 205,718 ) $ ( 329,456 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents VIR BIOTECHNOLOGY, INC. Condensed Consolidated Statements of Stockholders’ Equity (in thousands, except share amounts) (unaudited) Vir Stockholders’ Equity Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Noncontrolling Interest Total Stockholders’ Equity Shares Amount Balance at March 31, 2024 135,843,560 $ 14 $ 1,852,839 $ ( 2,397 ) $ ( 303,100 ) $ — $ 1,547,356 Vesting of restricted common stock 289,451 — — — — — — Exercise of stock options 141,255 — 410 — — — 410 Issuance of common stock under employee stock purchase plan 315,831 — 2,602 — — — 2,602 Stock-based compensation — — 22,162 — — — 22,162 Other comprehensive loss — — — ( 482 ) — — ( 482 ) Net loss — — — — ( 138,378 ) — ( 138,378 ) Balance at June 30, 2024 136,590,097 $ 14 $ 1,878,013 $ ( 2,879 ) $ ( 441,478 ) $ — $ 1,433,670 Vir Stockholders’ Equity Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Noncontrolling Interest Total Stockholders’ Equity Shares Amount Balance at March 31, 2023 133,930,957 $ 13 $ 1,737,626 $ ( 3,219 ) $ 236,337 $ 44 $ 1,970,801 Vesting of restricted common stock 100,292 — — — — — — Exercise of stock options 84,342 — 742 — — — 742 Issuance of common stock under employee stock purchase plan 114,903 — 2,605 — — — 2,605 Stock-based compensation — — 30,619 — — — 30,619 Other comprehensive income — — — 316 — — 316 Increase in ownership interest in a subsidiary — — ( 56 ) — — ( 44 ) ( 100 ) Net loss — — — — ( 194,775 ) — ( 194,775 ) Balance at June 30, 2023 134,230,494 $ 13 $ 1,771,536 $ ( 2,903 ) $ 41,562 $ — $ 1,810,208 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents VIR BIOTECHNOLOGY, INC. Condensed Consolidated Statements of Stockholders’ Equity (in thousands, except shares amounts) (unaudited) Vir Stockholders’ Equity Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Noncontrolling Interest Total Stockholders ’ Equity Shares Amount Balance at December 31, 2023 134,781,286 $ 13 $ 1,828,862 $ ( 815 ) $ ( 237,824 ) $ — $ 1,590,236 Vesting of restricted common stock 1,239,705 1 — — — — 1 Exercise of stock options 253,275 — 630 — — — 630 Issuance of common stock under employee stock purchase plan 315,831 — 2,602 — — — 2,602 Stock-based compensation — — 45,919 — — — 45,919 Other comprehensive loss — — — ( 2,064 ) — — ( 2,064 ) Net loss — — — — ( 203,654 ) — ( 203,654 ) Balance at June 30, 2024 136,590,097 $ 14 $ 1,878,013 $ ( 2,879 ) $ ( 441,478 ) $ — $ 1,433,670 Vir Stockholders’ Equity Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Noncontrolling Interest Total Stockholders’ Equity Shares Amount Balance at December 31, 2022 133,236,687 $ 13 $ 1,709,835 $ ( 9,122 ) $ 377,237 $ — $ 2,077,963 Vesting of restricted common stock 617,460 — — — — — — Exercise of stock options 261,444 — 3,052 — — — 3,052 Issuance of common stock under employee stock purchase plan 114,903 — 2,605 — — — 2,605 Stock-based compensation — — 56,100 — — — 56,100 Other comprehensive income — — — 6,219 — — 6,219 Contributions from noncontrolling interest owners — — — — — 100 100 Increase in ownership interest in a subsidiary — — ( 56 ) ( 44 ) ( 100 ) Net loss — — — — ( 335,675 ) ( 56 ) ( 335,731 ) Balance at June 30, 2023 134,230,494 $ 13 $ 1,771,536 $ ( 2,903 ) $ 41,562 $ — $ 1,810,208 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents VIR BIOTECHNOLOGY, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 203,654 ) $ ( 335,731 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in estimated constraint on profit-sharing amount 685 ( 26,285 ) Depreciation and amortization 8,777 10,386 Amortization of premiums (accretion of discounts) on investments, net 2,875 ( 12,366 ) Noncash lease expense 2,919 4,401 Change in fair value of equity investments 5,486 18,189 Change in estimated fair value of contingent consideration 4,639 ( 10 ) Stock-based compensation 45,919 56,100 In-process research and development impairment 3,512 6,899 Long-lived assets impairment and disposal loss 26,467 5,366 Change in deferred income taxes ( 363 ) — Other non-cash items, net — 172 Changes in operating assets and liabilities: Receivable from collaboration 2,288 3,041 Prepaid expenses and other current assets 8,257 27,298 Other assets ( 882 ) ( 2,283 ) Accounts payable ( 2,158 ) 5,630 Accrued liabilities and other long-term liabilities ( 34,773 ) ( 269,765 ) Operating lease liabilities ( 7,554 ) ( 6,235 ) Deferred revenue ( 49,677 ) 164 Net cash used in operating activities ( 187,237 ) ( 515,029 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of equipment 912 — Purchases of property and equipment ( 2,538 ) ( 16,324 ) Purchases of investments ( 834,339 ) ( 694,289 ) Maturities and sales of investments 1,075,992 1,039,007 Net cash provided by investing activities 240,027 328,394 CASH FLOWS FROM FINANCING ACTIVITIES: Payment of principal on financing lease obligation ( 138 ) ( 134 ) Proceeds from exercise of stock options 630 3,052 Issuance of common stock under ESPP 2,602 2,605 Contributions from noncontrolling interest owners — 100 Increase in ownership interest in a subsidiary — ( 100 ) Net cash provided by financing activities 3,094 5,523 Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents 55,884 ( 181,112 ) Cash, cash equivalents and restricted cash and cash equivalents at beginning of period 261,292 867,968 Cash, cash equivalents and restricted cash and cash equivalents at end of period $ 317,176 $ 686,856 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS TO THE CONDENSED CONSOLIDATED BALANCE SHEETS: Cash and cash equivalents $ 296,864 $ 666,949 Restricted cash and cash equivalents, current 13,946 13,163 Restricted cash and cash equivalents, noncurrent 6,366 6,744 Total cash, cash equivalents and restricted cash and cash equivalents $ 317,176 $ 686,856 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements 1. Organization Business Overview Vir Biotechnology, Inc. (“Vir” or the “Company”) is clinical-stage biopharmaceutical company focused on powering the immune system to transform lives by discovering and developing medicines for serious infectious diseases and cancer. Its current clinical development pipeline consists of product candidates targeting hepatitis delta virus (“HDV”) and hepatitis B virus (“HBV”). Vir also has a preclinical portfolio of programs across a range of other infectious diseases, including respiratory syncytial virus and human metapneumovirus (“RSV” and “MPV”, respectively). In January 2023, a majority-owned subsidiary, Encentrio Therapeutics, Inc. (“Encentrio”), was incorporated in the State of Delaware. The Company initially owned 80 % of Encentrio’s outstanding voting shares. During the three months ended June 30, 2023, the Company increased its ownership of Encentrio’s outstanding voting shares to 100 %. The primary purpose of Encentrio is to conduct research and development of oncology therapeutics. Liquidity and Capital Resources In November 2023, the Company entered into a sales agreement (“Sales Agreement”) with Cowen and Company, LLC, as sales agent (“TD Cowen”), pursuant to which the Company may from time to time offer and sell shares of its common stock for an aggregate offering price of up to $ 300.0 million, through or to TD Cowen, acting as sales agent or principal. The shares will be offered and sold under the Company’s shelf registration statement on Form S-3 and a related prospectus filed with the Securities and Exchange Commission (“SEC”) on November 3, 2023. The Company 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 June 30, 2024, no shares have been sold under the Sales Agreement. As of June 30, 2024, the Company had $ 1.43 billion in cash, cash equivalents, and investments, which the Company believes will be sufficient to fund its operations for a period through at least twelve months from the issuance date of these unaudited condensed consolidated financial statements. