Vir Biotechnology Inc
NASDAQ:VIR
Earnings Call Analysis
Q4-2023 Analysis
Vir Biotechnology Inc
In the tale of a company navigating the stormy seas of the market, the fourth quarter of 2023 was notably tough. Total revenues plummeted to $16.8 million from $49.4 million in the corresponding quarter in 2022, manifesting a stark contrast to the previous year's performance. The full-year figures were no less daunting, with revenues collapsing to $86.2 million from a previous high of $1.62 billion. The fall from grace was chiefly due to dwindling collaboration revenues from sotrovimab, with no significant future revenue from this source expected. The efforts led by partner GSK to support the marketing authorization of sotrovimab might even dent the top line further. Casting a shadow on the already challenging scenario was the $615.1 million net loss for the full year in contrast to the prior year's net gain of $515.8 million.
The opera of operating expenses had its own dynamics, with cost of revenue for the full-year plunging from $146.3 million in 2022 to a mere $2.8 million, thanks to reduced third-party royalties from sotrovimab. Research and Development (R&D) expenses in the fourth quarter saw a dip to $111.9 million from $155.2 million due in part to winding down the Phase II Flu study of VIR-2482. Despite this, R&D costs for the year rose to $589.7 million from $474.6 million, fueled by the VIR-2482 trials and the advancement of hepatitis delta and hepatitis B programs. General and Administrative (SG&A) expenses didn't lag, increasing to $178 million for the year from $161.8 million, reflecting higher personnel costs and associated severance charges.
Looking forward to the horizon of 2024, the company anticipates GAAP combined R&D and SG&A expenses between $650 million to $680 million. Digging deeper, one finds that after excluding non-cash stock-based compensation and restructuring charges, the figure condenses to a range of $500 million to $550 million. This provides a glimmer of hope, projecting an 18% year-over-year decline at the midpoint, a result of cost optimization measures taken in 2023 and the absence of expenses from the Phase II flu trial. Leveraging grants estimated to fund about 3% to 4% of the combined R&D and SG&A expenses, which will be recognized as revenue, the company gears up for balancing investments in hepatitis programs against a backdrop of cost containment.
You don't have any saved screeners yet
Hello. Welcome to Vir Biotechnology's Fourth Quarter and Full-Year 2023 Financial Results and Business Update Call. As a reminder, this conference call is being recorded. [Operator Instructions] I will now turn the call over to Sasha Damouni Ellis, Executive Vice President, Chief Corporate Affairs Officer. You may begin, Ms. Damouni Ellis.
Thank you, and good afternoon. With me today are Dr. Marianne De Backer, Chief Executive Officer; Dr. Phil Pang, Chief Medical Officer; and Sung Lee, Chief Financial Officer. Before we begin, I would like to remind everyone that some of the statements we are making today are forward-looking statements under the securities laws. These forward-looking statements involve substantial risks and uncertainties that could cause our clinical development programs, future results, performance, or achievements to differ significantly from those expressed or implied by such forward-looking statements. These risks and uncertainties and risks associated with our business are described in the company's reports filed with the Securities and Exchange Commission, including Forms 10-K, 10-Q, and 8-K. I will now turn the call over to our CEO, Marianne De Backer.
Thank you, Sasha. Good afternoon to everyone on the webcast, and thank you all for joining us today. Before we discuss the tremendous progress we made in 2023 and what's ahead in 2024, I want to touch on the announcement we made earlier this week that Phil Pang, our Chief Medical Officer, has decided to step down at the end of March to spend more time with his family. We have initiated a search for his successor. I want to sincerely thank Phil for his leadership. He leaves a strong clinical development team in place, positioning us well for continued success, and I wish him the very best. Stepping in as Interim Chief Medical Officer is Dr. Carey Hwang, currently Vir's Senior Vice President, Clinical Research. As I reflect on 2023, I'm proud of the clinical progress we have made towards developing a potential treatment for patients with chronic hepatitis delta, a potential functional cure for the millions living with chronic hepatitis B as well as a differentiated approach to preventing HIV. Our priority is to deliver on our mid-stage clinical pipeline while also refocusing our research and early pipeline to programs beyond infectious disease. We anticipate significant data readouts this year, which build off last year's progress across all our clinical programs. Specifically, already in the first quarter, we anticipate completing the enrollment of approximately 60 participants across 2 cohorts in SOLSTICE, our Phase II hepatitis delta trial. We attribute this rapid rate of enrollment to the positive clinician and patient interest following the initial data we reported at AASLD last year. In the second quarter, we plan to share early virologic and safety data on a subset of these participants. It is important to appreciate that there is a significant underserved patient population in need of a safe, highly efficacious, and convenience therapy for treating hepatitis delta. We estimate that there are at least 12 million people diagnosed with this disease and an estimated 60 million or more undiagnosed globally. We aim to develop a best-in-cost treatment, which we believe will drive increased diagnosis rates and position Vir to become the leader