Vir Biotechnology, Inc. (VIR)

Item 7. 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 audited consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Unless the context requires otherwise, references in this Annual Report on Form 10-K to the “Company”, “VirBio,” “we,” “our” and “us” refer to Vir Biotechnology, Inc. and its consolidated subsidiaries.

Our discussion and analysis below are focused on our financial results and liquidity and capital resources for the years ended December 31, 2024 and 2023, including year-over-year comparisons of our financial performance and condition for these years. Discussion and analysis of the year ended December 31, 2022 specifically, as well as the year-over-year comparison of our financial results and liquidity and capital resources for the years ended December 31, 2023 and 2022, are located in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 26, 2024. For a detailed discussion on our business environment, please read Item 1. Business, included in this Annual Report on Form 10-K. For additional information on the risks that could negatively impact our business, please read Item 1A. Risk Factors, included in this Annual Report on Form 10-K.

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 clinical-stage portfolio includes infectious disease programs for CHD and CHB infections and multiple dual-masked TCEs across validated targets in solid tumor indications. We also has a preclinical portfolio of programs across a range of infectious diseases and oncologic malignancies.

Our clinical development pipeline consists of investigational therapies targeting HDV and various solid tumors. In hepatitis delta, our phase 3 ECLIPSE registrational program evaluating the combination of tobevibart and elebsiran is scheduled to commence in the first half of 2025. Should the ECLIPSE program yield positive results that support regulatory approval and subsequent commercial launch, we believe the combination has the potential to be a new standard of care for hepatitis delta patients, for whom approved treatment options are either limited or unavailable. In oncology, we are advancing phase 1 clinical studies for our dual-masked TCEs: VIR-5818 in patients with HER2-expressing tumors and VIR-5500 in patients with PSMA-expressing mCRPC. We are also advancing our third TCE program,VIR-5525, in patients with EGFR-expressing tumors, with phase 1 clinical studies expected to begin in the first half of 2025. We are also developing therapeutic candidates in hepatitis B, HIV cure, and other solid tumors, leveraging our expertise and platform strengths.

We have an industry-leading management team and board of directors with significant immunology and infectious diseases and oncology 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 cancer, we are committed to developing transformative therapies that can make a meaningful difference in patients’ lives.

Significant Developments

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

Pipeline Programs

Chronic Hepatitis Delta (CHD)

•ECLIPSE Phase 3 registrational clinical program in CHD is advancing with the first patient in expected during the first half of 2025.

•Positive data from the SOLSTICE Phase 2 clinical trial were presented in at the AASLD The Liver Meeting® in November 2024. This data demonstrated the potential of the first-of-its-kind investigational combination to address a critical unmet need in CHD, showing rapid and sustained virologic suppression, using the most stringent measure of zero detectable hepatitis delta RNA in the blood or target not detected (TND defined as HDV RNA 0 IU/mL), and no treatment-related SAEs.

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•Tobevibart and elebsiran combination therapy has received multiple regulatory designations potentially supporting an expedited development and review process and recognizing the significant unmet need in CHD: U.S. FDA Breakthrough Therapy designation, U.S. FDA Fast Track designation, European PRIME designation and European Orphan Drug designation.

Solid Tumors

•In January 2025, we presented encouraging early safety and efficacy data in ongoing Phase 1 dose escalation trials for its dual-masked TCE programs.

◦VIR-5818, the only dual-masked HER2-targeting TCE in clinical trials, showed tumor shrinkage across various tumor types in 50% (10/20) of participants receiving doses ≥400 µg/kg, with cPRs in 33% (2/6) of participants with HER2-positive CRC.

◦VIR-5500, the only dual-masked PSMA-targeting TCE in clinical trials, showed PSA declines in 100% (12/12) of mCRPC patients after an initial dose ≥120 µg/kg. PSA50 response was confirmed in 58% (7/12) of participants.

◦Both clinical candidates have shown promising safety profiles, with MTD not yet reached, no dose-limiting CRS observed and no CRS greater than grade 2.

•Initial clinical data demonstrate PRO-XTEN™ masking technology’s potential to minimize systemic toxicity while enabling selective killing of cancer cells in the tumor microenvironment, minimizing CRS and expanding the therapeutic index compared to traditional therapeutic approaches.

•We are advancing VIR-5818 and VIR-5500 through ongoing Phase 1 dose escalation studies, aiming to further optimize dosing and efficacy. Additionally, we plan to initiate a Phase 1 study of VIR-5525, a dual-masked EGFR-targeting TCE, in the first quarter of 2025, evaluating its potential across a number of solid tumor indications.

Chronic Hepatitis B (CHB)

•We anticipate functional cure data from the 24-week follow-up of the MARCH Part B Phase 2 study in the second quarter of 2025.

•Positive end-of-treatment results of the MARCH Part B Phase 2 trial evaluating tobevibart and elebsiran in combination with PEG-IFNα or tobevibart and elebsiran alone were presented at AASLD The Liver Meeting® in November 2024. The data demonstrated compelling HBsAg loss and anti-HBs development at the end of treatment.

•Future advancement in CHB by us will be contingent on securing a worldwide development and commercialization partner outside of the China Territory to best enable further development in this area of high unmet need.

Preclinical Pipeline Candidates

•We are advancing multiple undisclosed dual-masked TCEs targeting clinically validated targets with potential applications across a variety of solid tumors. These preclinical candidates leverage the PRO-XTEN™ masking technology with novel TCEs discovered and engineered using our antibody discovery platform and our proprietary dAIsY™ AI engine.

•We will continue to advance our HIV broadly neutralizing antibody program for HIV cure in collaboration with the Gates Foundation.

Corporate Update

•In January 2025, we announced Maninder Hora, Ph.D. will assume the role of Executive Vice President, Chief Technical Operations in February 2025, on departure of our current Chief Technology Officer, Aine Hanley, Ph.D.

•In September 2024, we announced the appointment of Jason O’Byrne as Executive Vice President and Chief Financial Officer, effective October 2, 2024.

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•In August 2024 we announced an exclusive worldwide license to use of the proprietary PRO-XTEN™ universal masking technology for oncology and infectious disease and to three clinical-stage masked TCEs with potential applications in a range of cancers. The agreement became effective on September 9, 2024.

◦Certain former employees of Sanofi joined us following the closing of the agreement.

•In August 2024 we announced the phase-out of clinical programs in influenza, COVID-19, and its T-cell based viral vector platform. The Company is seeking partners to advance these clinical programs through further development. Additionally, the Company announced a workforce reduction of approximately 25%, or approximately 140 employees.

•In May 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.

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

•In April 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.

Financial Overview

We were incorporated in April 2016 and commenced principal operations later that year. To date, we have focused primarily on organizing and staffing our company, business planning, raising capital, identifying, acquiring, developing and in-licensing our technology platforms and product candidates, and conducting preclinical studies and clinical trials.

We have financed our operations primarily through sales of our common stock from our initial public offering, subsequent follow-on offering, and payments received under our grant and collaboration agreements. As of December 31, 2024, we had $1.1 billion in cash, cash equivalents, and investments. Based upon our current operating plan, we believe that the $1.1 billion will enable us to fund our operations for at least the next 12 months. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional financing to fund our long-term operations sooner than planned. In addition, as of December 31, 2024, we had $95.7 million in restricted cash and cash equivalents, which includes the $75.0 million subject to VIR-5525 achieving “first in human dosing” by 2026. See the section titled “Liquidity, Capital Resources and Capital Requirements—Funding Requirements and Conditions” below for additional information.

Our net loss was $522.0 million for the year ended December 31, 2024, compared to net loss of $615.1 million for the year ended December 31, 2023 and net income of $515.8 million for the year ended December 31, 2022, respectively. As of December 31, 2024, we had accumulated deficit of $759.8 million. Although we recorded net income for the years ended December 31, 2022 and 2021, we have otherwise incurred net losses since inception and may continue to incur net losses in the foreseeable future.

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, conducting preclinical studies and clinical trials, and to a lesser extent, selling, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. In particular, we expect our expenses and losses to increase over time as we continue our research and development efforts, advance our product candidates through preclinical and clinical development, seek regulatory approval, and begin to prepare for commercialization. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials expenditures and our expenditures on other research and development activities.

We manufacture product candidates for three therapeutic modalities: mAbs, masked TCEs and siRNA. We have established our own internal process, analytical and pharmaceutical development, manufacturing, supply chain and quality organizations that work with our selected CDMOs, to develop, manufacture, test and supply our early- and late-stage product candidates developed with our proprietary and external technology platforms. Contract development and

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manufacturing of our antibody, TCE and siRNA product candidates is supported at our San Francisco, California, corporate headquarters for process, analytical and formulation development, small-scale non-GMP manufacturing for preclinical studies and selected quality control testing. Our headquarters also conducts cell line development for our antibody and TCE product candidates.

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 the section titled “Business—Our Collaboration, License and Grant Agreements” and Note 5 Grant Agreements and Note 6 Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Components of Operating Results

Revenues

Other than sotrovimab, we have not obtained regulatory approval for our 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. 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 the foreseeable future. In December 2024, the FDA revoked EUA granted to sotrovimab in May 2021. 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. We do not expect meaningful collaboration revenue in the future from the sale of sotrovimab for the treatment of COVID-19.

Our revenues consist of the following:

Collaboration revenue includes recognition of our profit-share from the sales of sotrovimab pursuant to the 2020 GSK Agreement. As the lead party for all manufacturing and commercialization activities, GSK incurs all of the manufacturing, sales and marketing expenses and is the principal on sales transactions with third parties. As the agent, we recognize our contractual share (72.5%) of the profit-sharing amounts 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. 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.

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.

In 2025, 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.

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

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License revenue from a related party is comprised of revenue related to Brii Bio’s exercise of its option to obtain exclusive rights to develop and commercialize compounds arising from tobevibart in China Territory recognized in the year ended December 31, 2022.

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, CROs, 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 and clinical studies 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.

