Executive Summary / Key Takeaways

• Vir Biotechnology has undergone a significant strategic transformation, pivoting from a broad infectious disease focus, heavily reliant on COVID-19 revenue, to a streamlined, dual-platform company centered on high-value hepatitis programs and a newly acquired, differentiated oncology pipeline of masked T-cell engagers.
• The hepatitis delta (HDV) program, featuring the tobevibart and elebsiran combination, is advancing into Phase 3 registrational trials (ECLIPSE program) following promising Phase 2 data, targeting a rare disease market with significant unmet need and potential for accelerated approval pathways.
• The acquisition of the PRO-XTEN masking platform and three clinical-stage dual-masked T-cell engagers (VIR-5818, VIR-5500, VIR-5525) establishes a compelling oncology franchise, leveraging Vir's existing immunology and antibody engineering expertise to address toxicity limitations of conventional T-cell engagers.
• Early Phase 1 data for VIR-5818 (HER2) and VIR-5500 (PSMA) show encouraging signs of clinical activity and favorable safety profiles, supporting the platform's potential to enable higher dosing and expand the therapeutic index.
• A strong cash position of over $1 billion, projected to fund operations into mid-2027, provides the financial flexibility to advance the prioritized pipeline through multiple near-term value-driving clinical milestones, while the hepatitis B (HBV) program's future is contingent on securing a partner.

A Strategic Metamorphosis: Reshaping Vir Biotechnology

Vir Biotechnology, founded in 2016 with a mission to harness the power of the immune system against serious infectious diseases, has recently undergone a profound strategic transformation. Initially building capabilities in antibody discovery and various therapeutic modalities, the company gained significant prominence and generated substantial revenue through its collaboration with GSK (GSK) on sotrovimab for COVID-19. This period, marked by net income in 2021 and 2022, demonstrated Vir's ability to rapidly develop and commercialize a critical therapy during a global health crisis. However, the unpredictable nature of the pandemic and the evolution of viral variants led to the eventual revocation of sotrovimab's U.S. Emergency Use Authorization in late 2024, signaling the end of meaningful revenue from this source.

This shift, coupled with setbacks in other programs like the Phase 2 influenza candidate, prompted a strategic realignment. Beginning in late 2023 and accelerating into 2024, Vir implemented significant cost-saving measures, including workforce reductions, site closures, and the phasing out of programs in influenza, COVID-19, and a T-cell-based viral vector platform. These actions were designed to streamline operations and sharpen the company's focus on its most promising assets.

The culmination of this strategic pivot was the exclusive worldwide license agreement with Sanofi (SNY), which closed in September 2024. This landmark deal brought Vir three clinical-stage dual-masked T-cell engagers and, crucially, exclusive rights to the PRO-XTEN protease-cleavable masking platform for oncology and infectious diseases. This acquisition marked Vir's decisive entry into the oncology space, leveraging its foundational expertise in immunology, antibody engineering, and data science to build a complementary pipeline. The Sanofi transaction, combined with the internal restructuring, has effectively reshaped Vir into a dual-platform company, concentrating its resources on advancing its hepatitis delta program towards registration and exploring the potential of its newly acquired masked T-cell engager pipeline in oncology.

The competitive landscape in which Vir operates is intense and rapidly evolving, characterized by established pharmaceutical giants, innovative biotech firms, and academic institutions. In infectious diseases, particularly hepatitis, Vir competes with major players like Gilead Sciences (GILD), which holds a dominant position in antiviral markets with established distribution networks and deep regulatory expertise. While Gilead's scale and profitability (e.g., 2023 ROIC estimated at 12-15%) far exceed Vir's (TTM ROIC currently negative due to losses), Vir aims to differentiate its hepatitis therapies through potentially superior efficacy profiles. In oncology, the T-cell engager space is crowded, with various companies developing masked and unmasked TCEs targeting validated antigens. Vir's PRO-XTEN platform competes with other masking technologies (e.g., Janux (JANX), CytomX (CTMX)), seeking to offer a differentiated safety and efficacy profile that addresses the inherent toxicity limitations of this modality. The success of Vir's strategic pivot hinges on its ability to translate its technological advantages into clinical differentiation and navigate the competitive pressures in both its core hepatitis franchise and its nascent oncology pipeline.