in hepatitis delta. To position us for success, we are collaborating with patient advocacy groups and policymakers to improve surveillance and screening. In addition, crucial work is ongoing to understand who and where delta patients are. These efforts will support a targeted, rapid, and successful commercial launch in the future. Switching gears, I will now discuss our functional cure program for chronic hepatitis B, another area of high unmet medical need. Based on the data reported in our ongoing Phase II trial thus far, we believe our 2 therapeutic candidates, tobevibart and elebsiran has the potential to play a critical role in delivering high functional cure rates for chronic hepatitis B patients. We look forward to reporting end-of-treatment data from the MARCH Part B trial at a major medical congress in the fourth quarter. Finally, in the second half of the year, we are looking forward to sharing initial immunologic proof-of-concept data for VIR-1388, an HIV T cell vaccine candidate currently being evaluated in a Phase I trial. If the data supports the validity of the platform, it could be a springboard for other indications, including our preclinical therapeutic vaccine for control of pre-cancerous lesions and HPV cancers. Switching to research. We continue to advance antibody therapeutics optimized for increased likelihood of development success, thanks to our proprietary platform powered by AI and machine learning. Our focus is on prophylactic antibodies or influenza A and B, RSV/MPV, and COVID-19. In addition, we are developing a cocktail of broadly neutralizing antibodies for an HIV cure. We look forward to sharing more about these programs and the timing of potential IND submission during the year. On February 21, Vir and GSK terminated our collaboration to research, develop, and commercialize our monoclonal antibodies targeting the influenza of virus under our Definitive Collaboration Agreement that we established in May of 2021. Vir retains sole rights to continue advancing our investigational therapies for influenza. With that in mind, we are actively pursuing external partnership opportunities for our next-generation influenza A and B antibodies and ADCs. Meanwhile, our respiratory collaboration with GSK continues. Turning to our cash and investments. Our financial strength allows us to fund our clinical programs through major inflection points while enabling the flexibility to invest in external innovation opportunities. In evaluating external innovation, we are thoughtful, selective, and strategic with a focus on opportunities capable of augmenting our pipeline and platforms. To recap, we are preparing for a transformational year at Vir, anticipating critical value inflection points in our programs focused on chronic hepatitis delta, hepatitis B and HIV. With that, I'll now turn the call over to Phil.
Thank you, Marianne. I want to begin by thanking you, the Board, and all of my dear colleagues for what has been an honor and privilege to serve as Vir's Chief Medical Officer. Vir has been a family to me as well as an all-consuming passion for the last 7-plus years. I have full confidence in Vir's future and the ability of our promising clinical programs to impact the lives of millions of patients. Moving on to that pipeline. I'll begin by summarizing the initial results from our Phase II SOLSTICE trial, which is on hepatitis delta that was shared in a late-breaker presentation at AASLD last year and discussed earlier this year. The SOLSTICE trial is evaluating tobevibart alone and in combination with elebsiran as a potential chronic treatment for patients living with chronic hepatitis delta. Tobevibart is our investigational neutralizing monoclonal antibody, which has been engineered for enhanced immune engagement. Elebsiran is an investigational HBV-targeted siRNA that reduces hepatitis B surface antigen, which is the protein that the delta virus needs for its life cycle. In our initial data, we observed extraordinarily rapid declines in HDV RNA. 5 out of 6 participants had undetectable HDV RNA and 6 out of 6 or below the lower limit of quantification within 12 weeks of starting combination therapy. Of note, 2 out of 6 also achieved ALT normalization. While participant numbers are small, these data were recognized by several hepatologists as one of the most exciting advancements shared at the AASLD conference in 2023. That excitement has meaningfully translated into our ability to rapidly enroll patients both with and without cirrhosis ahead of schedule in our SOLSTICE study. As a reminder, our stated goal is to enroll approximately 60 participants in SOLSTICE by the end of the first quarter. These participants are being enrolled into 2 groups. The first group is receiving tobevibart monotherapy every 2 weeks and a second group is receiving tobevibart plus elebsiran combination therapy every 4 weeks. As of early February, greater than 90% of participants have been dosed. Notably, of the 55 participants who have already been dosed, 24 of them or 44% have compensated cirrhosis. We plan to share initial data on a subset of these participants in the second quarter, specifically, 15 participants per regimen at 12 weeks and 10 participants per regimen at 24 weeks. Should these data be supported, we intend to discuss with regulators on a potential path to registration in the third quarter. Switching to our Phase II program for chronic hepatitis B. Our preliminary data suggests that when elebsiran was given with pegylated interferon alfa for up to 48 weeks, approximately 26% of participants achieved hepatitis B surface antigen loss at the end of treatment and 16% maintained hepatitis B surface antigen loss 24 weeks after the end of therapy. Again, although the number of participants treated was small, this was the