In addition, under our license agreement with Sanofi, we may incur additional clinical, and regulatory milestone payments based on the development progress of certain oncology programs. We may also be required to pay commercial milestone payments and royalties in the event of a successful product launch and our receipt of commercial revenues. Therefore, we are unable to predict the timing or the final cost to complete our clinical programs or validation of our manufacturing and supply processes and delays may occur due to numerous factors. Factors that could cause or contribute to delays or additional costs include, but are not limited to, those discussed in the “Risk Factors” section of this Annual Report.

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 and clinical studies, regulatory developments, our ongoing assessments as to each product candidate’s commercial potential.. We cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured (if at all) and to what degree such arrangements will affect our development plans and capital requirements.

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

•whether a collaborator is paying for some or all of the costs;

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•per patient trial costs;

•the number of studies required for approval;

•the number of sites included in the studies;

•enrollment and retention of patients in studies 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 studies;

•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 studies 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. In the long-term as we advance our research and development programs toward potential commercialization, we expect our selling, general, and administrative expenses to increase in absolute dollars to support commercialization activities and related expansion in research and development activities.

Restructuring, long-lived asset impairment and related charges

Restructuring, long-lived asset impairment and related charges consist primarily of charges incurred in connection with our cost saving initiatives implemented during the second half of 2024 and 2023, respectively, 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) Income, Net

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

Benefit from (Provision for) Income Taxes

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

Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest consists of net loss attributable to our noncontrolling interest in Encentrio Therapeutics, Inc., our subsidiary, during the three months ended March 31, 2023.

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Results of Operations

Comparison of Years Ended December 31, 2024 and 2023

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

Revenues

The decrease in collaboration revenue for the year ended December 31, 2024 compared to the same period in 2023 was due to lower revenues from the release of sotrovimab profit-sharing amount previously constrained under our 2020 GSK Agreement.

The increase in contract revenue for the year ended December 31, 2024 compared to the same period in 2023 was primarily due to the recognition of $51.7 million revenue from the deferred revenue during the first quarter of 2024 when 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 year ended December 31, 2024 compared to the same period in 2023 was primarily due to lower revenue recognized in accordance with our agreement with BARDA and to a lesser extent, lower revenue recognized from the Gates Foundation. In August 2024, we announced a strategic realignment that included phasing out certain research programs, which impacted certain programs funded by Gates Foundation grants. We continue to advance our HIV broadly neutralizing antibody program for HIV cure in collaboration with the Gates Foundation. We terminated our agreement with BARDA on December 31, 2024.

Cost of Revenue

The decrease in cost of revenue for the year ended December 31, 2024 compared to the same period in 2023 was due to lower third-party royalties owed based on the lower collaboration revenue under the 2020 GSK Agreement.

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Research and Development Expenses

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

The decrease in research and development expenses for the year ended December 31, 2024 compared to the same period in 2023 was primarily due to lower contract manufacturing costs and clinical costs associated with the wind down of our Phase 2 PENINSULA trial evaluating VIR-2482, lower contract manufacturing costs associated with elebsiran used in the our CHD and CHB clinical trials, and lower personnel costs associated with the reduction in the headcount resulting from the cost saving initiatives implemented in 2023 and 2024, partially offset by the increase in licenses, collaboration and contingent consideration expenses primarily due to a portion of the upfront payment made to Sanofi allocated to in-process research and development and expensed.

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expenses for the year ended December 31, 2024 compared to the same period in 2023 was primarily due to savings realized through headcount reductions and the closing of our St. Louis, Missouri and Portland, Oregon sites, as part of our cost saving initiatives implemented in 2023 and 2024.

Restructuring, long-lived assets impairment and related charges

The increase in restructuring, long-lived assets impairment and related charges for the year ended December 31, 2024 compared to the same period in 2023 was primarily due to the right-of-use asset and leasehold improvement impairment charges related to closing our facilities in St. Louis, Missouri and Portland Oregon in 2024, which was previously announced on December 13, 2023, and severance charges incurred related to our strategic restructuring announcement in August 2024.

Change in Fair Value of Equity Investments

Our equity 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 year ended December 31, 2024, we recognized an unrealized loss of $5.5 million due to the change in fair value, compared to an unrealized loss of $21.9 million for the same period in 2023.

Interest Income

The decrease in interest income was primarily due to lower balances of cash, cash equivalents, and investments for the year ended December 31, 2024 compared to the same period in 2023.

Other Expense, Net

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

Benefit from Income Taxes

The benefit from income taxes for the year ended December 31, 2024 was nomimal. The benefit from income taxes for the year ended December 31, 2023 was primarily due to a pre-tax loss and our ability to carry back the research and development credit to 2022.

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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 December 31, 2024, we had $1.1 billion in cash, cash equivalents, and investments. In addition, as of December 31, 2024, we had $95.7 million in restricted cash and cash equivalents, which included the $75.0 million subject to VIR-5525 achieving “first in human dosing” by 2026. In November 2023, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC, as sales agent (“TD Cowen”), pursuant to which the Company may from time to time offer and sell shares of its common stock for an aggregate offering price of up to $300.0 million, through or to TD Cowen, acting as sales agent or principal. The shares will be offered and sold under the 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 December 31, 2024, no shares have been issued 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.

In December 2024, the FDA revoked EUA granted to sotrovimab in May 2021. 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 December 31, 2024 as noted above will enable us to fund our operations for at least the next 12 months from the filing date of this Annual Report on Form 10-K.

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 research and 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 and Switzerland with contractual lease periods expiring between 2033 and 2035. As of December 31, 2024, we expect to make total lease payments of $123.5 million through 2035.

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 the sections titled “Business—Our Collaboration, License and Grant Agreements,” as well as Note 6 Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. For information related to our future commitments under our facilities and manufacturing agreements, see Note 9 Leases and

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Note 10 Commitments and Contingencies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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 years presented (in thousands):

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 decreased in 2024 compared to 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 the $103.7 million upfront payment made under our license agreement with Sanofi. Cash used in operating activities decreased in 2023 compared to 2022 primarily due to lower cash received for the sales of sotrovimab and higher cash payments made to GSK related to profit-sharing amount constrained as part of the 2020 GSK Agreement.

Investing Activities

Cash provided by investing activities during 2024 was primarily due to $1.7 billion in proceeds received from investments that matured or sold during the year, partially offset by purchases of investments of $1.2 billion.

Cash provided by investing activities during 2023 was primarily due to $2.2 billion in proceeds received from investments that matured or sold during the period, partially offset by purchases of investments of $2.0 billion and property and equipment of $21.6 million.

Financing Activities

Cash provided by financing activities during 2024 was primarily due to of proceeds from the issuance of common stock under our employee stock purchase plan of $3.8 million.

Cash provided by financing activities during 2023 was primarily due to of proceeds from the issuance of common stock under our employee stock purchase plan of $4.3 million and exercises of stock options of $3.5 million.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our 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. The critical accounting policies, estimates and judgments that we believe to have the most significant impacts on our consolidated financial statements are described below. For more details on our critical accounting policies, refer to Note 2 Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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Asset Acquisitions

We make certain judgments to determine whether acquisitions and other similar transactions should be accounted for as acquisitions of assets or business combinations using the guidance in Accounting Standard Codification, or ASC, Topic 805, Business Combinations, by first applying a screen test to assess if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If the screen test is met, the transaction is accounted for as an asset acquisition. If the screen test is not met, further assessment is required to determine whether we have acquired inputs and a substantive process that together significantly contribute to the ability to create outputs, which would meet the definition of a business.

If determined to be an asset acquisition, we account the transaction using the cost accumulation and allocation method. Under this method, the cost of the acquisition, including direct acquisition-related costs, is allocated to the assets acquired or liabilities assumed on a relative fair value basis. Goodwill is not recognized in an asset acquisition, and any difference between consideration transferred and the fair value of the net assets acquired is allocated to the certain identifiable assets acquired based on their relative fair values.

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration is paid or becomes payable (unless the contingent consideration payments are subject to guidance in ASC 480, Distinguishing Liabilities from Equity, or ASC 815, Derivatives and Hedging). Upon recognition of the contingent consideration payments, the amount is included in the cost of the acquired asset or group of assets.

Accrued R&D expenses

We expense all research and development costs in the periods in which they are incurred. Clinical development costs compose a significant component of research and development costs. We typically contract with third parties, including CROs and CDMOs to conduct and manage preclinical studies and clinical trials, research services, and clinical manufacturing services on our behalf. When billing terms under these contracts do not coincide with the timing of when the work is performed, we estimate our obligations for services provided but not yet billed as of the period end based on a number of factors that include, but are not limited to, our knowledge of the research and development programs and clinical manufacturing activities, the status of the programs and activities, invoicing to date, and the provisions in the contracts. We obtain information regarding unbilled services directly from outside service providers and perform procedures to support our estimates based on our internal understanding of the services provided to date. However, we may also be required to estimate these services based on information available to our internal clinical and manufacturing administrative staff if such information is not able to be obtained timely from our service providers. Accrued R&D expenses are included in accrued and other liabilities on the consolidated balance sheets. In the event that advance payments are made to a CRO, CDMO or other outside service providers, the payments are recorded within prepaid expenses and/or other current assets and other assets on the consolidated balance sheet and subsequently recognized as research and development expense when the associated services are performed. The status and timing of actual services performed may vary from our estimates, resulting in adjustments to expense in future periods. Changes in these estimates could materially affect our results of operations.

Contingent Consideration associated with a Business Combination

Contingent consideration related to a business combination are initially measured at their estimated fair values on the transaction date and subsequently remeasured each subsequent reporting period with changes recorded in the consolidated statement of operations.

The estimated fair value of the contingent consideration related to the Humabs acquisition is determined by calculating the probability-weighted clinical and regulatory milestone payments based on the assessment of the likelihood and estimated timing that certain milestones will be achieved, as well as by using a Monte Carlo simulation model that includes significant estimates and assumptions pertaining to commercialization events and sales targets. The estimated fair value uses certain significant unobservable inputs categorized within level 3 of the fair value hierarchy, including the probabilities of achieving clinical and regulatory approval of the development projects, the subsequent commercial success and discount rates.

Recent Accounting Pronouncements Not Yet Adopted

See Note 2 Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition or results of operations.

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Item 7. 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 audited consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Unless the context requires otherwise, references in this Annual Report on Form 10-K to the “Company”, “Vir,” “we,” “our” and “us” refer to Vir Biotechnology, Inc. and its consolidated subsidiaries.