Technological Edge: Unmasking Potential with PRO-XTEN

At the heart of Vir's expanded strategy lies its technological differentiation, particularly the newly acquired PRO-XTEN protease-cleavable masking platform. This platform represents a critical component of the investment thesis, offering a potential solution to the significant toxicity challenges that have historically limited the therapeutic window and widespread adoption of potent immune modulators like T-cell engagers and cytokines.

The PRO-XTEN technology employs a universal, protease-releasable XTEN mask. In the context of T-cell engagers, this platform utilizes a dual masking approach, shielding both the tumor-associated antigen binding domain and the CD3 T-cell engaging domain. This dual masking, combined with a protease-cleavable linker, is designed to keep the molecule inactive in systemic circulation and healthy tissues. The "so what" for investors is that this masking aims to minimize off-target toxicity and systemic side effects, such as cytokine release syndrome (CRS), which are common limitations of unmasked TCEs.

The platform's key differentiator lies in its selective activation mechanism. The tumor microenvironment is known to have elevated levels of specific proteases. When the masked molecule reaches this environment, these proteases cleave the linkers, releasing the active, unmasked T-cell engager specifically at the disease site. Preclinical data supporting this mechanism are compelling: in vitro studies with a masked HER2 T-cell engager demonstrated a 10,000-fold shift in cytotoxicity compared to the unmasked molecule, indicating potent masking in the absence of tumor proteases. In vivo studies showed that the masked HER2 TCE induced robust tumor regression, equivalent to the unmasked molecule, confirming effective unmasking within the tumor. Furthermore, analysis showed preferential accumulation of the active, unmasked drug only in the tumor tissue, while the masked, inactive form was present more broadly.

Beyond selective activation, the PRO-XTEN platform offers other tangible benefits aimed at maximizing the therapeutic index. The XTEN mask provides extended pharmacokinetics to the masked molecule, allowing it to circulate longer and reach the tumor. Crucially, any unmasked molecules that escape the tumor microenvironment have a short half-life, leading to rapid systemic clearance and further reducing off-target exposure. Preclinical data highlighted this advantage: in nonhuman primate studies, the masked HER2 T-cell engager achieved a maximum tolerated dose (MTD) of 43 mg/kg, compared to just 0.2 mg/kg for the unmasked molecule. This represents a greater than 100-fold improvement in therapeutic index. Notably, the unmasked HER2 TCE was lethal at 0.3 mg/kg due to CRS, underscoring the safety benefits of the masking technology. Early clinical data from VIR-5818 and VIR-5500 appear to support this preclinical promise, showing minimal cytokine release syndrome (CRS) and allowing dose escalation without mandatory prophylactic steroids, differentiating them from many other TCEs in development.

The platform's "plug-and-play" nature, utilizing universal tunable masks, allows the same masking technology to be applied across multiple therapeutic candidates targeting different antigens. This universality is expected to expedite the development process by saving time and resources compared to developing unique masks for each molecule. Moreover, the XTEN mask component has been clinically validated in ALTUVIIIO, an approved hemophilia drug, providing a degree of de-risking for the masking technology itself.

Vir plans to leverage its existing capabilities, including its antibody discovery platform, protein engineering expertise, and dAIsY (data AI structure and antibody AI engine), to enhance the PRO-XTEN platform. These synergies are expected to enable the rapid generation and optimization of novel antibodies for new tumor targets and fine-tune the properties of masked molecules for improved stability, pharmacokinetics, and tumor-specific activation. This technological foundation, particularly the potential for a wider therapeutic window and reduced toxicity, forms a key competitive moat for Vir's oncology pipeline against both unmasked TCEs and other masked approaches that may not employ dual masking or offer the same pharmacokinetic profile.

