Vir Biotechnology, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included as part of our Annual Report on Form 10-K for the year ended December 31, 2023. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company”, “Vir,” “we,” “us” and “our” refer to Vir Biotechnology, Inc. and its consolidated subsidiaries. Overview We are a clinical-stage biopharmaceutical company focused on powering the immune system to transform lives by discovering and developing medicines for serious infectious diseases and cancer. At Vir, we have a bold vision – powering the immune system to transform lives. 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) and hepatitis B virus (HBV). The most advanced preclinical candidate in our pipeline includes respiratory syncytial virus (RSV) and human metapneumovirus (MPV). 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 worked 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 March 31, 2024. For additional developments or for a more comprehensive discussion of certain developments below, see our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Report on Form 10-Q for the period March 31, 2024. Pipeline Programs Chronic Hepatitis Delta (CHD) • We presented positive preliminary Phase 2 chronic hepatitis delta SOLSTICE study data at the European Association for the Study of the Liver, EASL™ Congress 2024. ◦ Tobevibart monotherapy and combination therapy with elebsiran achieved high virologic response and ALT normalization in people living with the hepatitis delta virus after 12 and 24 weeks of treatment. ◦ Complete 24-week treatment data on the approximately 60 participants is on track to be reported in the fourth quarter of 2024. • On June 26, the U.S. Food and Drug Administration (FDA) cleared our investigational new drug (IND) application and granted Fast Track designation for the combination of tobevibart and elebsiran for the treatment of chronic hepatitis delta infection. Chronic Hepatitis B (CHB) • The Phase 2 MARCH Part B study is fully enrolled with 48-week end of treatment data expected in the fourth quarter of 2024. The study 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 study and its THRIVE/STRIVE sub-protocols is expected in the first half of 2025. These studies are evaluating combinations of tobevibart, elebsiran and/or peginterferon alpha in two patient populations: immune-active but treatment-naïve and inactive carriers. 25 Table of Contents Corporate Update • As announced on August 1, 2024, we signed an exclusive worldwide license agreement with Sanofi for multiple potential best-in-class clinical-stage T-cell engagers and exclusive use of the protease-cleavable masking platform, acquired by Sanofi from Amunix Pharmaceuticals. This license agreement is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act Antitrust Improvements Act of 1976, as amended (HSR). • We initiated a strategic restructuring to advance the development of our hepatitis programs and focus on the highest near-term value opportunities. The organizational realignment and optimization include phasing out programs in influenza, COVID-19, and our T cell-based viral vector platform, as well as a workforce reduction of approximately 25% or approximately 140 employees. We expect to end 2024 with approximately 435 employees, a decrease of approximately 200 from our peak headcount in the second quarter of 2023. This includes the Sanofi employees who are expected to join us following receipt of HSR clearance. As a result of this strategic restructuring and prioritization we anticipate: • Approximately $50 million of annual workforce cost savings starting in 2025. Combined with the strategic actions taken in December 2023, we lowered our cost structure by approximately $90 million since its peak in 2023, part of which will be redeployed to the newly anticipated key personnel from Sanofi. • Cost savings of $50 million through the end of 2025 due to the phasing out of certain programs. These savings will substantially be reinvested in the newly licensed programs from Sanofi following closing of the transaction. • Restructuring expenses estimated at $11 million to $13 million, primarily related to employee severance cash payouts. We expect to recognize most of these expenses in the second half of 2024. • On May 29, 2024, we announced the appointment of Mark D. Eisner, M.D., M.P.H. as Executive Vice President and Chief Medical Officer, effective June 3, 2024. Dr. Eisner brings extensive late-stage clinical development expertise and deep knowledge in the fields of immunology and infectious disease. • On April 18, 2024, we announced that founding board members Phillip Sharp, Ph.D. and Robert Perez would not stand for reelection. Effective May 29, 2024, two new independent directors were elected in their place, including Norbert Bischofberger, Ph.D., who brings close to 40 years of biotech leadership experience and Ramy Farid, Ph.D., whose pioneering work applying advanced computational methods to drug discovery has enabled high-quality, novel molecules for drug development and materials applications. Our Collaboration, License and Grant Agreements We have entered into collaboration, license and grant arrangements with various third parties. For details regarding these and other agreements, see Note 4—Grant Agreements and Note 5—Collaboration and License Agreements to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and Note 7—Collaboration and License Agreements to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission, or SEC, on February 26, 2024. 26 Table of Contents Components of Operating Results Revenues To date, sotrovimab has been granted emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®), and has been supplied in more than 30 countries. Although we have previously recognized revenue from our profit-share related to sotrovimab under our definitive collaboration agreement with GSK executed in June 2020, or the 2020 GSK Agreement, we may continue to incur net operating losses for at least the next several years as the extent of future revenue from the sale of sotrovimab remains uncertain. While we have an EUA from the 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 variants. With this EUA revision, sotrovimab is not currently authorized for use in any U.S. region. Although certain countries outside the U.S. continue to maintain access to 500 mg IV while noting that the clinical efficacy is unknown or uncertain against existing and emerging 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, 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. 