Our discussion and analysis below are focused on our financial results and liquidity and capital resources for the years ended December 31, 2023 and 2022, including year-over-year comparisons of our financial performance and condition for these years. Discussion and analysis of the year ended December 31, 2021 specifically, as well as the year-over-year comparison of our financial performance and condition for the years ended December 31, 2022 and 2021, are located in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 28, 2023. For a detailed discussion on our business environment, please read Item 1. Business, included in this Annual Report on Form 10-K. For additional information on the risks that could negatively impact our business, please read Item 1A. Risk Factors, included in this Annual Report on Form 10-K.

Overview

We are an immunology company focused on combining cutting-edge technologies to treat and prevent serious infectious diseases and other serious conditions, including viral-associated diseases. At Vir, we have a bold vision – powering the immune system to transform lives. We aim to achieve this in two fundamental ways – first through developing powerful antibody therapeutics and second by generating unique T cell responses in vivo through our T cell-based viral vector platform. Our growth and pursuit of scientific innovation is fueled by our world-class leading monoclonal antibody (mAb) platform that has a proven track record and is further strengthened by our artificial intelligence-led mAb optimization and engineering capabilities.

Our current clinical development pipeline consists of product candidates targeting hepatitis delta virus (HDV), hepatitis B virus (HBV), and human immunodeficiency virus (HIV). The most advanced preclinical candidates in our pipeline include those targeting influenza A and B, coronavirus disease 2019 (COVID-19), respiratory syncytial virus (RSV) and human metapneumovirus (MPV), and human papillomavirus (HPV). We have assembled two technology platforms that modulate the immune system by exploiting critical observations of natural immune processes— a mAb discovery platform and a T cell-based viral vector platform. Additionally, Vir is evaluating a small interfering RNA (siRNA) through a collaboration with Alnylam in our hepatitis clinical trials. We have established our own internal process development, analytical development, manufacturing, supply chain and quality capabilities and work with contract development and manufacturing organizations (CDMOs) to develop, manufacture, test and supply our early- and late-stage product candidates.

We have an industry-leading management team and board of directors with significant immunology and infectious diseases experience, including a proven track record of progressing product candidates from early-stage research through clinical development, and worldwide regulatory approval and commercialization experience. Given the global impact of infectious diseases and other serious conditions, we are committed to providing broad access to our therapeutics.

Significant Developments

Following is a summary of significant developments affecting our business that have occurred and that we have reported since the filing of our Annual Report on Form 10-K for the year ended December 31, 2022.

Pipeline Programs

Chronic Hepatitis Delta (CHD)

•In November 2023, we presented initial SOLSTICE data from a small subset of participants in a late-breaker presentation at the American Association for the Study of Liver Diseases (AASLD) The Liver Meeting.

◦After 12 weeks of combination treatment with tobevibart and elebsiran, 5 out of 6 participants achieved undetectable HDV RNA and 6 out of 6 were below the lower limit of quantification. This is the fastest decline in HDV RNA observed to date.

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•The SOLSTICE trial is ongoing with enrollment currently ahead of schedule for completion in the first quarter of 2024 due to the high level of physician and patient interest. This portion of the SOLSTICE trial is investigating the combination of tobevibart and elebsiran given every 4 weeks in one cohort and tobevibart monotherapy given every 2 weeks in another cohort. Of the 30 participants anticipated to be enrolled in each cohort, approximately 44% have compensated cirrhosis.

◦We expect to report data on a subset of participants in the second quarter of 2024: 12-week treatment data for 15 participants per regimen as well as 24-week data for 10 participants per regimen. Complete 24-week treatment data for 30 participants per regimen is expected in the fourth quarter of 2024.

•In June 2023, we presented preclinical in vivo and in vitro data demonstrating the antiviral properties of elebsiran and tobevibart against hepatitis delta virus at the EASL Congress. These data further support the clinical development of these investigational medicines as a treatment for the chronic suppression of hepatitis delta virus.

Chronic Hepatitis B (CHB)

•In November 2023 we presented new MARCH Part B data at AASLD The Liver Meeting.

◦The data demonstrated an approximately three-fold higher response rate when adding tobevibart to a regimen of elebsiran with or without peginterferon after 24 weeks of treatment (15.0% for tobevibart + elebsiran + peginterferon alpha and 14.3% for tobevibart + elebsiran).

◦The MARCH Part B trial is ongoing with 48-week end of treatment data expected in the fourth quarter of 2024.

•The Phase 2 PREVAIL platform trial and its THRIVE/STRIVE sub-protocols are ongoing as of the date of this Annual Report on Form 10-K. The platform is evaluating combinations of tobevibart, elebsiran and/or peginterferon alpha in two CHB patient populations with the potential to evaluate other populations in the future. Initial data from this platform trial are expected in the first half of 2025.

HIV

•In September 2023, we announced the initiation of the Phase 1 trial of VIR-1388, an investigational novel T cell vaccine for the prevention of HIV. Our T cell platform utilizes human cytomegalovirus (HCMV) as a vector, which has the potential to induce high frequencies of antigen-specific, tissue-localizing effector memory T cells.

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

◦In December 2023, Nature Medicine recognized the Phase 1 trial of VIR-1388 as one of the “11 clinical trials that will shape medicine in 2024.”

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

•In May 2023 we reported safety and immunology data from the highest dose cohort 3 of the prototype Phase 1 trial of VIR-1111, an investigational HIV T cell vaccine based on HCMV. These data were consistent with the data from cohorts 1 and 2. Namely, no safety signals and no vector shedding or viremia were reported. In addition, no sustained HIV insert specific T cell responses were observed. The trial was funded in part by the BMGF.

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COVID-19

•In October 2023, we announced we were awarded approximately $50.0 million in new funding from the Biomedical Advanced Research and Development Authority (“BARDA”), part of the Administration for Strategic Preparedness and Response within the U.S. Department of Health and Human Services (“HHS”).

◦$40.0 million of the total funds is part of Project NextGen, the Biden administration's program to accelerate the development of next-generation COVID-19 vaccines and treatments, and will support the development through Phase 1 of VIR-7229, a next-generation COVID antibody that has been AI-engineered to have increased potency, breadth and resistance to viral escape compared to sotrovimab. It also supports developing alternative mAb delivery technologies, including RNA-delivered mAbs. We expect to initiate a Phase 1 clinical trial in 2024 and are exploring partner opportunities for post phase 1 development. The Phase 1 trial is expected to be completed in the second half of 2025.

◦$10.0 million of the total funds will support the discovery of new mAbs against a second pathogen of pandemic potential in the context of further advancing alternative mAb delivery technologies. This effort is receiving support from BARDA’s Division of Chemical, Biological, Radiological and Nuclear Medical Countermeasures.

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

•In February 2023, we and GSK amended their existing agreement to reflect that:

◦We will continue to discover, develop and advance next-generation solutions for COVID-19 and other potential coronavirus outbreaks, independently or with other partners.

◦The companies will continue working together to ensure ongoing access to sotrovimab for patients around the world, where authorized, and to develop new therapies for other respiratory diseases.

Influenza A virus

•We and GSK mutually terminated the Influenza Program under the Definitive Collaboration Agreement dated May 18, 2021, effective on February 21, 2024, to reflect that Vir retains sole rights to continue advancing its investigational therapies for influenza independently or with other partners. We are actively pursuing external partnership opportunities.

•In July 2023, we reported that the Phase 2 Prevention of Illness Due to Influenza A (PENINSULA) trial evaluating VIR-2482 for the prevention of symptomatic influenza A illness did not meet primary or secondary efficacy endpoints

•The full analysis of data from the Phase 2 PENINSULA trial is expected in the second quarter of 2024 in a scientific publication. Initial post-hoc analyses have yielded the following conclusions:

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

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

Preclinical Pipeline Candidates

•We are continuing to advance next-generation antibodies using our proprietary platform, which leverages dAIsY™, an AI engine, allowing us to bring high-quality drug candidates to the clinic more efficiently.

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

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

◦VIR-8190, an investigational mAb against RSV and MPV.

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

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Corporate Update

•In December of 2023, we announced strategic imperatives to focus its capital allocation on programs with the highest potential for patient impact and value creation, which include:

◦R&D facilities in St. Louis, Missouri and Portland, Oregon will be closed in 2024. Research activities will continue at our sites in San Francisco, California and Bellinzona, Switzerland.

◦Approximately 12% or 75 positions will be eliminated, which includes reductions from our discontinuation of its small molecule group which was initiated in the third quarter of 2023. The reductions will be substantially complete by the first quarter of 2024.

•In July 2023, we made the decision to increase focus on our proprietary antibody platform and discontinue our innate immunity small molecule platform.

Leadership Update

•In October 2023, we announced the appointment of Jennifer Towne, Ph.D., as Executive Vice President and Chief Scientific Officer, effective November 6, 2023. Dr. Towne joins us from The Janssen Pharmaceutical Companies of Johnson & Johnson, where she spent nine years holding immunology research leadership roles of increasing responsibility within Research and Development. Prior to Janssen, Dr. Towne held a variety of scientific roles during her 13 years at Amgen. During the course of her career, Dr. Towne led the development of 16 drug candidates from preclinical research to IND and early clinical development.

•In June 2023, Sasha Damouni Ellis joined us as Executive Vice President and Chief Corporate Affairs Officer. Previously, she was Senior Vice President, Corporate Affairs and Investor Relations of Marinus Pharmaceuticals.

•In May 2023, Jeff Calcagno, M.D., joined us as Executive Vice President and Chief Business Officer. He joined us from Johnson & Johnson (J&J), where he spent more than 12 years holding leadership roles of increasing responsibility within all three divisions of J&J Innovation (JJI), including as Global Transactions Lead for Infectious Diseases & Vaccines and as Head of JLABS Bay Area.

•In April 2023, Marianne De Backer, M.Sc., Ph.D., MBA, joined us as Chief Executive Officer (CEO) and member of the Board of Directors. Dr. De Backer has more than two decades of broad international experience, including a strong track record in global expansion, innovation technology licensing, and mergers and acquisitions. Prior to Vir, Dr. De Backer was Executive Vice President, Head of Pharmaceuticals Strategy, Business Development and Licensing/Open Innovation, and Member of the Executive Committee for Bayer Pharmaceuticals.