first sign that our siRNA may have a potential impact on functional cure rates beyond what is possible with peginterferon alone. In a subsequent trial, when adding tobevibart to a regimen of elebsiran alone or elebsiran plus peginterferon, we observed an almost threefold increase in end of treatment response rates after only 24 weeks of treatment. These data were the first indication of the potentially important role of an HBV directed antibody in hepatitis B functional cure. These data are encouraging, and we look forward to sharing end-of-treatment data from the MARCH Part B trial, which is evaluating 48 weeks of the doublet and triplet regimens in the fourth quarter. This will be followed by post-treatment data in the first half of 2025, which will allow us to assess functional cure rates. Turning to what we anticipate will enter the clinic next. VIR-7229 is a next-generation COVID antibody with increased potency, breadth and resistance to viral escape thanks to AI engineering and optimization. We expect to file a health authority application to support a Phase I trial later this year. The development of VIR-7229 through the end of Phase I is supported by BARDA. We look forward to continuing to share our progress over the coming quarters and during an R&D Day planned for the end of this year. I will now turn the call over to Sung.
Thank you, Phil. We're pleased to share our financial results for the fourth quarter of 2023 and the full year. Total revenues in the fourth quarter of 2023 were $16.8 million compared to $49.4 million for the same period in 2022. Total revenues for the full year of 2023 were $86.2 million compared to $1.62 billion in 2022. The primary driver for the year-over-year decline is lower collaboration revenues from sotrovimab. We do not anticipate any meaningful collaboration revenue from sotrovimab in the future. And this line item could make a negative contribution to our top-line due to the ongoing required investments to support the marketing authorization of sotrovimab, which our partner GSK leads the efforts in. Turning to operating expenses. Cost of revenue for the full year of 2023 was $2.8 million compared to $146.3 million in 2022. The year-over-year decline was driven by lower third-party royalties owed on sotrovimab sales. R&D expenses in the fourth quarter of 2023 were $111.9 million compared to $155.2 million in the same period in 2022. The decrease was primarily driven by the wind down of the Phase II Flu study of VIR-2482 in the fourth quarter of 2023. Included in the R&D expense for the fourth quarter of 2023 is a severance charge of $2.6 million related to the workforce reduction announced in December 2023. R&D expenses for the full year of 2023 were $589.7 million compared to $474.6 million in 2022. The year-over-year increase was primarily driven by the Phase II Flu trial evaluating VIR-2482 and related manufacturing costs, and to a lesser extent, the advancement of our hepatitis delta and hepatitis B programs. SG&A expenses in the fourth quarter of 2023 were $43.1 million compared to $38.7 million for the same period in 2022. The increase was primarily driven by higher personnel costs and a severance charge of $1.9 million related to the workforce reduction announced in December of 2023. SG&A expenses for the full year of 2023 were $178 million compared to $161.8 million in 2022. The year-over-year increase was primarily driven by higher personnel costs. For the fourth quarter of 2023, we reported a consolidated net loss of $116 million compared to a net loss of $101.6 million for the same period in 2022. For the full year of 2023, we reported a consolidated net loss of $615.1 million compared to a net income of $515.8 million in 2022. Moving to the balance sheet. Cash, cash equivalents and investments declined by $108 million quarter-over-quarter, and we finished the fourth quarter of 2023 with $1.63 billion. Turning to the financial guidance for 2024. We anticipate that the GAAP combined R&D and SG&A expense will be in the range of $650 million to $680 million. Included in this range are non-cash stock-based compensation expense in the range of $105 million to $115 million and restructuring charges for the closing of 2 R&D sites previously announced in December 2023 in the range of $25 million to $35 million. The restructuring expenses are primarily non-cash. When excluding the non-cash stock-based compensation and restructuring expenses from the GAAP combined R&D and SG&A expense range, the resulting range is $500 million to $550 million, which represents an 18% year-over-year decline at the midpoint. The expected year-over-year decline is driven primarily by, first, the absence of expenses from the Phase II flu trial evaluating VIR-2482 and related manufacturing cost in 2024, partially offset by the ramp-up of our hepatitis delta and hepatitis B programs in 2024; and second, the cost optimization measures taken in 2023. Approximately 3% to 4% of the GAAP combined R&D and SG&A expense will be funded by grants. It's important to remember that these grants are recognized as revenue in our income statement. The combined GAAP R&D and SG&A expense guidance does not include the effect of GAAP adjustments caused by events that may occur subsequent to the publication of this guidance, including but not limited to, business development activities, litigations, in-process R&D impairments and changes in the fair value of contingent considerations. Our financial strength allows us to advance the Phase II hepatitis delta and hepatitis B program through multiple milestones, invest in our core antibody platform and provide flexibility to evaluate external innovation. We will continue to have a disciplined approach to capital allocation and expense management. I will now turn the call back to Sasha.