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). 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 In May 2021, the FDA granted an EUA in the U.S. for sotrovimab. In April 2022, the FDA excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain 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. Our accounting policy related to the profit-share is to consider the agreed-upon share of the profit-sharing amounts each quarter and evaluate whether those amounts are subject to potential future adjustments based on the latest available facts and circumstances, subject to the terms of the 2020 GSK Agreement. As we are the agent under the 2020 GSK Agreement, we recognize our contractual share of the profit-sharing amounts or royalties (in case of an opt-out) as revenue, based on sales net of various estimated deductions such as rebates, discounts, chargebacks, credits and returns, less cost of sales and allowable expenses (including manufacturing, distribution, medical affairs, selling, and marketing expenses) in the period the sale occurs. Manufacturing costs include inventory revaluation adjustments, lower of cost or market inventory adjustments, inventory write-downs and write-offs, and binding purchase commitments with a third-party manufacturer, among other manufacturing costs. Our contractual share of the profit-sharing amounts is subject to potential future adjustments to allowable expenses, which we account for as a form of variable consideration. 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. We evaluate the latest available facts and circumstances to update our evaluation of whether any portion of profit-sharing amounts should continue to be constrained. We re-assess these estimates at each reporting period. Actual results could materially differ from estimates. 27 Table of Contents 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. Operating Expenses Cost of Revenue 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. Research and Development To date, our research and development expenses have related primarily to discovery efforts and preclinical and clinical development of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We do not track all research and development expenses by product candidate. Research and development expenses consist primarily of costs incurred for our product candidates in development and prior to regulatory approval, which include: • expenses related to license and collaboration agreements, and change in fair value of certain contingent consideration obligations arising from business acquisitions; • personnel-related expenses, including salaries, benefits and stock-based compensation for personnel contributing to research and development activities; • expenses incurred under agreements with third-party contract manufacturing organizations, contract research organizations, and consultants; • clinical costs, including laboratory supplies and costs related to compliance with regulatory requirements; and • other allocated expenses, including expenses for rent and facilities maintenance, and depreciation and amortization. We expect our research and development expenses to increase substantially in absolute dollars 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. The actual probability of success for our product candidates may be affected by a variety of factors including: the safety and efficacy of our product candidates, early clinical data, investment in our clinical programs, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate significant revenue from the commercialization and sale of any of our product candidates. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments, our ongoing assessments as to each product candidate’s commercial potential and the impact of public health epidemics, such as the COVID-19 pandemic. In addition, our existing collaborators have significant discretion in determining the efforts and resources that they will apply to our collaborations and may not pursue further development and commercialization of products resulting from our collaboration arrangements or may elect to not to continue or renew research and development programs, which would delay the development and may increase the cost of developing our product candidates and may result in a need for additional capital or a suitable replacement collaborator. For those product candidates where there is not a current collaboration arrangement in place, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured (if at all) and to what degree such arrangements will affect our development plans and capital requirements. 28 Table of Contents Our clinical development costs may vary significantly based on factors such as: • whether a collaborator is paying for some or all of the costs; • per patient trial costs; • the number of trials required for approval; • the number of sites included in the trials; • enrollment and retention of patients in trials in countries disrupted by geopolitical events, including civil or political unrest; • the length of time required to enroll eligible patients; • the number of patients that participate in the trials; • the number of doses that patients receive; • the drop-out or discontinuation rates of patients; • potential additional safety monitoring requested by regulatory agencies; • the duration of patient participation in the trials and follow-up; • the cost and timing of manufacturing our product candidates; • the phase of development of our product candidates; and • the efficacy and safety profile of our product candidates. Selling, General and Administrative Our selling, general