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. The unaudited condensed consolidated financial statements include the accounts of Vir and its majority-owned subsidiaries. For consolidated entities where Vir owns or is exposed to less than 100.0% of the economics, the Company records net income (loss) attributable to noncontrolling interests, net of tax in its unaudited condensed consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. All intercompany balances and transactions have been eliminated upon consolidation. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial information. The unaudited condensed consolidated results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for any other future annual or interim period. Certain information and footnote disclosures typically included in the Company’s annual consolidated financial statements have been condensed or omitted. As such, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024. 9 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates. Concentration of Credit Risk, Credit Loss and Other Risks and Uncertainties The Company is subject to a number of challenges and risks similar to other biopharmaceutical companies, 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 product candidates, and protection of proprietary technology. If the Company does not successfully obtain regulatory approval or commercialize or partner any of its product candidates, it will be unable to generate revenue from product sales or maintain profitability. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and investments. Cash and cash equivalents are deposited in checking and sweep accounts at financial institutions. Such deposits may, at times, exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents. Management believes that the Company is not currently exposed to significant credit risk as the Company’s investments are held in custody at third-party financial institutions. The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies, and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and investments and issuers of the investments to the extent recorded on the unaudited condensed consolidated balance sheets. As of June 30, 2024, the Company has no off-balance sheet concentrations of credit risk. Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents, which consist of amounts invested primarily in money market funds and are stated at fair value. Investments Investments include available-for-sale debt securities and equity investments carried at estimated fair value. Available-for-Sale Debt Securities The Company’s valuations of marketable securities are generally derived from independent pricing services based on quoted prices in active markets for similar securities at period end. Generally, investments with original maturities beyond three months at the date of purchase and that mature at, or less than 12 months from, the unaudited condensed consolidated balance sheet date are considered short-term investments, with all others considered to be long-term investments. Unrealized gains and losses deemed temporary in nature are reported as a component of accumulated other comprehensive loss. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the unaudited condensed consolidated statements of operations. The cost of securities sold is based on the specific identification method. Equity Investments The Company measures its investment in equity securities at fair value at each reporting date based on the market price at period end if it has a readily determinable fair value. Otherwise, the investments in equity securities are measured at cost less impairment, adjusted for observable price changes for identical or similar investments of the same issuer unless the Company has significant influence or control over the investee. Changes in fair value resulting from observable price changes are presented as change in fair value of equity investments, and changes in fair value resulting from foreign currency translation are included in other expense, net on the unaudited condensed consolidated statements of operations. 10 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements Restricted Cash and Cash Equivalents Restricted cash and cash equivalents, current and noncurrent, primarily consist of funds received from certain grants that are restricted as to their use and money market funds to secure standby letters of credit and security deposits with financial institutions under office and laboratory space lease agreements. Property and Equipment, Net Property and equipment are stated at cost, net of accumulated depreciation and amortization and, if applicable, impairment charges. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years . Leasehold improvements are amortized over the lesser of their useful lives or the remaining life of the lease. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the balance sheet, and the resulting gain or loss is reflected in operations in the period realized. Maintenance and repairs are charged to operations as incurred. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (group) may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net undiscounted cash flows that the asset (group) is expected to generate. If such asset (group) is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset (group) exceeds its fair value. Revenue Recognition Collaboration, License and Contract Revenue Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when the Company’s customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods and services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the Company satisfies a performance obligation. For collaborative arrangements that fall within the scope of ASC 808, Collaborative Arrangements (“ASC 808”), the Company first determines which elements of the collaboration are deemed to be a performance obligation with a customer within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808 and are not subject to the guidance in ASC 606, the Company applies the revenue recognition model under ASC 606, including the royalty exception guidance and variable consideration guidance under ASC 606 as described below, or other guidance, as deemed appropriate. When the Company is considered an agent in elements of collaboration arrangements within the scope of ASC 808, it records its share of collaboration revenue in the period in which such sales occur. The Company is considered an agent when the collaboration partner controls the product before transfer to the customers and has the ability to direct the use of and obtain substantially all of the remaining benefits from the product. In these instances, collaboration revenue is based upon the net sales reported by the Company’s collaboration partners, net of cost of goods sold and allowable expenses (e.g., manufacturing, distribution, medical affairs, selling, and marketing expenses) in the period. In order to record collaboration revenue, the Company utilizes certain information from its collaboration partner, including actual net product sales and costs incurred for sales activities, and makes key judgments based on business updates related to commercial and clinical activities such as expected commercial demand, commercial supply plan, manufacturing commitments, risks related to expired or obsolete inventories, and risks related to potential product returns or contract terminations. The Company uses these estimates to determine whether payments due to it under its collaboration arrangements, such as profit-share payments, should be recognized as revenue in the period that they become due or whether any portion of the payments due should be constrained from revenue recognition because it is not probable that recognizing such amounts will not result in a significant reversal of cumulative revenues recognized in future reporting periods. 