Pipeline in Focus: Hepatitis and Oncology Catalysts

Vir's pipeline is now strategically focused on two core areas: advancing its hepatitis programs and developing its masked T-cell engagers in oncology. This streamlined approach aims to concentrate resources on assets with the highest potential for near-term value creation.

The hepatitis delta (HDV) program, featuring the combination of tobevibart (an Fc-engineered monoclonal antibody) and elebsiran (a small interfering RNA), is a cornerstone of Vir's near-term strategy. HDV is a severe infectious disease with a significant unmet need; the company estimates approximately 7 million active viremic HDV RNA positive patients globally, including about 61,000 in the United States and 113,000 in the EU+UK. This market exhibits characteristics of a rare disease, with severe outcomes, a concentrated prescriber base (hepatologists/liver specialists), and potential for value-based pricing. Current treatment options are limited, particularly in the U.S. where none are approved, and the only EU-approved therapy requires daily subcutaneous injections.

The combination therapy targets both HDV and its necessary co-factor, Hepatitis B surface antigen (HBsAg), through distinct mechanisms. Promising Phase 2 SOLSTICE data demonstrated impressive virologic responses, with 41% of patients achieving HDV RNA target not detected (TND) at Week 24 in the de novo combination arm, increasing to 64% at Week 36, and 80% at Week 60 in the rollover cohort. The combination also showed significant HBsAg declines (approximately a 3-log reduction), much greater than monotherapy. These results, coupled with a favorable safety profile, support the advancement into Phase 3.

The registrational program, ECLIPSE, was initiated with the first patient enrolled in ECLIPSE-1 in March 2025. ECLIPSE-1 is a randomized (2:1) study enrolling 120 participants in regions where bulevirtide access is limited (including the U.S.), evaluating the combination versus deferred treatment with a primary endpoint of HDV RNA TND and ALT normalization at Week 48. ECLIPSE-2 will evaluate switching to the combination in patients not virally suppressed on bulevirtide, with a 24-week primary endpoint of HDV RNA TND. These two studies are designed to form the basis of regulatory submissions in the U.S. and Europe. The program has received significant regulatory support, including U.S. FDA Breakthrough Therapy and Fast Track designations, and EMA PRIME and Orphan Drug designations, which may accelerate development and review. Vir is aiming to complete enrollment in ECLIPSE-1 by the end of 2025, an aggressive target. The recent restated Alnylam (ALNY) agreement, where Alnylam opted out of profit sharing for elebsiran, clarifies the financial structure (milestone/royalty) and provides Vir flexibility for potential ex-U.S. partnering of the HDV program.

The hepatitis B (HBV) program, also utilizing tobevibart and elebsiran, aims for a functional cure (sustained loss of HBsAg and HBV DNA after finite treatment). The Phase 2 MARCH Part B study is evaluating doublet and triplet regimens (with PEG-IFNα). Functional cure data from the 24-week post-treatment follow-up of this study is anticipated at the EASL Congress in May 2025. Management has previously indicated target functional cure rates of 30% for the interferon-containing regimen and 20% for the regimen excluding interferon, based on KOL feedback. Best responses have been observed in patients with low HBsAg at baseline. However, future advancement of the HBV program is contingent on securing a worldwide development and commercialization partner outside China. This strategic decision allows Vir to focus internal resources on HDV and the oncology pipeline while seeking to unlock value from the HBV asset through collaboration.