and administrative expenses consist primarily of personnel-related expenses for personnel in executive, finance and other administrative functions, facilities and other allocated expenses, other expenses for outside professional services, including legal, audit and accounting services, insurance costs and change in fair value of certain contingent consideration obligations arising from business acquisitions. Personnel-related expenses consist of salaries, benefits and stock-based compensation. We expect our selling, general and administrative expenses to increase 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. Restructuring, long-lived asset impairment and related charges Restructuring, long-lives asset impairment and related charges consist primarily of charges incurred in connection with our cost saving initiatives implemented during the second half of 2023, including severance and other employee-related expenses and long-lived assets impairment charges and disposal losses. Change in Fair Value of Equity Investments Change in fair value of equity investments consists of the remeasurement of our investment in Brii Biosciences Limited’s, or Brii Bio Parent, ordinary shares based on the quoted market price at each reporting date. Interest Income Interest income consists of interest earned on our cash, cash equivalents and investments. Other Expense, Net Other expense, net consists of gains and losses from foreign currency transactions and the remeasurement of our contingent consideration obligation. Benefit from Income Taxes Benefit from income taxes consists primarily of income taxes on our domestic and foreign operations. 29 Table of Contents Net Loss Attributable to Noncontrolling Interest Net loss attributable to noncontrolling interest consists of net loss attributable to the noncontrolling interest owners of Encentrio Therapeutics, Inc., our subsidiary, during the three months ended March 31, 2023. Results of Operations Comparison of the Three and Six Months Ended June 30, 2024 and 2023 The following table summarizes our results of operations for the periods presented (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 Change 2024 2023 Change Revenues: Collaboration revenue $ 55 $ (13,779) $ 13,834 $ (932) $ 32,795 $ (33,727) Contract revenue 886 1,057 (171) 53,077 1,195 51,882 Grant revenue 2,134 16,519 (14,385) 7,306 32,764 (25,458) Total revenues 3,075 3,797 (722) 59,451 66,754 (7,303) Operating expenses: Cost of revenue 52 22 30 111 1,929 (1,818) Research and development 105,113 168,083 (62,970) 205,238 325,726 (120,488) Selling, general and administrative 30,265 45,512 (15,247) 66,586 92,290 (25,704) Restructuring, long-lived assets impairment and related charges 26,275 5,366 20,909 26,227 5,366 20,861 Total operating expenses 161,705 218,983 (57,278) 298,162 425,311 (127,149) Loss from operations (158,630) (215,186) 56,556 (238,711) (358,557) 119,846 Other income: Change in fair value of equity investments 429 (5,086) 5,515 (5,486) (18,189) 12,703 Interest income 18,846 23,016 (4,170) 40,129 44,323 (4,194) Other expense, net (535) (367) (168) (822) (8,388) 7,566 Total other income 18,740 17,563 1,177 33,821 17,746 16,075 Loss before benefit from income taxes (139,890) (197,623) 57,733 (204,890) (340,811) 135,921 Benefit from income taxes 1,512 2,848 (1,336) 1,236 5,080 (3,844) Net loss (138,378) (194,775) 56,397 (203,654) (335,731) 132,077 Net loss attributable to noncontrolling interest — — — — (56) 56 Net loss attributable to Vir $ (138,378) $ (194,775) $ 56,397 $ (203,654) $ (335,675) $ 132,021 Revenues The increase in collaboration revenue for the three months ended June 30, 2024 compared to the same period in 2023 was primarily due to lower loss from the sales of sotrovimab and lower profit-sharing amount constrained under the 2020 GSK Agreement. The decrease in collaboration revenue for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to lower revenues from the release of profit-sharing amount previously constrained. The decrease in contract revenue for the three months ended June 30, 2024 compared to the same period in 2023 was not material. The increase in contract revenue for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to $51.7 million of deferred revenue recognized during the first quarter of 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 and six months ended June 30, 2024 compared to the same periods in 2023 was primarily due to lower revenue recognized in accordance with our agreement with BARDA. 30 Table of Contents Cost of Revenue The increase in cost of revenue for the three months ended June 30, 2024 compared to the same period in 2023 was not material. The decrease in cost of revenue for the six months ended June 30, 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 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 Change 2024 2023 Change Licenses, collaborations and contingent consideration $ 5,182 $ 7,551 $ (2,369) $ 10,878 $ 15,297 $ (4,419) Personnel 43,670 50,089 (6,419) 89,860 94,033 (4,173) Contract manufacturing 10,524 28,242 (17,718) 20,193 65,795 (45,602) Clinical costs 12,318 43,881 (31,563) 23,925 83,719 (59,794) Other 33,419 38,320 (4,901) 60,382 66,882 (6,500) Total research and development expenses $ 105,113 $ 168,083 $ (62,970) $ 205,238 $ 325,726 $ (120,488) The decrease in research and development expenses for the three and six months ended June 30, 2024 compared to the same periods 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, lower contract manufacturing costs associated with tobevibart and elebsiran used in the Company's CHD and CHB clinical trials, and lower personnel costs associated with the reduction in the headcount resulting from the cost saving initiatives implemented during the second half of 2023. Selling, General and Administrative Expenses The decrease in selling, general and administrative expenses for the three and six months ended June 30, 2024 compared to the same periods in 2023 was primarily due to cost saving initiatives implemented during the second half of 2023. Restructuring, long-lived assets impairment