•In April 2023, George Scangos, Ph.D., retired from his position as CEO at Vir. He continues to provide strategic counsel to Vir as a member of the Board of Directors.

•In March 2023, Sung Lee, previously the Chief Financial Officer (CFO) and Management Board member of MorphoSys AG, became Vir’s Executive Vice President and CFO.

Financial Overview

We were incorporated in April 2016 and commenced principal operations later that year. To date, we have focused primarily on organizing and staffing our company, business planning, raising capital, identifying, acquiring, developing and in-licensing our technology platforms and product candidates, and conducting preclinical studies and clinical trials.

We have financed our operations primarily through sales of our common stock from our initial public offering, subsequent follow-on offering and convertible preferred securities, and payments received under our grant and collaboration agreements. As of December 31, 2023, we had $1.63 billion in cash, cash equivalents, and investments. Based upon our current operating plan, we believe that the $1.63 billion will enable us to fund our operations for at least the next 12 months. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional financing to fund our long-term operations sooner than planned. See the section titled “Liquidity, Capital Resources and Capital Requirements—Funding Requirements and Conditions” below for additional information.

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Our net loss was $615.1 million for the year ended December 31, 2023, compared to net income of $515.8 million and $528.6 million for the years ended December 31, 2022 and December 31, 2021, respectively. As of December 31, 2023, we had accumulated deficit of $237.8 million. Although we recorded net income for the years ended December 31, 2022 and 2021, we have otherwise incurred net losses since inception and may continue to incur net losses in the foreseeable future.

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, conducting preclinical studies and clinical trials, and to a lesser extent, selling, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. In particular, we expect our expenses and losses to increase over time as we continue our research and development efforts, advance our product candidates through preclinical and clinical development, seek regulatory approval, and begin to prepare for commercialization. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials expenditures and our expenditures on other research and development activities.

We manufacture product candidates for three therapeutic modalities: mAbs, T cells and siRNA. We have established our own internal process development, manufacturing, supply chain and quality capabilities organizations that work with our selected CDMOs to develop, manufacture, test and supply our early- and late-stage product candidates developed with our proprietary and external technology platforms. Contract development and manufacturing of our antibody product candidates is supported by our San Francisco, California, laboratory for cell line development, process, analytical and formulation development, small-scale non-GMP manufacturing for preclinical studies and selected quality control testing. For our HCMV product candidates, our in-house capabilities for early-stage process development and HCMV research viral seed stock production will be transferred to a CDMO upon closure of our Portland, Oregon laboratory in 2024.

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 the section titled “Business—Our Collaboration, License and Grant Agreements” and Note 6 — Grant Agreements and Note 7 — Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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 U.S. Food and Drug Administration, or FDA, for sotrovimab, the FDA has excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants. With this EUA revision, sotrovimab is not currently authorized for use in any U.S. region. 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.

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Our revenues consist of the following:

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 Omicron subvariants. 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.

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

License revenue from a related party is comprised of revenue related to Brii Bio’s exercise of its option to obtain exclusive rights to develop and commercialize compounds arising from tobevibart in mainland China, Hong Kong, Macau and Taiwan recognized in the year ended December 31, 2022.

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.

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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 the 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.

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;

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•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.

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) Income, Net

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

Benefit from (Provision for) Income Taxes

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

Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest consists of net loss attributable to our noncontrolling interest in Encentrio Therapeutics, Inc., our subsidiary, during the three months ended March 31, 2023.

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Results of Operations

Comparison of Years Ended December 31, 2023 and 2022

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

Revenues

The decrease in collaboration revenue for the year ended December 31, 2023 compared to the same period in 2022 was due to lower profit-sharing amounts under the 2020 GSK Agreement, which was attributable to lower sales of sotrovimab as a result of the decision by the FDA in April 2022 to exclude the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants, as further described above under “Components of Operating Results—Revenues”. Collaboration revenue for the year ended December 31, 2023 consisted of $1.5 million in profit-sharing amount from the sale of sotrovimab and the release of $35.7 million profit-sharing amount previously constrained. Our release of the profit-sharing constraint and recognition of collaboration revenue was primarily driven by favorable changes in excess manufacturing commitments of sotrovimab.

The decrease in contract revenue for the year ended December 31, 2023 compared to the same period in 2022 was primarily due to the recognition of $39.8 million from deferred revenue in the third quarter of 2022 related to GSK’s selection of RSV as its first pathogen under the Additional Programs of the 2021 GSK Agreement.

The decrease in license revenue from a related party for the year ended December 31, 2023 compared to the same period in 2022 was due to Brii Bio Parent’s exercise of its option to obtain exclusive rights to develop and commercialize compounds and products arising from tobevibart in mainland China, Hong Kong, Macau and Taiwan.

The increase in grant revenue for the year ended December 31, 2023 compared to the same period in 2022 was primarily due to higher revenue recognized under our agreement with BARDA supporting the Company’s Phase 2 PENINSULA trial of VIR-2482 and, to lesser extent, higher revenue recognized related to grants received from BMGF.

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Cost of Revenue

The decrease in cost of revenue for the year ended December 31, 2023 compared to the same period in 2022 was due to lower third-party royalties owed based on the lower 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 years presented (in thousands):

The increase in research and development expenses for the year ended December 31, 2023 compared to the same period in 2022 was primarily due to the following factors:

•the increase in contract manufacturing expenses was primarily related to studies involving VIR-2482 and, to a lesser extent, elebsiran, tobevibart, and VIR-7229;

•the increase in personnel-related expenses was primarily attributable to supporting the advancement of our clinical programs and severance and other personnel related costs incurred in connection with strategic steps to reduce operating expenses adopted in 2023; and

•the increase in other research and development expenses was primarily attributable to non-cash impairment charges associated with certain non-prioritized in-process research and development assets, facilities related costs including depreciation, other costs due to an increase in our personnel, and non-cash impairment charges associated with the discontinuation of the Company’s small molecule platform.

partially offset by

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

Selling, General and Administrative Expenses

The increase in selling, general and administrative expenses for the year ended December 31, 2023 compared to the same period in 2022 was primarily due to higher personnel related costs to support the growth of the Company.

Change in Fair Value of Equity Investments

Our equity 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 year ended December 31, 2023, we recognized an unrealized loss of $21.9 million due to the change in fair value, compared to an unrealized loss of $111.1 million for the same period in 2022.

Interest Income

The increase in interest income was primarily due to higher interest rates as well as higher balances of short-term and long-term investments for the year ended December 31, 2023 compared to the same period in 2022.

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Other (Expense) Income, Net

The decrease in other (expense) income, net for the year ended December 31, 2023 compared to the same period in 2022 was primarily due to higher foreign exchange measurement losses related to the accrued liability recognized in connection with the profit-sharing amount constrained under the 2020 GSK Agreement and lower income associated with the decrease in the fair value of the contingent consideration obligation from our acquisition of TomegaVax.

Benefit from (Provision for) Income Taxes

The benefit from income taxes for the year ended December 31, 2023 was primarily due to a pre-tax loss and our ability to carry back the research and development credit to 2022. The provision for income taxes for the year ended December 31, 2022 was primarily due to taxable income for 2022 attributable to significant collaboration revenue from the sales of sotrovimab.

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 December 31, 2023, we had $1.63 billion in cash, cash equivalents, and investments. As of December 31, 2023, we had accumulated deficits of $237.8 million. In November 2023, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC, as sales agent (“TD Cowen”), pursuant to which the Company may from time to time offer and sell shares of its common stock for an aggregate offering price of up to $300.0 million, through or to TD Cowen, acting as sales agent or principal. The shares will be offered and sold under the 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 December 31, 2023, no shares have been issued 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 December 31, 2023 as noted above will enable us to fund our operations for at least the next 12 months from the filing date of this Annual Report on Form 10-K.

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.

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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 2033. As of December 31, 2023, we expect to make total lease payments of $156.4 million through 2033.

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 the sections titled “Business—Our Collaboration, License and Grant Agreements,” as well as Note 4—Acquisitions and Note 7—Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. For information related to our future commitments under our facilities and manufacturing agreements, see Note 10—Commitments and Contingencies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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):

Operating Activities

Cash used in operating activities after adjustments for non-cash items decreased in 2023 primarily due to lower collaboration revenue from the sales of sotrovimab as part of the 2020 GSK Agreement and payments made to GSK related to previously reserved excess sotrovimab supply and binding reserved manufacturing capacity not utilized. The non-cash charges of $140.9 million primarily consisted of $111.3 million for stock-based compensation expense and an unrealized loss of $21.9 million on our equity investment.

Cash provided by operating activities after adjustments for non-cash items increased in 2022 primarily due to higher collaboration revenue from the sales of sotrovimab as part of the 2020 GSK Agreement, partially offset by $93.8 million for payment for contingent consideration in excess of acquisition date fair value. The non-cash charges of $575.9 million primarily consisted of $369.5 million for change in estimated constraint on profit-sharing amount, an unrealized loss of $111.1 million on our equity investment, and $102.1 million for stock-based compensation expense.

Investing Activities

Cash provided by investing activities during 2023 was primarily due to $2.2 billion in proceeds received from investments that matured or sold during the period, partially offset by purchases of investments of $2.0 billion and property and equipment of $21.6 million.

Cash used in investing activities during 2022 was primarily due to purchases of investments of $1.5 billion and property and equipment of $68.0 million, partially offset by $351.5 million in proceeds received from investments that matured during the period.

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Financing Activities

Cash provided by financing activities during 2023 was primarily due to of proceeds from the issuance of common stock under our employee stock purchase plan of $4.3 million and exercises of stock options of $3.5 million.