The newly acquired oncology pipeline, powered by the PRO-XTEN platform, represents Vir's significant expansion into cancer therapeutics. The clinical-stage assets include:

• VIR-5818 (HER2): A dual-masked HER2-targeted TCE in Phase 1 development (monotherapy and combination with pembrolizumab). Early Phase 1 data presented in January 2025 showed encouraging activity, including tumor shrinkage and a 33% confirmed partial response rate in HER2-positive colorectal cancer patients at doses ≥ 400 µg/kg, with one response lasting over 18 months. Notably, responses were observed in microsatellite stable (MSS) CRC, a population typically resistant to immunotherapy, suggesting the molecule's potential to overcome immunological barriers. VIR-5818 is the only dual-masked HER2 TCE in clinical trials.
• VIR-5500 (PSMA): A dual-masked PSMA-targeted TCE in Phase 1 dose escalation (monotherapy). Early Phase 1 data (January 2025) in metastatic castration-resistant prostate cancer (mCRPC) showed impressive PSA responses, with 100% of patients at doses > 120 µg/kg experiencing PSA declines and 58% achieving a PSA50 response, all without prophylactic steroids and with minimal CRS. This favorable safety profile and the potential for Q3-week dosing (supported by an 8-10 day half-life) differentiate VIR-5500 from other PSMA-targeted therapies. VIR-5500 is the only dual-masked PSMA TCE in clinical trials.
• VIR-5525 (EGFR): A dual-masked EGFR-targeted TCE with IND clearance, targeted to begin Phase 1 in the second quarter of 2025. This asset targets validated indications like non-small cell lung cancer, colorectal cancer, and head and neck squamous cell carcinoma, where significant unmet need remains. The dual masking approach is particularly relevant for EGFR due to its broad expression in healthy tissues, offering the potential for a differentiated safety profile compared to conventional EGFR-targeted approaches.

Vir is continuing dose escalation for VIR-5818 and VIR-5500 to optimize dosing and efficacy, with plans to share more mature data at higher doses, including comparative data between weekly and every 3-week dosing, once available. The preclinical pipeline includes multiple undisclosed PRO-XTEN dual-masked TCEs (7 targets progressing), leveraging Vir's internal capabilities for future pipeline expansion.

Financial Strength and Outlook

Vir maintains a strong financial position, providing the necessary resources to execute its refined strategy and advance its prioritized pipeline. As of March 31, 2025, the company held $1.02 billion in cash, cash equivalents, and investments, along with $94.4 million in restricted cash and cash equivalents (including the $75 million escrow for the VIR-5525 milestone). This robust cash balance is projected to fund operations into mid-2027, based on the company's current operating plan.

Recent financial performance reflects the ongoing strategic transition and investment priorities. For the three months ended March 31, 2025, total revenues were $3.032 million, a significant decrease from $56.376 million in the same period of 2024. This decline was primarily driven by lower contract revenue due to the recognition of $51.7 million in deferred revenue in Q1 2024 related to a GSK option expiration, and lower grant revenue from BARDA and the Gates Foundation. Collaboration revenue was nominal in both periods, reflecting the minimal ongoing revenue from sotrovimab.

Operating expenses saw a modest increase, totaling $142.579 million in Q1 2025 compared to $136.457 million in Q1 2024. Research and development (R&D) expenses increased to $118.645 million from $100.125 million, primarily due to higher license, collaboration, and contingent consideration expenses (including a $30 million payment to Alnylam and a milestone payment related to the HDV Phase 3 initiation) and increased clinical costs for the HDV Phase 3 and newer oncology programs. These increases were partially offset by cost savings from headcount reductions, site closures (St. Louis and Portland), and de-prioritized programs. Selling, general, and administrative (SG&A) expenses decreased significantly to $23.944 million from $36.321 million, reflecting ongoing cost-saving initiatives.

The net loss for Q1 2025 was $120.965 million, compared to a net loss of $65.276 million in Q1 2024. This wider loss was largely a function of the substantial decrease in revenue, partially offset by controlled operating expense growth and increased other income (driven by a change in fair value of equity investments). The accumulated deficit stood at $880.7 million as of March 31, 2025.

Cash flow from operations improved, with net cash used in operating activities decreasing to $78.116 million in Q1 2025 from $109.390 million in Q1 2024, primarily due to the realized cost savings. Cash provided by investing activities increased significantly to $126.818 million from $28.420 million, driven by higher net proceeds from maturities and sales of investments.