Thank you, Sung. We will now start the Q&A section. Please limit questions to 2 per person so that we are able to get to all of our covering analysts. Operator, please open up the line for questions.
[Operator Instructions] Your first question comes from the line of Paul Choi with Goldman Sachs.
This is Khalil calling in for Paul. I guess we'd like to ask about the tobevibart/elebsiran combination cohort without peginterferon alfa in MARCH Part B at 24 weeks. Is that slightly higher efficacy observed in the cohort without interferon, something you expect to see repeated in the 48-week data? And what would that mean for interferon's place in a future pivotal study?
Thank you for that question, Paul. I will ask our CMO, Phil Pang to give you deeper insights into that.
Yes. So I think that -- remember the numbers from the 24-week end of treatment data that we showed with the doublet and the triplet are still small numbers. So I would not look much into the fact that the doublet was slightly different from the triplet at 24 weeks. I think that really what we're looking forward to seeing is what happens, as you know, after 48 weeks of the doublet and triplet. So I would say the jury is still out as to what those results are going to be, which we will share with you in the fourth quarter. And I think that that leaves open whether or not interferon will be required. And if it is, I think it will require a slightly higher functional cure rate given the known side effects of interferon. But I think, again, for patients and for providers, it always comes down to risk benefit. And I think that if we can show a transformational increase in functional cure rates, such as 30% or more, this is something that will be a very important tool for clinicians.
And I guess a quick follow-up kind of relating to the pipeline in general. Could you guys give like a potential time line as to when the company will select any front-runner antibody candidates to enter the clinic? And any color on what would drive that decision of choosing one?
Yes. So just to provide a little clarity, we have a number of candidates entering the clinic in the near term, and that's sort of regardless of platform, whether it's an antibody or a T cell vaccine. And really, what we're always looking for is obviously something that is differentiated and something that we believe can make an impact on patients' lives. So those 3 candidates are VIR-7229, the next-generation COVID antibody I spoke about earlier with its increased breadth and potency, thanks to our AI engineering platform. That also includes VIR-2981, our neuraminidase targeting monoclonal antibody, which is differentiated on 3 levels. One, it targets both flu A and B. It's more potent than 2482, and it has a derisk mechanism of action by targeting the neuraminidase enzyme. And third, we're very excited about VIR-1949, which is a potential therapeutic T cell vaccine that builds on our human cytomegalovirus vaccine vector platform and target pre-cancerous HPV lesions. But I do want to say and stress that, of course, the first 2 candidates, 7229 and 2981, we are planning to execute with a partner given the scale of development necessary.
Your next question comes from the line of Gena Wang with Barclays.
This is Yi on Gena. So first of all, for Phil, best wishes for your next journey. And for Marianne, with Phil's departure and now you have focus on infectious disease, oncology, and immunology, what do you think will be the ideal candidate for your next CMO? And for your HDV, could you share your data expectation that you're going to share in the second quarter? And also, did you hear some initial regulatory feedback on the approval path? And lastly, for your earlier stage pipeline, how do you select the lead antibody candidates and what will drive those decisions?
Thank you very much, Gena. I will start with your first question related to a successor to Phil and what we are looking for in the next CMO. First of all, what is going to be really critical is for someone to have a proven track record in advancing therapies really through Phase III and having experience bringing therapeutics all the way to market. Needless to say, we have already initiated a search for a successor. And I must say also, since the news has gone out this week, we have received a flood of inquiries. But obviously, we will be very selective in what the profile of that candidate needs to be. We're also looking for someone who has a really in-depth understanding of the evolving regulatory landscape, deep insights in how to use data and big data for insights into clinical development. So there's a number of things here that need to come together. And as Phil pointed out, we have a very talented leadership team here in our clinical group. So we are also looking for someone who can lead such a team of very talented developers for success, especially focused on our hepatitis B and hepatitis delta programs. Now switching to your second question, Gena, I understood that was related to hepatitis delta and what data we are expecting in the second quarter. So I will ask Phil to give you more color on that.