Cash provided by financing activities in 2022 was primarily due to proceeds from the issuance of our common stock to BMGF of $28.5 million under the stock purchase agreement, from exercises of stock options of $4.5 million, and from issuance of common stock under our employee stock purchase plan of $3.2 million, partially offset by $1.2 million for payment of contingent consideration.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our 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. The critical accounting policies, estimates and judgments that we believe to have the most significant impacts on our consolidated financial statements are described below. For more detail on our critical accounting policies, refer to Note 2—Summary of Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Accrued R&D expenses

We expense all research and development costs in the periods in which they are incurred. Clinical development costs compose a significant component of research and development costs. We typically contract with third parties, including contract research organizations (“CROs”) and CDMOs to conduct and manage preclinical studies and clinical trials, research services, and clinical manufacturing services on our behalf. When billing terms under these contracts do not coincide with the timing of when the work is performed, we estimate our obligations for services provided but not yet billed as of the period end based on a number of factors that include, but are not limited to, our knowledge of the research and development programs and clinical manufacturing activities, the status of the programs and activities, invoicing to date, and the provisions in the contracts. We obtain information regarding unbilled services directly from outside service providers and perform procedures to support our estimates based on our internal understanding of the services provided to date. However, we may also be required to estimate these services based on information available to our internal clinical and manufacturing administrative staff if such information is not able to be obtained timely from our service providers. Accrued R&D expenses are included in accrued and other liabilities on the consolidated balance sheets. In the event that advance payments are made to a CRO, CDMO or other outside service providers, the payments are recorded within prepaid expenses and other current assets and other assets on the consolidated balance sheet and subsequently recognized as research and development expense when the associated services are performed. The status and timing of actual services performed may vary from our estimates, resulting in adjustments to expense in future periods. Changes in these estimates could materially affect our results of operations.

Contingent Consideration

Contingent consideration related to business combinations is considered to be Level 3 instruments that are initially measured at their estimated fair values on the transaction date and subsequently remeasured with changes recorded in the consolidated statement of operations each subsequent reporting period.

The estimated fair value of the contingent consideration related to the Humabs acquisition is determined by calculating the probability-weighted clinical and regulatory milestone payments based on the assessment of the likelihood and estimated timing that certain milestones will be achieved, as well as use of a Monte Carlo simulation model that includes significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs are the probabilities of achieving clinical and regulatory approval of the development projects and the subsequent commercial success and discount rates.

Recent Accounting Pronouncements Not Yet Adopted

See Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition or results of operations.

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Item 7. 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 audited consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Unless the context requires otherwise, references in this Annual Report on Form 10-K to the “Company”, “Vir,” “we,” “us” and “our” refer to Vir Biotechnology, Inc. and its consolidated subsidiaries.

Our discussion and analysis below are focused on our financial results and liquidity and capital resources for the years ended December 31, 2022 and 2021, including year-over-year comparisons of our financial performance and condition for these years. Discussion and analysis of the year ended December 31, 2020 specifically, as well as the year-over-year comparison of our financial performance and condition for the years ended December 31, 2021 and 2020, are located in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022. For a detailed discussion on our business environment, please read Item 1. Business, included in this Annual Report on Form 10-K. For additional information on the risks that could negatively impact our business, please read Item 1A. Risk Factors, included in this Annual Report on Form 10-K.

Overview

We are a commercial-stage immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases. Infectious diseases are among the leading causes of death worldwide and can cause trillions of dollars of direct and indirect economic burden each year – as evidenced by the coronavirus disease 2019, or COVID-19, pandemic. We believe that now is the time to apply the recent and remarkable advances in immunology to combat current and prepare for future infectious diseases. Our approach begins with identifying the limitations of the immune system in combating a particular pathogen, the vulnerabilities of that pathogen and the reasons why previous approaches have failed. We then bring to bear powerful technologies that we believe, individually or in combination, will lead to effective therapies.

Our current pipeline consists of sotrovimab (previously VIR-7831; and where marketing authorization has been granted, marketed under the brand name Xevudy®) and other product candidates targeting hepatitis B virus, or HBV, hepatitis D virus, or HDV, influenza A virus, COVID-19, and human immunodeficiency virus, or HIV. We have assembled four technology platforms, focused on antibodies, T cells, innate immunity and small interfering ribonucleic acid, or siRNA, through internal development, collaborations and acquisitions. We have built an industry-leading team that has deep experience in immunology, infectious diseases, and product development and commercialization. Given the global impact of infectious diseases, we are committed to developing cost-effective treatments that can be delivered at scale.

HBV

VIR-2218 is an investigational HBV-targeting siRNA, and VIR-3434 is an investigational HBV-neutralizing mAb that incorporates Xencor’s Xtend and other Fc technologies.

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In November 2022, at the American Association for the Study of Liver Diseases, or AASLD, The Liver Meeting®, we presented new data from multiple ongoing trials evaluating the potential for VIR-2218 and VIR-3434 to achieve a functional cure for chronic HBV, as well as health outcomes research. Highlights included:

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Initial Phase 2 end-of-treatment data demonstrated that 30.8% of participants receiving 48 weeks of VIR-2218 plus IFN-α achieved hepatitis B surface antigen, or HBsAg seroclearance and each of those participants also achieved seroconversion, suggesting an improvement in those participants’ immune function (anti-HBs levels 10mIU/mL). No safety signals have been reported to date. Additional data are expected in the first half of 2023.

o
Initial end-of-treatment results from Part A of the Phase 2 Monoclonal Antibody siRNA Combination against Hepatitis B, or MARCH, trial demonstrated mean HBsAg reductions of ≥2.7 log10 IU/mL across all three cohorts. These data show that VIR-2218 and VIR-3434 are additive in reducing HBsAg. No safety signals have been reported to date. Additional data from Part A are expected in the first half of 2023. Initial data from Part B, evaluating VIR-2218 in combination with VIR-3434 for 24 and 48 weeks, and in triple combination with VIR-3434 and IFN-α for 24 and 48 weeks, are expected in the second half of 2023.

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Initiation of the Phase 2 PREVAIL platform trial and its THRIVE/STRIVE sub-protocols of VIR-3434 and/or VIR-2218 and/or IFN-α in viremic patients is expected in the first half of 2023. The THRIVE sub-protocol will evaluate inactive carriers defined as adults with chronic HBV that are HBeAg negative with HBV DNA ≤2000 IU/mL and ALT ≤ ULN. The STRIVE sub-protocol will evaluate immune active, treatment-naïve patients defined as adults with chronic HBV who have not received prior NRTIs, or IFN-α therapy and are HBeAg positive or negative with HBV DNA 2000 IU/mL, ALT ULN and ≤ 5× ULN. Initial data are expected in the first half of 2024.

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In February 2022, initial data from the Phase 2 trial led by Brii Biosciences evaluating VIR-2218 in combination with BRII-179, an investigational T cell vaccine, for the potential treatment of chronic HBV infection were presented at the Asian Pacific Association for the Study of the Liver. Although the combination of VIR-2218 and BRII-179 had greater anti-HBs responses and improved HBsAg-specific T-cell responses, comparable HBsAg reduction was observed in all cohorts at end of treatment (-1.7-1.8 log10 IU/mL). The combination of VIR-2218 and BRII-179 was generally well tolerated.

HDV

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Initial data from the Phase 2 SOLSTICE trial, which began in September 2022, evaluating VIR-2218 and VIR-3434 as monotherapy and in combination for the treatment of people living with chronic HDV, the most aggressive form of viral hepatitis, are expected in the second half of 2023.

Influenza A virus

VIR-2482 is an investigational influenza A-neutralizing mAb.

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In October 2022, we initiated the groundbreaking Phase 2 Prevention of Illness Due to Influenza A (PENINSULA) trial evaluating VIR-2482, and in December 2022, we achieved the target enrollment of approximately 3,000 participants. This is the first Phase 2 outpatient trial to evaluate the role of a mAb in the prevention of influenza A illness. The primary efficacy endpoint is the proportion of trial participants with protocol-defined influenza illness, requiring one systemic symptom and one respiratory symptom, with confirmed influenza A infection compared to placebo. Other endpoints will evaluate the effect of VIR-2482 on the severity and duration of illness in trial participants with confirmed influenza A compared to placebo. Initial data are expected in mid-2023. The PENINSULA trial is being supported in part with federal funds from the Department of Health and Human Services, or HHS; Administration for Strategic Preparedness and Response, or ASPR; and Biomedical Advanced Research and Development Authority, or BARDA, under Other Transaction Number: 75A50122C00081.

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In August 2022, we initiated the Phase 1b prophylaxis trial evaluating the safety of VIR-2482 in adults aged 65 and older receiving a flu vaccine, and initial data are expected in mid-2023.

COVID-19

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

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In 2022, a total of approximately 1.5 million doses were delivered worldwide.

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Sotrovimab has obtained emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®️) for early treatment of COVID-19, supplying more than 40 countries. Sotrovimab is not authorized in the U.S.

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In February 2023, the U.K.’s National Institute for Health and Care Excellence (NICE) provided positive final draft guidance recommending the use of sotrovimab in adults who do not need supplemental oxygen for COVID-19 and who have an increased risk for progression to severe COVID-19 where nirmatrelvir/ritonavir (Paxlovid) is contraindicated or unsuitable.

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In February of 2022, Vir and GSK amended their existing agreement to reflect that:

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We will continue to discover, develop and advance next-generation solutions for COVID-19 and other potential coronavirus outbreaks, independently or with other partners.

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We and GSK will continue working together to ensure ongoing access to sotrovimab for patients around the world, where authorized, and to develop new therapies for influenza and other respiratory diseases.

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HIV

VIR-1111 is an investigational HIV T cell vaccine based on human cytomegalovirus, or HCMV, and VIR-1388 is a preclinical HIV T cell vaccine based on HCMV.

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Safety and immunology data from the initial two cohorts of the proof-of-concept Phase 1 trial of VIR-1111 show no safety signals and no vector shedding or viremia reported to date. No sustained HIV insert-specific T cell responses have been observed in the lower dose cohorts 1 and 2. Safety and immunology data from the highest dose cohort 3 of the proof-of-concept Phase 1 trial of VIR-1111 are anticipated in the first half of 2023. This trial is being funded in part by the Bill & Melinda Gates Foundation.

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Initiation of a Phase 1 trial of VIR-1388, a novel vector that has the potential to have enhanced immunogenicity, is expected in the second half of 2023. This trial is being funded in part by the Bill & Melinda Gates Foundation and the National Institutes of Health’s Division of AIDS through the HIV Vaccine Trials Network.