11 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements The Company has entered into a number of license and collaboration agreements that fall within the scope of ASC 606. The Company evaluates the promised goods or services in these agreements to determine which ones represent distinct performance obligations. Prior to recognizing revenue, the Company estimates the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required. These agreements may include the following types of consideration: non-refundable upfront payments, reimbursement for research and development services, research, development or regulatory milestone payments, profit-sharing arrangements, and royalty and commercial sales milestone payments. If there are multiple distinct performance obligations, the Company allocates the transaction price to each distinct performance obligation based on their estimated standalone selling prices (“SSP”). The Company estimates the SSP for each distinct performance obligation by considering information such as market conditions, entity-specific factors, and information about its customer that is reasonably available. The Company considers estimation approaches that allow it to maximize the use of observable inputs. These estimation approaches may include the adjusted market assessment approach, the expected cost plus a margin approach or the residual approach. The Company also considers whether to use a different estimation approach or a combination of approaches to estimate the SSP for each distinct performance obligation. Developing certain assumptions (e.g., treatable patient population, expected market share, probability of success and product profitability, and discount rate based on weighted-average cost of capital) to estimate the SSP of a distinct performance obligation requires significant judgment. For performance obligations satisfied over time, the Company estimates the efforts needed to complete the performance obligation and recognizes revenue by measuring the progress towards complete satisfaction of the performance obligation using an input measure. For arrangements that include sales-based royalties, including commercial milestone payments based on pre-specified levels of sales, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon the performance of the licensee. Grant Revenue Grants received, including cost reimbursement agreements, are assessed to determine if the agreement should be accounted for as an exchange transaction or a contribution. An agreement is accounted for as a contribution if the resource provider does not receive commensurate value in return for the assets transferred. Contributions are recognized as grant revenue when all donor-imposed conditions have been met. Contingent Consideration Obligations Contingent consideration obligations incurred in connection with a business combination are recorded at their fair values on the acquisition date, are remeasured each subsequent reporting period until the related contingencies are resolved, and are classified as contingent consideration on the unaudited condensed consolidated balance sheets. The changes in fair values of contingent consideration related to the achievement of various milestones are recorded within research and development expenses or selling, general and administrative expenses based on the nature of the relevant underlying activities. Leases In accordance with ASC 842, Leases, 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. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability, include any lease payments made prior to or on lease commencement, and exclude lease incentives and initial direct costs incurred, as applicable. On the lease commencement date, the Company estimates and includes in its lease payments any lease incentive amounts based on future events when (1) the events are within the Company’s control and (2) the event triggering the right to receive the incentive is deemed reasonably certain to occur. If the lease incentive received is greater or less than the amount recognized at lease commencement, the Company recognizes the difference as an adjustment to ROU asset and/or lease liability, as applicable. 12 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements As the implicit rate in the Company’s leases is generally unknown, the Company uses an incremental borrowing rate estimated based on the information available at the lease commencement date in determining the present value of future lease payments. When calculating its estimated incremental borrowing rates, the Company considers its credit risk, the lease term, the total lease payments and the impact of collateral, as necessary. The lease terms may include options to extend or terminate the lease when the Company is reasonably certain it will exercise such options. ROU assets and lease liabilities are remeasured upon certain modifications to leases using the present value of remaining lease payments and estimated incremental borrowing rate upon lease modification. Rent expense for the Company’s operating leases is recognized on a straight-line basis within operating expenses over the reasonably assured lease term. The Company elected to not separate lease and non-lease components for any leases within its existing classes of assets and, as a result, accounts for the lease and non-lease components as a single lease component. The Company also elected to not apply the recognition requirement to any leases within its existing classes of assets with a term of 12 months or less. ROU assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (group) may not be recoverable, like that of property and equipment. New Accounting Pronouncement Not Yet Adopted In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact the adoption of ASU 2023-09 may have on its consolidated financial statements and related disclosures. Reclassification Certain reclassifications have been made to prior period amounts on the Company’s condensed consolidated balance sheets to conform to the current period presentation and enhance comparability. As a result, the prior period amounts from deferred revenue, noncurrent were reclassified to other long-term liabilities . These reclassifications had no impact on previously reported total assets, total liabilities, or total stockholders' equity. Certain reclassifications have been made to prior period amounts on the Company’s condensed consolidated statements of operations to conform to the current period presentation and enhance comparability. As a result, certain amounts related to long-lived assets impairment, previously reflected in research and development and selling, general and administrative , were reclassified to restructuring, long-lived assets impairment and related charges . These reclassifications had no impact on previously reported total revenues, total operating expenses, or net loss, There were no reclassifications made to the condensed consolidated statements of comprehensive loss, condensed consolidated statements of stockholders’ equity or consolidated consolidated statements of cash flows. 