and related charges The increase in restructuring, long-lived assets impairment and related charges for the three and six months ended June 30, 2024 compared to the same periods in 2023 was primarily due to right-of-use asset and leasehold improvement impairment charges related to closing our St. Louis, Missouri facility, which was previously announced on December 13, 2023. Change in Fair Value of Equity Investments Our investment consisted solely of shares of Brii Bio Parent, which is a marketable equity investment and remeasured to fair value at each reporting period. For the three and six months ended June 30, 2024, we recognized an unrealized gain of $0.4 million and an unrealized loss $5.5 million due to the change in fair value, respectively, compared to an unrealized loss of $5.1 million and $18.2 million for the same periods in 2023, respectively. Interest Income The decrease in interest income for the three and six months ended June 30, 2024 compared to the same periods in 2023 was primarily due to lower balances of cash, cash equivalents, and investments. Other Expense, Net The increase in other expense, net for the three months ended June 30, 2024 compared to the same period in 2023 was not material. The decrease in other expense, net for the six months ended June 30, 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. 31 Table of Contents Benefit from Income Taxes The benefit for income taxes for the three and six months ended June 30, 2024 was primarily due to favorable adjustments 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. Liquidity, Capital Resources and Capital Requirements Sources of Liquidity 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 June 30, 2024, we had $1.43 billion in cash, cash equivalents, and investments. As of June 30, 2024, we had accumulated deficit of $441.5 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 June 30, 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. We have not obtained regulatory approval for any product candidates other than sotrovimab, and we do not expect to generate significant revenue from the sale of our other product candidates until we complete clinical development, submit regulatory filings and receive approvals from the applicable regulatory bodies for such product candidates, if ever. We may continue to incur net losses for the foreseeable future. Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments as of June 30, 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. We expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. See the sections titled “Risk Factors—Risks Related to Our Financial Position and Capital Needs—Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates” and “Risk Factors—Risks Related to Our Financial Position and Capital Needs—We may require substantial additional funding to finance our operations. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate certain of our development programs or other operations” for a description of the risks that may be associated with any future capital raises. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. See the section titled “Risk Factors—Risks Related to Our Financial Position and Capital Needs” for a description of certain risks that will affect our future capital requirements. We have various operating lease arrangements for office and laboratory spaces located in California, Oregon, Missouri and Switzerland with contractual lease periods expiring between 2024 and 2035. As of June 30, 2024, we expect to make total lease payments of $143.5 million through 2034. 32 Table of Contents To date, we have entered into collaboration, license and acquisition agreements where the payment obligations are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones, and we are required to make royalty payments in connection with the sale of products developed under those agreements. For additional information regarding these agreements, including our payment obligations thereunder, see Note 5—Collaboration and License Agreements to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and Note 7—Collaboration and License Agreements to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024. For information related to our future commitments under our facilities and manufacturing agreements. 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 June 30, 2024, the Company had a balance of unaccrued unpaid commitments of approximately $19 million under the Tobevibart Agreements. We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements. Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Six Months Ended June 30, 2024 2023 Net cash (used in) provided by: Operating activities $ (187,237) $ (515,029) Investing activities 240,027 328,394 Financing activities 3,094 5,523 Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents $ 55,884 $ (181,112) Operating Activities 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 six months ended June 30, 2024 decreased compared to the same period in 2023 primarily due to lower payments to GSK related to profit-sharing amount constrained under the 2020 GSK Agreement, and lower clinical development and contract manufacturing activities related to the wind down of the Phase 2 PENINSULA trial evaluating VIR-2482, partially offset by lower receipts for grant and collaboration revenues. Investing Activities Cash provided by investing activities during the six months ended June 30, 2024 decreased compared to the same period in 2023 primarily due to higher cash used in investment purchases, net of investment maturities and sales. Financing Activities Cash provided by financing activities during the six months ended June 30, 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 Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our unaudited condensed consolidated financial statements requires us to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. There have been no significant changes in our critical accounting policies during the six months ended June 30, 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. 33 Table of Contents