The projected cash runway into mid-2027 is a critical factor for investors, providing visibility and funding for key upcoming milestones without immediate reliance on external financing, although the company retains access to an ATM facility for potential future needs. The financial strategy is focused on disciplined capital allocation to advance the prioritized pipeline, including accelerating HDV Phase 3 enrollment, continuing TCE dose escalation, and initiating the VIR-5525 study. The decision to seek a partner for the HBV program is a key assumption underpinning the cash runway, limiting internal spend on that asset.

Risks and Challenges

Despite the strategic pivot and promising pipeline, Vir faces significant risks inherent in the biotechnology sector. The most prominent risks include:

• Clinical Development Risk: The success of the HDV Phase 3 program and the masked TCE Phase 1/future studies is uncertain. Positive early-stage data does not guarantee success in larger, later-stage trials. Delays, unexpected safety findings, or failure to meet endpoints could significantly impact the investment thesis.
• Regulatory Risk: While the HDV program has received multiple expedited designations, these do not guarantee faster approval or approval at all. Regulatory authorities may require additional studies or impose restrictions.
• Competition: Both the hepatitis and oncology markets are highly competitive. For HDV, while current options are limited, competitors are also developing therapies. In oncology, the masked TCE space is emerging but includes other players, and Vir's assets compete with established and emerging modalities targeting HER2, PSMA, and EGFR. Demonstrating a differentiated profile in terms of safety, efficacy, and convenience will be crucial.
• Need for Future Funding: Although the current cash runway extends into mid-2027, significant capital will be required to complete late-stage clinical trials, prepare for potential commercialization, and fund future research. The ability to raise additional capital on favorable terms is not guaranteed and could result in dilution.
• Reliance on Third Parties: Vir relies heavily on contract manufacturing organizations (CDMOs) for drug supply and contract research organizations (CROs) for clinical trial execution. Delays, quality issues, or capacity constraints from these third parties could negatively impact development timelines and costs.
• Intellectual Property Risk: Obtaining and maintaining robust patent protection for its technologies and product candidates is critical. Challenges to patents or inability to protect trade secrets could erode competitive advantages.
• Market Acceptance: Even if approved, market acceptance of Vir's therapies by physicians, patients, and payors is not guaranteed and depends on factors like perceived value, pricing, and reimbursement.

These risks could impact the company's ability to achieve its strategic objectives and realize the full potential of its pipeline.

Conclusion

Vir Biotechnology has successfully executed a strategic transformation, moving beyond its reliance on COVID-19 revenue to focus on a streamlined, high-potential pipeline in hepatitis and oncology. The initiation of the Phase 3 ECLIPSE program for chronic hepatitis delta, supported by compelling Phase 2 data and significant regulatory designations, positions the company to address a rare disease with high unmet need and represents a key near-term value inflection point. Simultaneously, the acquisition of the PRO-XTEN masking platform and clinical-stage T-cell engagers establishes a promising oncology franchise, leveraging Vir's core expertise to potentially overcome the toxicity limitations of conventional TCEs. Early clinical data from the masked TCEs are encouraging, providing initial validation for the platform's differentiated approach.

Supported by a strong cash position projected to fund operations into mid-2027, Vir is well-resourced to advance these prioritized programs. While the future of the hepatitis B program is contingent on securing a partner, the focused investment in HDV and the masked TCE pipeline, coupled with ongoing cost-saving initiatives, underpins the company's financial resilience. The investment thesis hinges on the successful clinical execution of the ECLIPSE program and the ability of the PRO-XTEN platform to translate preclinical promise into clinical differentiation and meaningful efficacy in the masked TCE pipeline. Investors should closely monitor upcoming clinical data readouts, particularly the HBV functional cure data at EASL and future updates from the TCE dose escalation studies, as these will be critical indicators of Vir's ability to deliver on its transformed strategy and drive value creation in the years ahead.