3. Fair Value Measurements The Company determines the fair value of financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows: • Level 1: Inputs that include quoted prices in active markets for identical assets and liabilities. • Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 13 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements The carrying amounts of the Company’s financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. Cash Equivalents and Available-for-Sale Securities The following tables summarize the Company’s Level 1 and Level 2 financial assets measured at fair value on a recurring basis within the fair value hierarchy as of June 30, 2024 and December 31, 2023 (in thousands): June 30, 2024 Valuation Hierarchy Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Aggregate Fair Value Assets: Money market funds (1) Level 1 $ 297,006 $ — $ — $ 297,006 U.S. government treasuries Level 2 748,101 47 ( 617 ) 747,531 U.S. government agency bonds and discount notes Level 2 96,270 50 ( 68 ) 96,252 Asset-backed securities Level 2 23,196 11 ( 4 ) 23,203 Corporate bonds Level 2 269,349 150 ( 556 ) 268,943 Equity securities Level 1 N/A N/A N/A 4,368 Total financial assets $ 1,433,922 $ 258 $ ( 1,245 ) $ 1,437,303 ______________________________________________ (1) Includes $ 20.3 million of restricted cash equivalents. December 31, 2023 Valuation Hierarchy Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Aggregate Fair Value Assets: Money market funds (1) Level 1 $ 278,187 $ — $ — $ 278,187 U.S. government treasuries Level 2 1,162,124 1,017 ( 80 ) 1,163,061 U.S. government agency bonds and discount notes Level 2 181,189 27 ( 50 ) 181,166 Equity securities Level 1 N/A N/A N/A 9,853 Total financial assets $ 1,621,500 $ 1,044 $ ( 130 ) $ 1,632,267 ______________________________________________ (1) Includes $ 19.7 million of restricted cash equivalents. Accrued interest receivable excluded from both the fair value and amortized cost basis of the available-for-sale debt securities are presented within prepaid expenses and other current assets in the unaudited condensed consolidated balance sheets. Accrued interest receivable amounted to $ 6.2 million and $ 4.0 million as of June 30, 2024 and December 31, 2023, respectively. The Company did not write off any accrued interest receivable during the six months ended June 30, 2024 and 2023. The Company recognized total net unrealized losses of $ 1.0 million and total net unrealized gains of $ 0.9 million in accumulated other comprehensive loss as of June 30, 2024 and December 31, 2023, respectively. The gross unrealized losses related to U.S. government treasuries, U.S. government agency bonds and discount notes, and securities issued by institutions with investment-grade credit ratings as of June 30, 2024 and December 31, 2023 were due to changes in interest rates. The Company determined that the gross unrealized losses on the investments as of June 30, 2024 were temporary in nature. The Company currently does not intend, and it is highly unlikely that it will be required, to sell these securities before recovery of their amortized cost basis. As of June 30, 2024, no securities have contractual maturities (or weighted average life for asset-backed securities) of longer than two years . 14 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements As of June 30, 2024, the Company’s equity investment consisted solely of ordinary shares of Brii Biosciences Limited (“Brii Bio Parent”). The equity securities of Brii Bio Parent are listed on the The Stock Exchange of Hong Kong Limited, are considered to be marketable equity securities, and measured at fair value at each reporting date. As of June 30, 2024, the Company remeasured the equity investment at a fair value of $ 4.4 million. The Company recognized an unrealized gain of $ 0.4 million and an unrealized loss of $ 5.1 million, for the three months ended June 30, 2024 and 2023, respectively, and an unrealized loss of $ 5.5 million and $ 18.2 million for the six months ended June 30, 2024 and 2023, respectively, as other income in the unaudited condensed consolidated statement of operations. For the three and six months ended June 30, 2024 and 2023, the unrealized gains or losses related to foreign currency translation were not material. Contingent Consideration Obligations Contingent consideration obligations include potential milestone payments in connection with the acquisition of Humabs Biomed SA (“Humabs”). The Company classifies the contingent consideration as Level 3 financial liabilities within the fair value hierarchy as of June 30, 2024 and December 31, 2023. The estimated fair value of the contingent consideration related to the Humabs acquisition was determined by calculating the probability-weighted clinical, regulatory and commercial milestone payments based on the assessment of the likelihood and estimated timing that certain milestones would be achieved. As of June 30, 2024, the Company calculated the estimated fair value of the remaining clinical and regulatory milestones related to tobevibart (formerly as VIR-3434), an investigational subcutaneously administered HBV-neutralizing monoclonal antibody, or mAb, using the following significant unobservable inputs: Unobservable input Range (Weighted-Average) 1 Discount rates 13.3 % - 14.0 % ( 13.4 %) Probability of achievement 16.2 % - 80.0 % ( 58.7 %) ______________________________________________ (1) Unobservable inputs were weighted based on the relative fair value of the clinical and regulatory milestone payments. For the commercial milestones, the Company used a Monte Carlo simulation. As of June 30, 2024, the Monte Carlo simulation assumed a commercial product launch and associated discrete revenue forecasts, as well as the following significant unobservable inputs for the remaining commercial milestones related to tobevibart: Unobservable input Value Volatility 75.0 % Discount rate 10.0 % Probability of achievement 47.4 % The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due. As of June 30, 2024 and December 31, 2023, the estimated fair value of the contingent consideration related to the Humabs acquisition was $ 30.6 million and $ 26.0 million, respectively, with changes in the estimated fair value recorded in research and development expenses in the unaudited condensed consolidated statements of operations. The estimated fair value of the contingent consideration related to the Humabs acquisition involves significant estimates and assumptions that give rise to measurement uncertainty. The following table sets forth the changes in the estimated fair value of the Company’s contingent consideration obligations (in thousands): Contingent Consideration Balance at December 31, 2023 $ 25,961 Changes in fair value 4,639 Balance at June 30, 2024 $ 30,600 15 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements 4. Grant Agreements Bill & Melinda Gates Foundation Grants The Company has entered into various grant agreements with the Bill & Melinda Gates Foundation (“BMGF”), under which it is currently awarded grants totaling up to $ 49.9 million to support its HIV vaccine program, tuberculosis vaccine program, HIV vaccinal antibody program and malaria vaccinal antibody program. The term of the grant agreements will expire at various dates through June 2027, unless terminated earlier by the BMGF 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 BMGF reasonably believes may threaten the success of the projects. Concurrently with the execution of the grant agreement for the vaccinal antibody program, the