Yes. Thank you, Marianne. So with regard to the data in Q2 around hepatitis delta, to step back first, as we shared both at the conference earlier this year as well as the AASLD, what we showed was data on 6 patients. And that data, we think, is quite transformative, but it is only 6 patients. So what we're looking for in Q2 is really to answer 3 questions. The first is, what happens when we dose more patients with our combination therapy, will we be able to repeat that type of data? #2, what will happen when we dose patients who have compensated cirrhosis, and 3, what will happen with the long-term durability of those initial 6 patients? So I think we're excited and looking forward to that data. I think you also asked a question about regulatory feedback. And I just wanted to reiterate what we have said earlier this year, which is that the next step will be to take that data if positive and put it in front of regulators in the third quarter in an attempt to discuss a path to registration. So that's sort of the path as we see it coming from here on out.
Yes. And we're not -- related to your third question, which was related to our early-stage pipeline, I think that's still in answering question, as Paul already laid out. We really have 3 candidates that can enter the clinic for in the next 12 months to 24 months. It's VIR-7229, VIR-2981, VIR-1949. And so each of those are really progressing very well, and we will be providing more data and informational timing during the course of this year.
Your next question comes from the line of Roanna Ruiz with Leerink Partners.
This is Nik Gasic on for Roanna. Just first on HDV. Could you provide a little more color around how large the market opportunity is in HDV currently? And also, could you discuss what a possible accelerated approval pathway could look like for tobevibart and elebsiran in HDV? And then I have a quick follow-up.
Let me maybe begin with reminding everyone that delta is the most severe form of hepatitis. And as you know, I mean people that are co-infected with delta progress to liver cancer 4x faster and 2x faster to death. So there's a tremendous unmet need here. I think it's the first point that I would like to make. And then looking at the prevalence, we estimate that there are about 100,000 patients in the United States and over 200,000 patients in the EU5 alone. And we do believe that this is likely a growth underestimate given that diagnosis is really not optimal at this moment in time. So you can assume that even if you were to access only a modest portion of this population and if you think about pricing that would reflect really the clinical benefit of a potential transformative therapy, taking that together, we are confident that you would already be looking at a very large and significant market opportunity. And obviously, we believe that the combination regimen that we have of tobevibart and elebsiran represents the potential of such a transformative therapy based on the data that we have shown thus far and of course, in a limited set of patients, but still very impressive data.
And with regard to an accelerated approval, if I'll take that one, Marianne.
Yes, please go ahead, Phil.
I think that as we often like to say in the development space, data changes everything and more data is always better. So I think that when we think about accelerated approval, or a rapid path to approval, what's in our favor is the fact that the unmet need, as Marianne has described, is undoubtable, right? There are hundreds of thousands of patients worldwide who would benefit from a chronic suppressive therapy for delta. And the fact that there is a lack of good options for many of them is also clear. So I think that, that all favors a rapid path in the setting of the right data. On the other hand, of course, our program is still early, and we're really waiting for our chance to get in front of regulators and our anticipated goalpost is Q3. And by then, we'll have a subset of data, which we've talked about previously, which we will share in Q2, which is 30 participants through week 12 and 20 participants through week 24 in our 2 regimens that we are exploring. And to remind you of that, that is the combination of tobevibart and elebsiran every 4 weeks versus just tobevibart every 2 weeks.
Thank you, Phil. Josh, did you have an additional question?
Yes. Sorry, this is Nik. Just wanted to follow up on HDV. Curious what signals you're hoping to see in the upcoming additional data from SOLSTICE and maybe what are some of the gating factors for moving this program into the Phase III? I guess like what would regulators really want to see in this data to support maybe going into the Phase III?
Sorry, Josh, are you referring to hepatitis B or delta?
I can take that one, Marianne. So I think -- thank you, Nik. So as I said earlier, I think it's really a question of getting in front of them with the -- so to answer your first question, there are 3 things we're looking for in the data. The first thing we're looking for in the data is does it repeat what we've seen with the original 6 patients? Second, what will happen when we dose patients who have compensated cirrhosis, and third, how durable it will be? I think that all of that data in terms of numbers will matter to the regulators and be able to reassure them that 6 patients -- the data on the 6 patients is not sort of a one-off, but actually something that really is as transformative as we believe it to be. So in terms of gating factors, I can only speak more generally, but once we have the opportunity to sit down with regulators in the third quarter, which is our anticipated goal, we'll be able to discuss with them, one, what the comparator arm would be; 2, what the size of the safety database needs to be; and 3, what kind of particular endpoints they would be most interested in that they believe would be demonstrative of transformative efficacy. So that's what we're going to be talking about. And then, of course, it's a matter of execution. I will say that, of course, we are planning for success in terms of both trial planning and regulatory interactions. And so we'll continue to do so because this is our most important clinical program and it's first out of the gate.