Financial Overview

We were incorporated in April 2016 and commenced principal operations later that year. To date, we have focused primarily on organizing and staffing our company, business planning, raising capital, identifying, acquiring, developing and in-licensing our technology platforms and product candidates, and conducting preclinical studies and clinical trials.

We have financed our operations primarily through sales of our common stock from our initial public offering, subsequent follow-on offering and convertible preferred securities, and payments received under our grant and collaboration agreements. As of December 31, 2022, we had $2.4 billion in cash, cash equivalents, and investments. Based upon our current operating plan, we believe that the $2.4 billion will enable us to fund our operations for at least the next 12 months. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional financing to fund our long-term operations sooner than planned. See the section titled “Liquidity, Capital Resources and Capital Requirements—Future Funding Requirements” below for additional information.

Although we recorded net income for the years ended December 31, 2022 and 2021, we have otherwise incurred net losses since inception and may continue to incur net losses in the foreseeable future. To date, sotrovimab has been granted emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®), supplying more than 40 countries. Although we have an EUA from the FDA for sotrovimab, the FDA has excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants. With this EUA revision, sotrovimab is not currently authorized for use in any U.S. region. 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. Furthermore, due to the evolving COVID-19 landscape and based on discussions with the FDA, we and GSK do not plan to file a BLA for sotrovimab at this time. Although certain countries outside of the U.S., such as Canada and Japan, continue to maintain access to sotrovimab 500 mg IV while noting that it is unlikely to maintain efficacy against certain Omicron subvariants, we cannot predict whether other countries will further limit the use of sotrovimab. We have not obtained regulatory approval for any other product candidates, 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.

Our net income was $515.8 million and $528.6 million for the years ended December 31, 2022 and 2021, respectively. Our net loss was $298.7 million for the year ended December 31, 2020. As of December 31, 2022, we had retained earnings of $377.2 million. 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. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Although we began recognizing revenue for sotrovimab and have substantial deferred revenue under our definitive collaboration agreement with GSK executed in May 2021, or the 2021 GSK Agreement, we may continue to incur net operating losses for at least the next several years as the extent of future revenue remains uncertain. In particular, we expect our expenses and losses to increase as we continue our research and development efforts, advance our product candidates through preclinical and clinical development, seek regulatory approval, and prepare for commercialization, as well as hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company. We also expect to increase the size of our administrative functions to support the growth of our business. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

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We are currently manufacturing product candidates from three of our platforms: antibodies, T cells and siRNAs. We have established our own internal process development, manufacturing and quality capabilities and are working with contract development and manufacturing organizations, or CDMOs, to supply our early- and late-stage product candidates in the near term. We continue to expand our internal capabilities and resources in process development, analytical development, quality, manufacturing and supply chain, which are supported by our San Francisco, California, and Portland, Oregon facilities that include laboratories for process development, production of HCMV research viral seed stock and selected quality control testing for our product candidates. We have established relationships with multiple CDMOs and have produced material to support preclinical studies and Phase 1 through Phase 3 clinical trials. Material for Phase 3 clinical trials and commercial supply will generally require large-volume, low-cost-of-goods production. For example, for sotrovimab, we and our collaborator GSK have executed manufacturing agreements with CDMOs having large-scale capacity to support future scale-up and product supply, particularly for potential commercialization.

COVID-19 Business Update and Macroeconomic Uncertainties

We have implemented a number of plans and policies designed to address and mitigate the impact of the COVID-19 pandemic on our employees and our business. We continue to closely monitor the COVID-19 situation and will evolve our plans and policies as needed going forward. As a result of these developments, in March 2020, we implemented work-from-home policies for most of our employees. We now offer all our employees the choice of working full time in the office, a hybrid approach, or full-time remote. As a result, we expect to continue to be subject to the challenges and risks of having a remote workforce, as well as new challenges and risks from operating with a hybrid workforce. We are working closely with our CDMOs to manage our supply chain activities and mitigate any potential disruptions to our clinical trial supplies as a result of the COVID-19 pandemic. However, there are no assurances that our manufacturing and supply chain infrastructure will remain uninterrupted and reliable, or that the CDMOs will be able to satisfy demand in a timely manner and not have supply chain disruptions due to COVID-19 related shutdowns, stock-outs due to raw material shortages and/or greater than anticipated demand or quality issues given the operational challenges and raw material shortages that have been experienced during the COVID-19 pandemic. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic.

In addition to the impacts described above, the global economy, including the financial and credit markets, has recently experienced extreme volatility and disruptions, including increases to inflation rates, rising interest rates, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. The severity and duration of the impact of these conditions on our business cannot be predicted.

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 the section titled “Business—Our Collaboration, License and Grant Agreements” and Note 6—Grant Agreements and Note 7—Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Components of Operating Results

Revenues

To date, sotrovimab has been granted emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®), supplying more than 40 countries. Although we have previously recognized revenue from our profit-share under our definitive collaboration agreement with GSK executed in June 2020, or the 2020 GSK Agreement, related to sotrovimab, 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. Although we have an EUA from the FDA for sotrovimab, the FDA has excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants. With this EUA revision, sotrovimab is not currently authorized for use in any U.S. region. Although certain countries outside of the U.S., such as Canada and Japan, continue to maintain access to sotrovimab 500 mg IV while noting that it is unlikely to maintain efficacy against certain Omicron subvariants, we cannot predict whether other countries will further limit the use of sotrovimab. In addition, due to the evolving COVID-19 landscape and based on discussions with the FDA, we and GSK do not plan to file a BLA for sotrovimab at this time. 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. 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.

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Our revenues consist of the following:

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.

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 Omicron subvariants. 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 estimated various 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.

As of December 31, 2022, GSK held certain potentially excess binding supply manufacturing commitments of sotrovimab and reserved certain binding manufacturing capacity potentially not expected to be utilized, which have not yet been reported to us as allowable manufacturing expenses for the cumulative profit-sharing amounts to date. We expect GSK to adjust allowable manufacturing expenses for our share of the potential charge for excess supply write-offs and unused binding manufacturing capacity and report to us as cost-sharing amounts in future periods. We evaluated the latest available facts and circumstances to determine whether any portion of profit-sharing amounts should be constrained. In doing so, as of December 31, 2022, based on the current state of the COVID-19 pandemic, including the continued proportion of cases caused by certain Omicron subvariants, discussions with the FDA and other regulatory authorities, and our expectations for future sales in light of these factors, we revised our estimates and determined that $369.7 million should be constrained from profit-sharing revenues earned in relation to our anticipated contractual share of potential future adjustments to manufacturing expenses and recorded such amount as adjustments to profit-sharing amounts recognized in the year ended December 31, 2022 and accrued and other liabilities. We will re-assess these estimates each reporting period. Actual results could materially differ from this estimate.

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

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

License revenue from a related party is comprised of revenue related to Brii Bio’s exercise of its option to obtain exclusive rights to develop and commercialize compounds arising from VIR-3434 in mainland China, Hong Kong, Macau and Taiwan recognized in the year ended December 31, 2022.

Operating Expenses

Cost of Revenue

Cost of revenue currently represents royalties earned by third-party licensors on net sales of sotrovimab by us or our collaborators. We recognize these royalties as cost of revenue when we recognize the corresponding revenue that gives rise to payments due to our licensors.

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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 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:

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expenses related to license and collaboration agreements, and change in fair value of certain contingent consideration obligations arising from business acquisitions;

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personnel-related expenses, including salaries, benefits and stock-based compensation for personnel contributing to research and development activities;

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expenses incurred under agreements with third-party contract manufacturing organizations, contract research organizations, and consultants;

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clinical costs, including laboratory supplies and costs related to compliance with regulatory requirements; and

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

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our product candidates into and through preclinical studies and clinical trials and pursue regulatory approval of our product candidates. 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. To date, sotrovimab has been granted emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®), supplying more than 40 countries. Although we have an EUA from the FDA for sotrovimab, the FDA has excluded the use of sotrovimab in all U.S. regions due to the continued proportion of COVID-19 cases caused by certain Omicron subvariants. With this EUA revision, sotrovimab is not currently authorized for use in any U.S. region. 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. In addition, due to the evolving COVID-19 landscape and based on discussions with the FDA, we and GSK do not plan to file a BLA for sotrovimab at this time. Although certain countries outside of the U.S., such as Canada and Japan, continue to maintain access to sotrovimab 500 mg IV while noting that it is unlikely to maintain efficacy against certain Omicron subvariants, we cannot predict whether other countries will further limit the use of sotrovimab. Furthermore, COVID-19 treatment standards are susceptible to rapid changes in epidemiology and the emergence of new variants or subvariants, which may render sotrovimab inferior or obsolete in the future.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate significant revenue from the commercialization and sale of any of our product candidates. 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, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured (if at all) and to what degree such arrangements would affect our development plans and capital requirements.

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

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whether a collaborator is paying for some or all of the costs;

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per patient trial costs;

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the number of trials required for approval;

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the number of sites included in the trials;

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enrollment and retention of patients in trials in countries disrupted by geopolitical events, including civil or political unrest;

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the length of time required to enroll eligible patients;

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the number of patients that participate in the trials;

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the number of doses that patients receive;

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the drop-out or discontinuation rates of patients;

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potential additional safety monitoring requested by regulatory agencies;

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the duration of patient participation in the trials and follow-up;

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the cost and timing of manufacturing our product candidates;

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the phase of development of our product candidates; and

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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 substantially in absolute dollars in the foreseeable future as we continue to support our research and development activities, and commercialization activities for any of our product candidates, if approved, and to grow our business. We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the Securities and Exchange Commission, or SEC, and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

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 Income (Expense), Net

Other income (expense), net consists of gains and losses from foreign currency transactions and the remeasurement of contingent consideration related to our acquisition of TomegaVax, Inc., or TomegaVax.

Provision for Income Taxes

Provision for income taxes consisted primarily of income tax on our domestic and foreign operations.

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Results of Operations

Comparison of Years Ended December 31, 2022 and 2021

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

Revenues

The increase in collaboration revenue for the year ended December 31, 2022 compared to the same period in 2021 was due to our profit-sharing arrangement with GSK for the sale of sotrovimab under the 2020 GSK Agreement. Our contractual share of 72.5% from the sales of sotrovimab is applied to the profit-sharing amounts, 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, and any amount constrained in relation to our anticipated contractual share of potential future adjustments to manufacturing expenses.