Company entered into a stock purchase agreement with the BMGF, under which the BMGF purchased 881,365 shares of the Company’s common stock on January 13, 2022, at a price per share of $ 45.38 , for an aggregate purchase price of approximately $ 40.0 million. The fair market value of the common stock issued to the BMGF was $ 28.5 million, based on the closing stock price of $ 37.65 per share on the closing date and taking into account a discount for the lack of marketability due to the restrictions in place on the underlying shares, resulting in a $ 11.3 million premium received by the Company. The Company accounted for the common stock issued to the BMGF based on its fair market value on the closing date and determined that the premium paid by the BMGF should be included in the deferred revenue from the vaccinal antibody grant. Payments received in advance that are related to future research activities along with the aforementioned premium received are deferred and recognized as revenue when the donor-imposed conditions are met, which is as the research and development activities are performed. The premium received by the Company is deferred and recognized over the same period as the grant proportionally. The Company recognized grant revenue of $ 0.3 million and $ 4.7 million for the three months ended June 30, 2024 and 2023, respectively, and $ 2.2 million and $ 6.6 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, the Company had deferred revenue of $ 15.2 million and $ 13.1 million, respectively. As of June 30, 2024 and December 31, 2023, the Company had $ 7.6 million and $ 9.2 million, respectively, within accrued and other liabilities, which may need to be refunded to the BMGF. Biomedical Advanced Research and Development Authority In September 2022, the Company entered into a multi-year agreement (the “BARDA Agreement”) under Other Transaction Authority with the Biomedical Advanced Research and Development Authority (“BARDA”), part of the U.S. Department of Health and Human Services’ Administration for Strategic Preparedness and Response. Under the BARDA Agreement, the Company may receive up to an estimated $ 1.0 billion to advance the development of a full portfolio of innovative solutions to address influenza and potentially other infectious disease threats. The Base Period for the BARDA Agreement includes government funding of approximately $ 55.0 million to reimburse a portion of expenses incurred by the Company to support the development of VIR-2482, an investigational prophylactic monoclonal antibody designed with the aim to protect against seasonal and pandemic influenza, including expenses related to the Phase 2 pre-exposure prophylaxis trial of VIR-2482. The BARDA Agreement also provides for additional funding after the exercise by BARDA of up to twelve options to further support the development of pre-exposure prophylactic antibodies including and beyond VIR-2482 for the prevention of influenza illness and supporting medical countermeasures for other pathogens of pandemic potential. In September 2023, the Company and BARDA entered into Amendment No. P00001 to the BARDA Agreement (the “Amended BARDA Agreement”), pursuant to which BARDA awarded the Company $ 50.1 million in new funding upon the exercise of an additional option. The Company will use $ 40.0 million to support the development of VIR-7229 through a Phase 1 clinical trial and $ 10.1 million to support the discovery of new monoclonal antibody against a second pathogen of pandemic potential. The Company may also receive up to $ 11.2 million additional funding for the Base Period under the Amended BARDA Agreement to wind down activities related to the Phase 2 pre-exposure prophylaxis trial of VIR-2482. The Amended BARDA Agreement will expire in July 2027 and may be extended by mutual written agreement of the Company and BARDA, if funding is available and research opportunities within scope reasonably warrant, or, if any of the options are exercised (as described above), to cover the period of such exercised option set forth in the Amended BARDA Agreement. The Amended BARDA Agreement is terminable by the Company and BARDA at any time under specified circumstances, including for convenience. 16 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements The Company recognized grant revenue related to BARDA of $ 1.8 million and $ 11.8 million for the three months ended June 30, 2024 and 2023, respectively, and $ 5.1 million and $ 26.1 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, the Company had receivables from BARDA of $ 1.0 million and $ 7.6 million, respectively, as part of prepaid expenses and other current assets. As of June 30, 2024, $ 51.4 million of potential future reimbursement remains available under the Amended BARDA Agreement. 5. Collaboration and License Agreements Collaboration Agreements with GSK 2020 GSK Agreement In 2020, the Company, Glaxo Wellcome UK Limited and Beecham S.A. entered into a collaboration agreement (the “2020 GSK Agreement”). Subsequently, Beecham S.A. assigned and transferred all its rights, title, interest, and benefit in the 2020 GSK Agreement to GlaxoSmithKline Biologicals S.A. (Glaxo Wellcome UK Limited and GlaxoSmithKline Biologicals S.A., referred to, individually and together, as “GSK”). Under the terms of the 2020 GSK Agreement, the Company and GSK agreed to collaborate to research, develop and commercialize products for the prevention, treatment and prophylaxis of diseases caused by SARS-CoV-2, the virus that causes COVID-19, and potentially other coronaviruses. The collaboration initially focused on the development and commercialization of three programs: (1) antibodies targeting SARS-CoV-2 and potentially other coronaviruses (the “Antibody Program”); (2) vaccines targeting SARS-CoV-2 and potentially other coronaviruses (the “Vaccine Program”), and (3) products based on genome-wide CRISPR screening of host targets expressed in connection with exposure to SARS-CoV-2 and potentially other coronaviruses (the “Functional Genomics Program”). On February 8, 2023, the Company and GSK entered into Amendment No. 2 and Amendment No. 3 to the 2020 GSK Agreement. Pursuant to Amendment No. 2, the Company and GSK agreed to remove the Vaccine Program from the 2020 GSK Agreement, and to wind down and terminate the cost-sharing arrangements and all ongoing activities in relation to the Vaccine Program. As of the effective date of Amendment No. 2, the Vaccine Program had not yet advanced to its predefined development candidate stage. The Company retains the right to progress development of vaccine products directed to SARS-CoV-2 and other coronaviruses independently (including with or for third parties) outside the scope of the 2020 GSK Agreement, subject to the payment of tiered royalties to GSK on net sales of any vaccine products covered by certain GSK intellectual property rights in the low single digits. Pursuant to Amendment No. 3, the Company and GSK agreed to modify the Antibody Program to remove from the collaboration all coronavirus antibodies other than sotrovimab and VIR-7832, and certain variants thereof. Sotrovimab and VIR-7832, and certain variants thereof, remain subject to the terms of the 2020 GSK Agreement, and the Company retains the sole right to progress the development and commercialization of the terminated antibody products independently (including with or for third parties), subject to the payment of tiered royalties to GSK on net sales of such terminated antibody products at percentages ranging from the very low single digits to the mid-single digits, depending on the nature of the antibody product being commercialized. Subject to an opt-out mechanism, the parties share all development costs, manufacturing costs, and costs and expenses for the commercialization of the collaboration products, with the Company bearing 72.5 % of such costs for the antibody products, except that GSK has the sole right to develop (including to seek, obtain or maintain regulatory approvals), manufacture and commercialize sotrovimab in and for mainland China, Hong Kong, Macau and Taiwan at GSK’s sole cost and expense, and equal sharing of such costs for the functional genomics products. The 2020 GSK Agreement will remain in effect with respect to each collaboration program for as long as there is a collaboration product being developed or commercialized by the lead party, or the non-opt-out party, in such program. Either party has the right to terminate the 2020 GSK Agreement in the case of the insolvency of the other party, an uncured material breach of the other party with respect to a collaboration program or collaboration product, or as mutually agreed by the parties. 