Yes. So just to maybe add and repeat that, already in the second quarter, we will be seeing 12-week data on 30 participants across the 2 regimens and then 20 participants for the 24 weeks. So that will give us already a lot of insights into the data.
Your next question comes from the line of Eva Privitera with TD Cowen.
Just a couple from us. On the HDV SOLSTICE trial, there was some ALT elevations seen with 2218 monotherapy, which came down with the combo. What's the mechanism for that? And what are the kinetics for achieving ALT normalization with suppressing viral RNA?
I'll take that one, Eva. So thank you for the question. I think that it's important to remember that the number of patients dosed with 2218 or elebsiran monotherapy is small, but we did see a couple of patients who did show an ALT signal. This replicates what we've seen with other siRNA therapy in hepatitis delta patients in a larger study, known as REEF-D, almost 70% of patients did see an ALT signal in patients receiving siRNA who had delta. But it's important to remember that when they gave an siRNA and when we've given our siRNA to hepatitis B patients, we have not seen this. So it does not appear to be something intrinsic to the drug, but some interaction between the drug and the hepatitis delta virus itself. So with that in mind, when you look at the data closely, it seems to suggest that on treatment with an siRNA, there is a paradoxical increase in HDV RNA after some duration of therapy. If that is the driving force behind the ALT signal, then it would make sense that driving that HDV RNA down further and preventing the infection of new hepatocytes would be key. And that's exactly what we're intending to do with our monoclonal antibody tobevibart, or VIR-3434. So the idea there is that any kind of fluctuation you would see in HDV RNA that might be driving an ALT signal would be prevented by having a neutralizing antibody like tobevibart. And so far, of course, the numbers are very small, of the 6 patients, we did not see any ALT elevations unlike the 70% of ALT elevation seen with siRNA monotherapy by another company. And so that's the thing we'll be looking forward to seeing as to what will happen when we dose these next 30 patients in the combination arm. So to summarize, the mechanism is still not clear, but there are early signals that it is due to the changes in the HDV RNA and there are early signals that 3434 or tobevibart can solve for that.
And another question on the HBV MARCH trial. You've previously shown that high antibody titers were predictive of sustained surface antigen loss. Do you expect to present antibody titer data at the 48 weeks end of treatment data in Q4?
So we have not yet guided to whether or not we will be sharing anti-HBs data along with the actual surface antigen loss, but we will be doing everything we can to provide as much clarity on our results at that time. So stay tuned.
Your next question comes from the line of Patrick Trucchio with H.C. Wainwright.
Congrats on all the progress. I have a couple of follow-up questions on SOLSTICE program. So just first, a clarification around the next data readouts. I'm wondering, first, should we expect the next update or when should we expect the next update on the patient cohort data reported at AASLD 2023, specifically the proportion who achieved ALT normalization, which I understand can take longer than achieving HDV RNA below lower limit of quantification as well as assessment of the durability of the virologic response? I'm wondering if that update may be part of this data that's coming in the second quarter or if maybe we would see the next cut there later this year in the fourth quarter. And then secondly, I'm wondering how we should think about the 44% of patients having compensated cirrhosis. Is this a proportion of patients with compensated cirrhosis consistent with what would be expected in real-world setting for patients with chronic HDV or how did you decide on that proportion? And then how should we think about these key endpoints like HBV RNA and normalization of ALT and as well the safety profile of the combination regimen in these patients with or without compensated cirrhosis?