The decrease in contract revenue for the year ended December 31, 2022 compared to the same period in 2021 was primarily due to $168.3 million related to the license granted to GSK upon execution of the 2021 GSK Agreement, partially offset by $39.8 million recognized in 2022 related to GSK’s selection of respiratory syncytial virus, or RSV, as its first pathogen under the additional programs to develop neutralizing mAbs under the 2021 GSK Agreement, or First Option Exercise, and $7.0 million related to the additional license granted to GSK in mainland China, Hong Kong, Macau and Taiwan upon execution of the Amendment No. 1 to the 2020 GSK Agreement in the second quarter of 2022.

The increase in license revenue from a related party for the year ended December 31, 2022 compared to the same period in 2021 was due to $22.3 million related to Brii Bio’s exercise of its option to obtain exclusive rights to develop and commercialize compounds and products arising from VIR-3434 in China, Taiwan, Hong Kong and Macau. No comparable amount was incurred for the same period in 2021.

The increase in grant revenue for the year ended December 31, 2022 compared to the same period in 2021 was primarily due to the grant revenue recognized in connection with the BARDA agreement and the timing of research activities under the grant agreements with the Bill & Melinda Gates Foundation.

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Cost of Revenue

The increase in cost of revenue for the year ended December 31, 2022 compared to the same period in 2021 was due to third-party royalties owed based on the sales of sotrovimab under the 2020 GSK Agreement.

Research and Development Expenses

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

The increase in research and development expenses for the year ended December 31, 2022 compared to the same period in 2021 was primarily due to the following factors:

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personnel-related expenses increased by $35.4 million, which was primarily attributable to an increase in our headcount;

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clinical costs increased by $21.3 million, which was primarily attributable to activities related to VIR-2482, VIR-2218 and VIR-3434, partially offset by activities related to the clinical trials for sotrovimab in the same period of 2021;

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contract manufacturing increased by $16.3 million, which was primarily related to an increase in manufacturing activities for our product candidates; and

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other research and development expenses increased by $31.8 million, which was primarily attributable to the allocation of facilities and other costs due to an increase in our headcount, and higher outsource research and lab-related expenses;

partially offset by

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licenses, collaborations and contingent consideration expenses decreased by $78.3 million, which was primarily attributable to a decrease of $50.6 million in costs under our collaboration agreements with GSK, and $37.2 million related to the change in fair value of the contingent consideration from our acquisition of Humabs BioMed SA, or Humabs, partially offset by $7.0 million recognized in connection with the termination of our development and manufacturing collaboration agreement with WuXi Biologics (Hong Kong) Limited, or WuXi Biologics.

Selling, General and Administrative Expenses

The increase in selling, general and administrative expenses for the year ended December 31, 2022 compared to the same period in 2021 was primarily due to higher personnel-related expenses related to additional headcount, external consulting services, business tax expenses related to increased profit-sharing amount and allocated facilities costs due to higher lease expenses. This was partially offset by $39.4 million in fair value of the contingent consideration related to sales-based milestones from our acquisition of Humabs that were achieved in 2021.

Change in Fair Value of Equity Investments

In July 2021, Brii Bio Parent became a publicly traded company on the Stock Exchange of Hong Kong Limited. In connection with the initial public offering, our investment in shares of Brii Bio Parent became a marketable equity investment and subsequently remeasured to fair value at each reporting period. For the year ended December 31, 2022, we recognized an unrealized loss of $111.1 million due to the change in fair value of the equity investment, compared to an unrealized gain of $138.0 million for the same period in 2021.

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Interest Income

The increase in interest income was primarily due to higher interest rates as well as higher balances of short-term and long-term investments, partially offset by higher amortization of premium on investment balances, for the year ended December 31, 2022 compared to the same period in 2021.

Other Income (Expense), Net

The increase in other income (expense), net for the year ended December 31, 2022 compared to the same period in 2021 was primarily due to the change in fair value of the contingent consideration related to our acquisition of TomegaVax.

Provision for Income Taxes

The increase in provision for income taxes for the year ended December 31, 2022 compared to the same period in 2021 was primarily due to taxable income for 2022 attributable to collaboration revenue under the 2020 GSK agreement and the requirement under the Tax Cuts and Jobs Act of 2017 for taxpayers to capitalize and amortize research and development expenditures over five or fifteen years pursuant to Section 174 of the Internal Revenue Code of 1986, as amended.

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 December 31, 2022, we had $2.4 billion in cash, cash equivalents, and investments. As of December 31, 2022, we had retained earnings of $377.2 million. We entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, in 2020 pursuant to which we may from time to time offer and sell shares of our common stock for an aggregate offering price of up to $300.0 million, through or to Cowen, acting as sales agent or principal. We will pay 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 Cowen with customary indemnification and contribution rights. As of December 31, 2022, no shares have been issued under the Sales Agreement.

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.

Future Funding Requirements

Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments as of December 31, 2022 as noted above will enable us to fund our operations for at least the next 12 months. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional financing to fund our long-term operations sooner than planned. Moreover, it is particularly difficult to estimate with certainty our future revenue and expenses given the dynamic and rapidly evolving nature of our business and the COVID-19 pandemic environment generally. For example, in March and April 2022, the FDA amended the EUA fact sheet to exclude sotrovimab use in geographic regions where infection is likely to have been caused by a non-susceptible SARS-CoV-2 variant based on available information, including variant susceptibility to these drugs and regional variant frequency. With these EUA revisions, sotrovimab is not currently authorized for use in any U.S. region. 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. In addition, due to the evolving COVID-19 landscape and based on discussions with the FDA, we and GSK do not plan to file a BLA for sotrovimab at this time. It is possible that the FDA and other regulatory authorities may not grant sotrovimab full marketing approval for the treatment of COVID-19, or that any such marketing approvals, if granted, may have similar or other significant limitations on its use.

We may also 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. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to

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relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. There can be no assurance that sufficient funds will be available to us on attractive terms or at all. If we are unable to obtain additional funding from these or other sources, it may be necessary to significantly reduce our rate of spending through reductions in staff and delaying, scaling back, or stopping certain research and development programs. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. General economic conditions , both inside and outside the U.S., including heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession as well as the COVID-19 pandemic and geopolitical events, including civil or political unrest (such as the ongoing war between Ukraine and Russia) have resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital. and geopolitical events, including civil or political unrest (such as the ongoing war between Ukraine and Russia) have resulted in a significant disruption of global financial markets, market volatility, high levels of inflation, and interest rate fluctuations may increase our cost of financing or restrict our access to potential sources of future liquidity.

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 2022 and 2033. As of December 31, 2022, we expect to make total lease payments of $175.0 million through 2033.

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 the sections titled “Business—Our Collaboration, License and Grant Agreements” and “Business—Our Acquisition Agreements,” as well as Note 4—Acquisitions and Note 7—Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. For information related to our future commitments under our facilities and manufacturing agreements, see Note 9—Commitments and Contingencies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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:

Operating Activities

During the year ended December 31, 2022, net cash provided by operating activities was $1.7 billion. This consisted primarily of net income of $515.8 million, non-cash charges of $575.9 million, and an increase in our net operating assets of $665.4 million, partially offset by $93.8 million for payment for contingent consideration in excess of acquisition date fair value. The change in our net operating assets of $665.4 million was primarily due to a decrease in collaboration receivable by $770.0 million resulting from our profit-share from the sale of sotrovimab, partially offset by a $33.3 million decrease in deferred revenue primarily driven by GSK's First Option Exercise and Brii Bio's exercise for VIR-3434 netted with the grants received from Bill & Melinda Gates Foundation, an increase in prepaid expenses and other current assets by $39.4 million and an increase in other assets by $11.8 million, which are due to timing of payments. The non-cash charges of $575.9 million primarily consisted of $369.5 million for change in estimated

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constraint on profit-sharing amount, an unrealized loss of $111.1 million on our equity investment, $102.1 million for stock-based compensation expense and $8.7 million for noncash lease expense, partially offset by $15.2 million for deferred income tax.

During the year ended December 31, 2021, net cash used in operating activities was $47.6 million. This consisted primarily of net income of $528.6 million and non-cash charges of $203.3 million, offset by an unrealized gain of $138.0 million on our equity investment, payment of contingent consideration of $8.1 million for the achievement of a milestone related to our TomegaVax acquisition, a gain of $4.8 million from a sublease termination, and an increase in our net operating assets of $628.4 million. The change in our net operating assets of $628.4 million was primarily due to an increase in receivable from collaboration by $773.1 million resulting from our profit share from the sale of sotrovimab, and an increase in prepaid expenses and other current assets of $3.7 million, partially offset by an increase in deferred revenue of $92.0 million driven by the upfront fee received under the 2021 GSK Agreement, and an increase in accrued liabilities and other long-term liabilities of $58.5 million due to timing of payments. The non-cash charges of $203.3 million primarily consisted of $91.8 million for revaluation of contingent consideration, $83.8 million for stock-based compensation expense, $15.2 million for deferred income tax expense, $6.2 million for noncash lease expense, and $5.3 million for depreciation and amortization.

Investing Activities

During the year ended December 31, 2022, net cash used in investing activities was $1.2 billion. This consisted primarily of purchases of investments of $1.5 billion and property and equipment of $68.0 million, partially offset by $351.5 million in proceeds received from investments that matured during the period.

During the year ended December 31, 2021, net cash used in investing activities was $140.8 million. This consisted primarily of purchases of investments of $420.2 million and property and equipment of $21.8 million, partially offset by $301.2 million in proceeds received from investments that matured during the period.

Financing Activities

During the year ended December 31, 2022, net cash provided by financing activities was $34.8 million. This consisted primarily of proceeds from the issuance of our common stock to the Bill & Melinda Gates Foundation of $28.5 million under the stock purchase agreement, from exercises of stock options of $4.5 million, and from issuance of common stock under our employee stock purchase plan of $3.2 million, partially offset by $1.2 million for payment of contingent consideration.