17 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements In May 2021, the U.S. Food and Drug Administration (“FDA”) granted an EUA in the United States for sotrovimab, the first collaboration product under the Antibody Program. In April 2022, the FDA excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain variants. As the lead party for all manufacturing and commercialization activities, GSK incurs all of the manufacturing, sales and marketing expenses and is the principal on sales transactions with third parties. As described in Note 2—Summary of Significant Accounting Policies, the Company’s accounting policy related to the profit-share is to consider the agreed-upon share of the profit-sharing amounts each quarter and evaluate whether those amounts are subject to potential future adjustments based on the latest available facts and circumstances. As the Company is the agent, the Company recognizes its contractual share of the profit-sharing amounts or royalties (in case of an opt-out) as revenue, based on sales net of various estimated deductions such as rebates, discounts, chargebacks, credits and returns, less cost of sales and allowable expenses (including manufacturing, distribution, medical affairs, selling, and marketing expenses) in the period the sale occurs. Manufacturing costs include inventory revaluation adjustments, lower of cost or market inventory adjustments, inventory write-downs and write-offs, and binding purchase commitments with a third-party manufacturer among other manufacturing costs. In periods when allowable expenses exceed amounts recognized for net product sales of sotrovimab, negative revenue will be reported in our consolidated statements of operations. The Company’s contractual share of the profit-sharing amounts is subject to potential future adjustments to allowable expenses, which represents a form of variable consideration. At each reporting period, the Company evaluates the latest available facts and circumstances to determine whether any portion of profit-sharing amounts should be constrained. In 2023, GSK reported to the Company certain allowable manufacturing expenses related to excess sotrovimab supply and binding reserved manufacturing capacity not utilized, which the Company had previously reserved as constraint on its cumulative profit-sharing amounts. For the year ended December 31, 2023, the Company paid GSK $ 341.4 million relating to these manufacturing expenses. GSK may continue to adjust allowable manufacturing expenses for the Company’s share of the excess supply write-offs and unused binding manufacturing capacity and report to the Company as cost-sharing amounts in future periods. The Company evaluated the latest available facts and circumstances to update its evaluation of profit-sharing amounts to be constrained. As of June 30, 2024, the Company’s share of the remaining estimated manufacturing expenses related to excess sotrovimab supply and binding reserved manufacturing capacity not utilized is not material. The Company re-assesses these estimates each reporting period. During the three and six months ended June 30, 2024 and 2023, the Company recorded profit-sharing amount, profit-sharing amount constrained, and profit-sharing amount previously constrained, released as components of collaboration revenue in the unaudited condensed consolidated statements of operations, as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Profit-sharing amount $ 55 $ ( 8,396 ) $ ( 232 ) $ ( 1,160 ) Profit-sharing amount constrained — ( 5,383 ) ( 700 ) — Profit-sharing amount previously constrained, released — — — 33,955 Total collaboration revenue, net $ 55 $ ( 13,779 ) $ ( 932 ) $ 32,795 Costs associated with co-development activities performed under the 2020 GSK Agreement are included in research and development expenses on the unaudited condensed consolidated statements of operations, with any reimbursement of costs by GSK reflected as a reduction of such expenses. Under the 2020 GSK Agreement, the Company recognized additional net research and development expenses of $ 2.7 million and $ 5.3 million during the three months ended June 30, 2024 and 2023, respectively, and $ 5.5 million and $ 12.5 million during the six months ended June 30, 2024 and 2023, respectively. 18 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements 2021 Expanded GSK Collaboration In 2021, the Company and GSK entered into a collaboration agreement (the “2021 GSK Agreement”) under which the parties agreed to expand the 2020 GSK Agreement to collaborate on three separate programs: (1) a program to research, develop and commercialize certain mAbs for the prevention, treatment or prophylaxis of the influenza virus (the “Influenza Program”), excluding VIR-2482 unless GSK exercises its exclusive option to co-develop and commercialize after the Company completes a Phase 2 clinical trial (“VIR-2482 Option”); (2) an expansion of the parties’ current Functional Genomics Program to focus on functional genomics screens directed to targets associated with respiratory viruses (the “Expanded Functional Genomics Program”); and (3) additional programs to develop neutralizing mAbs directed to up to three non-influenza target pathogens if selected by GSK prior to March 25, 2024 (the “Selected Pathogens” and such programs, the “Additional Programs”). On February 21, 2024, the Company and GSK entered into a letter agreement (the “Letter Agreement”) pursuant to which the Company and GSK agreed to terminate the Influenza Program and GSK’s VIR-2482 Option from the 2021 GSK Agreement and to wind down and terminate the cost-sharing arrangements and all ongoing activities in relation to the Influenza Program. The parties mutually agree upon the allocation of responsibility for the development of products under the Expanded Functional Genomics Program, and for the development and early-stage manufacturing of products under the Additional Programs if and when GSK decides which Selected Pathogens to pursue. GSK is primarily responsible for commercial manufacturing and commercialization activities for products under the Expanded Functional Genomics Program and Additional Programs, if and when selected by GSK. For each collaboration program, the Company granted or will grant GSK certain license rights related to the development, manufacturing and commercialization of products arising from the program. GSK selected RSV as its first pathogen under the Additional Programs in 2022. During the first quarter of 2024, the Company recognized contract revenue of $ 51.7 million as GSK’s rights to select the remaining two additional non-influenza target pathogens expired on March 25, 2024. The Company had no other remaining performance obligations under the 2021 GSK Agreement. The parties share 50 % of all development costs in accordance with the budget for each of the collaboration programs. The parties also share 50 % of all profits and losses arising from any collaboration product. Costs associated with co-development activities performed under the 2021 GSK Agreement are included in research and development expenses in the unaudited condensed consolidated statements of operations, with any reimbursement of costs by GSK reflected as a reduction of such expenses. Under the 2021 GSK Agreement, the Company recognized net reimbursement of research and development expenses of $ 0.5 million during the three and six months ended June 30, 2024 and additional net research and development expenses of $ 0.9 million and $ 1.3 million, respectively, during the three and six months ended June 30, 2023. 