All right. Well, Patrick, you're going to challenge my memory to make sure I remember all those questions. But let me start with the compensated cirrhosis question, and move on to the endpoint question and then finish with the durability question. So with regard to the compensated cirrhosis, it is, the epidemiology on hepatitis delta patients and how many of them have compensated cirrhosis is not entirely clear, but it is certainly a large proportion, probably somewhere between 30% to 50%. That was not the reason why we ended up at 44%. As you can imagine, when you're enrolling in this trial, we actually targeted around 50%, but you want to move also the trial enrollment as fast as possible. So right now, as I said in my prepared remarks, there's about 90% of the trial has been enrolled. That's why it's at 44%. I expect that number to go up because the only patients left in screening are all cirrhotic -- are all patients with cirrhosis. So we'll probably get 44% or maybe even 48% or somewhere around there. But what we really wanted to do was to get at least 10 to 15 patients with cirrhosis per cohort to be able to understand what the kinetics of viral decline is and ensure that there's no obvious safety signals. So that's how the 44% is just sort of the result of where we are in enrollment. With regard to the endpoints, I think it is important to remember that how we think about the endpoints is both historical as well as forward-looking. So there are a few possibilities for the primary endpoint that I want to share with you. The first, of course, is the endpoint that was used by bulevirtide, which was a combined virologic and biochemical endpoint. Specifically, that virologic endpoint allowed either a 2-log decline or getting to the limit of detection virologically and then also requiring ALT normalization. But I think when you speak to physicians, providers, and virologists, what they'll say is, they're not sure what a 2-log decline actually means. For example, if you go from 7 logs to 5 logs, you still have 100,000 copies of the virus in your blood per milliliter. And that obviously does not sound good. So we think as well as clinicians that getting to undetectable or below the limit of quantification would be strongly preferred. So then you can imagine a forward-looking endpoint, and I think this is the likely possibility of requiring patients to get to the lower limit of detection or the lower limit of qualification and ALT normalization without allowing patients to achieve just a 2-log decline in viral load. That would set a gold standard that I think we could definitely show a meaningful benefit on because it would require everyone to at the first instance, get to the lower limit of quantification where we would have a possible advantage over the standard of care. So I think those are some of the color I can provide for you around the primary endpoint. And then as far as your third question around durability, I would say that we have actually not guided to the follow-up on those 6 patients. But as we're going to have nearly 20 participants at 24 weeks, we'll be able to share their kinetics of both viral load decline and ALT changes, which I think will be informative. And we will look into sharing the 6 patient follow-up data as well in a future guidance call.
Your next question comes from the line of Eric Joseph with JPMorgan.
[Technical Difficulty] or to have the program, what do you expect to be the ultimate treatment duration or kind of paradigm here with the tobe/ele combination? Do you expect it to be finite therapy or chronic treatment? And if it is the former finite interval, I guess how much sort of off-treatment observation do you think you would sort of hope to have going into discussions with regulators?
So Eric, sorry, the beginning of your question was a little bit difficult to understand.
Is the -- in hepatitis delta, is the expected treatment algorithm going to be finite therapy or chronic therapy? If it's finite therapy, how much treatment follow-up do you think you would have going into initial discussions with regulators?
Thank you, Eric. Yes, what we are aiming to achieve here is a chronic treatment regimen for hepatitis delta patients. Do you want to comment further, Phil?
Yes. So with that -- in that framework of chronic viral suppressive therapy, as we currently know it, for example, for other viruses like HIV and hepatitis B, there is no need for a follow-up therapy as there is not a finite duration therapy. I think one of the questions that can come up is, are we going to be following these patients for 24 or 48 weeks? And of course, we'll follow for both but the question will be with regulators, is there any precedent for earlier data and there is with bulevirtide, and that's another discussion we'll be having with regulators.
Anything you can share about the tolerability profile in -- among patients receiving the upfront combo regimen in the Q2 cohort?
Yes. So I think that certainly, we're looking forward to the Q2 data from our SOLSTICE trial and the patients who have started what we call de novo or immediately on combination therapy without lead-in. And what we've said is that we'll have about 30 participants between the 2 arms actually, between mono and combo at week 12 and 20 participants at week 24. So you divide that into 15 of the patients will be through week 12 and 10 participants through week 24 in the combination arm, and we're looking forward to being able to share that data in Q2.
Your next question comes from the line of Alec Stranahan with Bank of America.
Just a couple from us. You've mentioned in the past about expanding beyond infectious disease into say, immunology, et cetera. Are there any areas of immunology or targets such as say in 20 that you see as particularly interesting? And would you say within your core competencies regarding antibodies in siRNA or would you be more maybe technology-agnostic? And one question on how you plan to allocate your $1.6 billion roughly in cash. Maybe if you could break down percent spend on pipeline development, discovery, clinical trials, and investments in your AI and machine learning capabilities versus, say, dry powder for investing in external innovation, that'd be great.
Yes. I mean since its inception, Vir has really been a leader in immunology and of course, initially focused only on really targeting infectious diseases. But what we're really doing now is broadening that vision to, we call it powering the immune system, which is really giving patients the ability to power their immune system to either fight infection, fight cancer. And we do it in 2 fundamental ways through our powerful antibody therapeutics, which we generate through AI engineering. And then secondly, through generating unique T cell responses in vivo with our T cell-based viral vector platform. So the type of expansion that we're looking at, Alec, is really rooted in our strength as a company and where we have deep expertise, and that is in immunology, virology, and oncology. So we are looking at expanding into viral-associated diseases and then indeed immune targeting such as in cancer. And we will be sharing more information on our early programs in that area towards the end of the year when we will be holding an R&D Day. So with that, I'll maybe ask Sung to comment on our cash position and breakdown.