6. Balance Sheet Components Property and Equipment, net Property and equipment, net consists of the following (in thousands): Useful life (in years) June 30, 2024 December 31, 2023 Laboratory equipment 5 $ 40,530 $ 43,728 Computer equipment 3 2,551 2,783 Furniture and fixtures 5 2,549 2,887 Leasehold improvements 10 - 12 53,132 80,290 Construction in progress N/A 267 226 Property and equipment, gross 99,029 129,914 Less accumulated depreciation ( 32,966 ) ( 33,896 ) Total property and equipment, net $ 66,063 $ 96,018 Depreciation expenses were $ 4.2 million and $ 4.6 million for the three months ended June 30, 2024 and 2023, respectively, and $ 8.6 million and $ 10.1 million for the six months ended June 30, 2024 and 2023, respectively. 19 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements Accrued and Other Liabilities Accrued and other liabilities consist of the following (in thousands): June 30, 2024 December 31, 2023 Research and development expenses $ 22,286 $ 33,129 Operating lease liabilities, current 19,495 12,867 Payroll and related expenses 19,040 41,322 Excess funds payable under grant agreements 7,603 9,202 Other professional and consulting expenses 2,835 3,418 Accrued royalties 1,135 816 Accrued income taxes 17 149 Other accrued expenses 2,910 3,317 Total accrued and other liabilities $ 75,321 $ 104,220 7. Restructuring, Asset Impairment and Related Charges In December 2023, the Company initiated strategic steps to reduce operating expenses and focus its capital allocation on programs with the highest potential for patient impact and value creation (“2023 Restructuring Plan”). As part of the steps, the R&D facilities in St. Louis, Missouri and Portland, Oregon will be closed in 2024. In addition, approximately 75 net positions, or 12 % of the workforce, will be eliminated, which includes reductions from the Company’s discontinuation of its innate immunity small molecule group that was initiated in the third quarter of 2023. The following table is a summary of restructuring charges incurred during the three and six months ended June 30, 2024 and a roll forward of accrued restructuring costs from December 31, 2023 to June 30, 2024 (in thousands). During the three months ended June 30, 2024, due to the completion of R&D activities at the St. Louis, Missouri site the Company assessed the related long-lived assets at the site for impairment. As a result, the Company recorded non-cash impairment charges of $ 24.2 million primarily related to the the write-off of the remaining balance of ROU asset and leasehold improvements and non-cash disposal losses of $ 2.3 million related to certain lab equipment held for sale. For the three and six months ended June 30, 2024, the Company did not incur material contract termination costs or other associated exit costs. As of June 30, 2024, the Company expects to incur additional restructuring charges of approximately $ 2 million, primarily related to facility closures in the future under the 2023 Restructuring Plan. The Company expects all actions related to the 2023 Restructuring Plan to be substantially completed in the third quarter of 2024. Severance and other employee-related expenses Long-lived assets impairment charges and disposal losses Total Accrued restructuring charges at December 31, 2023 $ 4,454 $ — $ 4,454 Restructuring charges, net ( 48 ) — ( 48 ) Cash payment ( 2,592 ) — ( 2,592 ) Accrued restructuring charges at March 31, 2024 $ 1,814 $ — $ 1,814 Restructuring charges, net ( 200 ) 26,475 26,275 Cash payment ( 710 ) — ( 710 ) Non-cash activity — ( 26,475 ) ( 26,475 ) Accrued restructuring charges at June 30, 2024 $ 904 $ — $ 904 Reconciliation of accrued restructuring charges to the condensed consolidated balance sheets Accrued and other liabilities $ 904 $ — $ 904 20 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements During the three months ended June 30, 2023, the Company ceased to use the leased space at 499 Illinois Street, San Francisco, California, former corporate headquarter. As a result, the Company assessed the related long-lived assets at the site for impairment and recognized $ 5.4 million impairment charges, primarily related to the write-off of the remaining balance of ROU asset and leasehold improvements. 8. Commitments and Contingencies Manufacturing and Supply Agreements 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 June 30, 2024, the Company had unaccrued unpaid commitments of approximately $ 19 million under the Tobevibart Agreements. Legal Proceedings The Company may from time to time be party to claims and legal proceedings that arise in the normal course of its business and that may or may not have, individually or in the aggregate, a material adverse effect on its results of operations, financial condition or liquidity. Indemnification In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Under such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. In addition, the Company has entered into indemnification agreements with its directors and certain officers that may require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. To date, no demands have been made upon the Company to provide indemnification under these agreements, and thus, there are no indemnification claims that the Company is aware of that could have a material effect on the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of operations, or unaudited condensed consolidated statements of cash flows. 9. Related Party Transactions The Company holds a minority equity interest in Brii Biosciences Offshore Limited through Brii Bio Parent. As of June 30, 2024, one member of the Company’s board of directors serves on Brii Bio Parent’s board of directors. 10. Stock-Based Awards The Company has maintained a stock incentive plan for the issuance of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, other stock awards and performance cash awards, to employees, non-employee directors, and consultants. The Company also has an employee stock purchase plan (“ESPP”) for its employees. Stock Options Granted to Employees The fair value of stock options granted to employees was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Expected term of options (in years) 5.5 - 6.1 5.5 - 6.1 5.5 - 6.1 5.5 - 6.1 Expected stock price volatility 90.2 % - 91.8 % 99.6 % - 101.5 % 89.2 % - 91.8 % 99.6 % - 101.5 % Risk-free interest rate 4.4 % - 4.6 % 3.5 % - 3.9 % 4.3 % - 4.6 % 3.4 % - 4.1 % Expected dividend yield — — — — 21 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements The valuation assumptions for stock options were determined as follows: • Expected Term — The expected term represents the period that the stock options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term). • Expected Volatility — Expected volatility is determined by using a blended approach of the Company and certain industry peers’ historical volatilities. • Risk-Free Interest Rate — The Company based the risk-free interest rate over the expected term of the stock options based on the constant maturity rate of U.S. Treasury securities with similar maturities as of the date of the grant. • Expected Dividend Rate — The expected dividend is zero as the Company has not paid nor does it anticipate paying any dividends on its profit interest units in the foreseeable future. Stock-Based Compensation Expense Stock-based compensation is recognized on a straight-line basis over the requisite service period, which is generally the vesting period. The following table sets forth the total stock-based compensation expense for all awards granted to employees and non-employees and the ESPP in the unaudited condensed consolidated statements of operations (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Research and development $ 13,073 $ 17,112 $ 26,679 $ 30,465 Selling, general and administrative 9,089 13,507 19,240 25,635 Total stock-based compensation $ 22,162 $ 30,619 $ 45,919 $ 56,100 11. Net Loss Per Share Basic net loss per common share is computed by dividing the net loss attributable to Vir by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per common share is computed by dividing the net loss attributable to Vir by the sum of the weighted-average number of common shares outstanding during the period plus any potential dilutive effects of common stock equivalents outstanding during the period calculated in accordance with the treasury stock method. For periods that the Company was in a net loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common securities outstanding would have been anti-dilutive. The following is a calculation of the basic and diluted net loss per share (in thousands, except share and per share data): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss attributable to Vir $ ( 138,378 ) $ ( 194,775 ) $ ( 203,654 ) $ ( 335,675 ) Weighted-average shares outstanding, basic and diluted 136,233,725 134,059,079 135,757,187 133,807,357 Net loss attributable to Vir per share, basic and diluted $ ( 1.02 ) $ ( 1.45 ) $ ( 1.50 ) $ ( 2.51 ) 22 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Options issued and outstanding 11,671,732 10,223,201 12,284,822 10,419,357 Restricted shares subject to future vesting 3,579,637 3,622,091 4,771,497 3,066,323 Total 15,251,369 13,845,292 17,056,319 13,485,680 12. Income Taxes The table below presents our loss before benefit from income taxes, benefit from income taxes and effective tax rate for the three and six months ended June 30, 2024 and 2023 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Loss before benefit from income taxes $ ( 139,890 ) $ ( 197,623 ) $ ( 204,890 ) $ ( 340,811 ) Benefit from income taxes $ 1,512 $ 2,848 $ 1,236 $ 5,080 Effective tax rate 1.1 % 1.4 % 0.6 % 1.5 % The Company is subject to income taxes in the United States and foreign jurisdictions. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, the Company’s effective tax rates will vary depending on the relative proportion of foreign to United States income/loss, the utilization of net operating loss and tax credit carry forwards and carrybacks, changes in jurisdictional mix of income and expense, changes in management’s assessment of matters such as the ability to realize deferred tax assets, and changes in tax laws. The benefit from income taxes for the three and six months ended June 30, 2024 was primarily due to a favorable adjustment in estimated tax payable. The benefit from income taxes for the three and six months ended June 30, 2023 was primarily due to a pre-tax loss and the Company’s ability to carry back the research and development credit to 2022. Unrecognized tax benefits were $ 14.4 million and $ 13.6 million as of June 30, 2024 and December 31, 2023, respectively, and if recognized, would favorably affect the effective tax rate in future periods. 13. Subsequent events 2024 Restructuring Plan On July 29, 2024, the Company, by its duly authorized officer, approved a strategic restructuring plan (“2024 Restructuring Plan”) to advance the development of its clinical portfolio and focus on the highest-value near-term opportunities. The 2024 Restructuring Plan is designed to optimize the Company’s cost structure by reducing the size of its workforce in alignment with the Company’s current goals and strategy. The Company is prioritizing investment in the clinical execution of its chronic hepatitis delta and chronic hepatitis B programs, as well as the T-cell engager assets subject to the recently announced exclusive worldwide license agreement with Amunix Pharmaceuticals, Inc., a Sanofi Company (“Sanofi”). The organizational realignment and optimization include phasing out programs in influenza, COVID-19 and the Company’s T cell-based viral vector platform. Notifications to employees impacted by the strategic restructuring plan were completed on July 31, 2024. Such employees represent approximately 25 % of the Company’s workforce, or approximately 140 employees. The reduction will be substantially complete by the fourth quarter of 2024. As a result of these changes, the Company expects to incur restructuring charges between $ 11 million to $ 13 million, primarily related to employee severance cash expenditures. The Company anticipates recognizing these expenses through the fourth quarter of 2024. The estimated restructuring charges are contingent upon various assumptions, and actual results may differ materially. The Company may also incur additional costs not currently contemplated due to events related to or resulting from these strategic steps. 23 Table of Contents VIR BIOTECHNOLOGY, INC. Notes to Unaudited Condensed Consolidated Financial Statements License Agreement with Sanofi On July 31, 2024, the Company and Sanofi entered into a License Agreement (the “Agreement”). Upon closing of the transaction contemplated by the Agreement (the “Closing” and the “Transaction”, respectively), the Company will obtain an exclusive (even as to Sanofi and its affiliates), worldwide, royalty-bearing, sublicensable (through multiple tiers in accordance with the Agreement), transferable (to the extent permitted under the Agreement) license to research, develop, manufacture, commercialize and otherwise exploit (i) three clinical-stage masked T-cell engagers of Sanofi, for all therapeutic, prophylactic, palliative, and diagnostic uses, excluding the ophthalmological field, and (ii) the protease-cleavable masking platform of Sanofi for oncology and infectious disease, excluding the ophthalmological field. At Closing, the Company will make an upfront payment to Sanofi in the amount of $ 100 million plus $ 75 million in an escrowed milestone payment that is subject to SAR446368 (AMX-525) achieving “first in human dosing” by 2026. Sanofi will also be eligible to receive up to an additional $ 323 million in future development and regulatory milestone payments, up to an additional $ 1.488 billion in commercial net sales-based milestone payments, and low single-digit to low double-digit tiered royalties on worldwide net sales. The consummation of the Transaction is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.  The Company is in the process of assessing the accounting treatment of the Transaction. 24 Table of Contents