Yes. So Alec, thanks for that question. So with regard to our $1.6 billion in cash and cash equivalents, the majority of this will be dedicated to the ongoing clinical stage programs of hepatitis delta and hepatitis B. Of course, we have to sort of take this 1 year at a time as we have important data readouts in both of those programs this year. So obviously, we're rooting for success and that would dictate the capital allocation for subsequent years. But when you look at the immediate year 2024, we've provided guidance of R&D and SG&A expense combined. It's fair to think that more than half of that is dedicated to the development programs, primarily hepatitis delta and hepatitis B. There's amounts that will be invested to in our antibody platform. And as Marianne said in her prepared comments, we'll be very opportunistic about tapping into external innovation where it makes sense, but we'll be very prudent about that.
Your next question comes from the line of Joseph Stringer with Needham & Company.
Just a follow-up question on the delta readout in the second quarter. I just wanted to focus on the cirrhotic patients. Clearly, safety will be key, but do you anticipate that it would be more challenging to show a treatment effect in these patients relative to the non-cirrhotic patients? And how important from a commercial perspective would it be to show a clinical effect in these patients?
Thank you, Joey. I'll take that one if that's all right, Marianne. So in terms of cirrhosis, first off, I want to just provide a little clarity. We need to distinguish between patients who have what we call compensated cirrhosis and patients who have decompensated cirrhosis. Decompensated patients are obviously much more fragile and have a high 1-year mortality. So I think really, we need to -- we are focused on getting our drugs to patients as fast as possible or our drug candidates to patients as fast as possible. And that will include both compensated cirrhosis -- patients with compensated cirrhosis as well as those who are non-cirrhotic. We think that the -- as I said earlier, I think the compensated cirrhosis patients are approximately 30% to 50% of patients currently living with hepatitis delta. That number is obviously a little bit biased simply because those with compensated cirrhosis are more likely to present to a clinician. In terms of whether or not we expect the efficacy to be any different, I don't see any biological reason why we would expect a different result in cirrhotic patients compared to non-cirrhotic patients from a viral efficacy perspective. From a safety perspective, there's also not any reason to believe that they would be a significant safety signal. I do want to point out that we did do a hepatic impairment study in decompensated Child-Pugh Turcotte B patients or CPT B patients, and there was no evidence to date of a clinically significant change in PK or safety in that small study. So I think that there's, again, no reason to believe there's a concern, but that's why we do the clinical trials. And that's why we're looking forward to seeing what that data looks like in Q2.
Your next question comes from the line of Mike Ulz with Morgan Stanley.
Maybe just a follow-up for Sung. Thanks for giving clarity on how to think about OpEx spend this year. But maybe if I could push you a little bit. As we think about moving beyond 2024, maybe give us a sense of how to think about it trend-wise. Should we be thinking more flattish spend or should we be thinking sort of an upward trend? I know a lot will depend on kind of what happens with some of these readouts here. But any comments there would be helpful.
So kind of going back to what I said before, the bulk of the capital allocation, if we continue to demonstrate successful data with hepatitis delta and hepatitis B programs as we have over the last 18 months, that would garner the lion's share of capital allocation. So moving beyond 2024, we would expect hepatitis delta and hepatitis B studies to continue to ramp up. They're still in Phase II. As we get into Phase III, both of these studies would peak, but that peak would not be reached in 2025. The peak would most likely be reached somewhere in the second half of 2026 to 2027 time frame as things progress. But again, we have to really take this 1 year at a time because it's dependent on data. I might just add though, when you look at the guidance for 2024, we put a lot of information out there to help you think about not only GAAP operating expenses, excluding cost of sales, but also how to think about cash utilization from our guidance range because we've provided you with important non-cash items. So both on an OpEx basis and cash utilization basis, we would be significantly lower than 2023, which we would consider a peak year driven by the flu study and related manufacturing. And I'll just round out my statement by saying, on an operating expense basis, when you exclude the non-cash significant items, we would expect to be down 18% year-over-year, which is significant. And again, from all the cost optimization efforts undertaken last year and coming off the peak of the flu investment last year as well.
There are no further questions at this time. I will now turn the call over to Marianne De Backer for closing remarks.
Okay. Thank you, operator. So to close, we are eagerly anticipating on multiple data catalysts that really in our mind holds a great promise for patient impact and for value creation. And we are well on our way, as we said, powering the immune system to transform lives. Thank you all for joining us today. And operator, you may end the call. Thank you.
This concludes today's call. You may now disconnect.