During the year ended December 31, 2021, net cash provided by financing activities was $100.3 million. This consisted primarily of proceeds received from the issuance of our common stock to Glaxo Group Limited (an affiliate of GSK) of $85.2 million in March 2021, from exercises of stock options of $13.1 million, and from issuance of common stock under our employee stock purchase plan of $2.3 million.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our 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. The critical accounting policies, estimates and judgments that we believe to have the most significant impacts on our consolidated financial statements are described below. For more detail on our critical accounting policies, refer to Note 2—Summary of Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Revenue Recognition

Collaboration, License and Contract Revenue

Under Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, or ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods and services. To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy a performance obligation.

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For collaborative arrangements that fall within the scope of ASC 808, Collaborative Arrangements, or ASC 808, we first determine which elements of the collaboration are deemed to be performance obligations with a customer within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808 and are not subject to the guidance in ASC 606, we apply the revenue recognition model under ASC 606, including the royalty exception guidance and variable consideration guidance under ASC 606 as described below, or other guidance, as deemed appropriate. When we are considered an agent in elements of collaboration arrangements within the scope of ASC 808, we record our share of collaboration revenue in the period in which such sales occur. We are considered an agent when the collaboration partner controls the product before transfer to the customers and has the ability to direct the use of and obtain substantially all of the remaining benefits from the product. In these instances, collaboration revenue is based upon the net sales reported by our collaboration partners, net of cost of goods sold and allowable expenses (e.g., manufacturing, distribution, medical affairs, selling, and marketing expenses) in the period. In order to record collaboration revenue, 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. We use these estimates to determine whether payments due to us under our collaboration arrangements, such as profit-share payments, should be recognized as revenues in the period that they become due or whether any portion of the payments due should be constrained from revenue recognition because it is not probable that recognizing such amounts would not result in a material reversal of revenues in future reporting periods. For the periods covered in the financial statements presented, there have been no material changes to prior period estimates of revenues and expenses, except the profit-share amount constrained in the year ended December 31, 2022, as discussed in Note 7—Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We have entered into a number of license and collaboration agreements that fall within the scope of ASC 606. We evaluate the promised goods or services in these agreements to determine which ones represent distinct performance obligations. These agreements may include the following types of promised goods or services: (i) grants of licenses, (ii) performance of research and development services, and (iii) participation on joint research and/or development committees. They also may include options to obtain licenses to our intellectual property.

Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required. These agreements may include the following types of consideration: non-refundable upfront payments, reimbursement for research services, research, development or regulatory milestone payments, profit-sharing arrangements, and royalty and commercial sales milestone payments.

If there are multiple distinct performance obligations, we allocate the transaction price to each distinct performance obligation based on their estimated standalone selling prices, or SSP. We estimate the SSP for each distinct performance obligation by considering information such as market conditions, entity-specific factors, and information about our customer that is reasonably available to us. We consider estimation approaches that allow us to maximize the use of observable inputs. These estimation approaches may include the adjusted market assessment approach, the expected cost plus a margin approach or the residual approach. We also consider whether to use a different estimation approach or a combination of approaches to estimate the SSP for each distinct performance obligation. Developing certain assumptions (e.g., treatable patient population, expected market share, probability of success and product profitability, and discount rate based on weighted-average cost of capital) to estimate the SSP of a distinct performance obligation requires significant judgment. Accordingly, these assumptions are subject to uncertainty, and changing the methodology and/or assumptions could materially impact the estimated SSP for distinct performance obligations, and as a result, the amount and/or timing of revenue recognition.

For performance obligations satisfied over time, we estimate the efforts needed to complete the performance obligation and recognize revenue by measuring the progress towards complete satisfaction of the performance obligation using an input measure. For arrangements that include sales-based royalties, including commercial milestone payments based on pre-specified levels of sales, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon the performance of the licensee.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the SSP of identified performance obligations, and estimating the progress towards satisfaction of performance obligations.

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Contingent Consideration and Embedded Derivatives

Contingent consideration related to business combinations and obligations required to be accounted for as embedded derivative financial instruments under Topic ASC 815, Derivatives and Hedging, are considered to be Level 3 instruments that are initially measured at their estimated fair values on the transaction date and subsequently remeasured with changes recorded in the consolidated statement of operations each subsequent reporting period.

The estimated fair value of the contingent consideration related to the Humabs acquisition was determined by calculating the probability-weighted clinical and regulatory milestone payments based on the assessment of the likelihood and estimated timing that certain milestones would be achieved, as well as use of a Monte Carlo simulation model that includes significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs are the probabilities of achieving clinical and regulatory approval of the development projects and the subsequent commercial success and discount rates.

The estimated fair value of the contingent consideration related to our acquisition of TomegaVax was determined based on a Monte Carlo simulation model that includes significant estimates and assumptions pertaining to probability and timing to achieve the required share price of our common stock, expected volatility and discount rate. Although the TomegaVax acquisition was accounted for as an asset acquisition, such contingent consideration met the definition of an embedded derivative financial instrument.

Recent Accounting Pronouncements Not Yet Adopted

See Note 2—Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition or results of operations.

Item 7. 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 audited consolidated financial statements and notes and other financial information included elsewhere in this Annual Report on Form 10-K. Unless the context requires otherwise, references in this Annual Report on Form 10-K to the “Company”, “Vir,” “we,” “us” and “our” refer to Vir Biotechnology, Inc. and its consolidated subsidiaries.

Our discussion and analysis below are focused on our financial results and liquidity and capital resources for the years ended December 31, 2021 and 2020, including year-over-year comparisons of our financial performance and condition for these years. Discussion and analysis of the year ended December 31, 2019 specifically, as well as the year-over-year comparison of our financial performance and condition for the years ended December 31, 2020 and 2019, are located in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on February 25, 2021. For a detailed discussion on our business environment, please read Item 1. Business, included in this Annual Report on Form 10-K. For additional information on the risks that could negatively impact our business, please read Item 1A. Risk Factors, included in this Annual Report on Form 10-K.

Overview

We are a commercial-stage immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases. Infectious diseases are among the leading causes of death worldwide and can cause trillions of dollars of direct and indirect economic burden each year – as evidenced by the coronavirus disease 2019, or COVID-19, pandemic. We believe that now is the time to apply the recent and remarkable advances in immunology to combat current and prepare for future infectious diseases. Our approach begins with identifying the limitations of the immune system in combating a particular pathogen, the vulnerabilities of that pathogen and the reasons why previous approaches have failed. We then bring to bear powerful technologies that we believe, individually or in combination, will lead to effective therapies.

Our current pipeline consists of sotrovimab (previously VIR-7831; and where marketing authorization has been granted, marketed under the brand name Xevudy®) and other product candidates targeting COVID-19, hepatitis B virus, or HBV, influenza A virus, and human immunodeficiency virus, or HIV. We have assembled four technology platforms, focused on antibodies, T cells, innate immunity and small interfering ribonucleic acid, or siRNA, through internal development, collaborations and acquisitions. We have built an industry-leading team that has deep experience in immunology, infectious diseases, and product development and commercialization. Given the global impact of infectious diseases, we are committed to developing cost-effective treatments that can be delivered at scale.

COVID-19

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

•
In May 2021, the U.S. Food and Drug Administration, or FDA, granted an Emergency Use Authorization, or EUA, to sotrovimab for the early treatment of mild to moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg) with positive results of direct SARS-CoV-2 viral testing, and at high risk for progression to severe COVID-19, including hospitalization or death. We also received a positive scientific opinion from the Committee for Human Medicinal Products in the European Union, or EU, for sotrovimab in May 2021. In June 2021, we announced confirmatory full results for the Phase 3 COVID-19 Monoclonal antibody Efficacy Trial - Intent to Care Early, or COMET-ICE, trial, which resulted in an adjusted relative risk reduction of 79% (p0.001) in all-cause hospitalization for more than 24 hours or death due to any cause by Day 29 compared to placebo, meeting the primary endpoint of the trial. In December 2021, the European Commission granted marketing authorization to Xevudy® (sotrovimab) in the EU for the treatment of adults and adolescents at increased risk of progressing to severe COVID-19.

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We have made significant progress increasing global patient access to sotrovimab in collaboration with Glaxo Wellcome UK Limited and GlaxoSmithKline Biologicals S.A. (individually and collectively referred to as GSK). Sotrovimab has been granted EUA, temporary authorization or marketing approval (under the brand name Xevudy®) in more than 40 countries.

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To date, binding agreements have been received for the sale of approximately 1.7 million doses of sotrovimab worldwide.

o
In November 2021, we and GSK announced the sale of more than 750,000 doses globally to date, including multiple contracts with the U.S. government. Approximately 90% of those doses were delivered in 2021 and the remainder are expected to be delivered throughout the first half of 2022. The delivered doses led to the recognition of $917.2 million of sotrovimab collaboration revenue in 2021.

o
In January 2022, we and GSK announced the sale of an additional 600,000 doses to the U.S. government, which are expected to be delivered throughout the first quarter of 2022, and the sale of approximately 350,000 additional doses to other countries, which are expected to be delivered throughout the first half of 2022. Based solely on the binding agreements received to date, we expect to recognize approximately $1.1 billion of sotrovimab collaboration revenues when the doses are delivered in the first half of 2022.

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We and GSK expect to manufacture approximately two million doses of sotrovimab in the first half of 2022, and additional doses in the second half of 2022.

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During and following the fourth quarter, we announced preclinical data generated through pseudovirus testing demonstrating that sotrovimab retains neutralizing activity against the highly divergent Omicron variant (B.1.1.529).

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In February 2022, we published pseudovirus data demonstrating a 16-fold shift in neutralization activity against the Omicron BA.2 subvariant. Our BA.2 results were derived from 10 independent experiments that were conducted using an optimized pseudovirus assay. This is the same assay that was used to generate data for previous variants. These data have been shared with regulatory agencies around the world. Initial feedback from the FDA question our conclusion that the 500 mg intravenous, or IV, dose of sotrovimab retains activity against the BA.2 Omicron subvariant based on our current modeling assumptions, and the FDA has asked for additional data to support our position. The FDA also requested safety data for higher doses. Both have been provided to the FDA and we are awaiting further correspondence.

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The Health Care Provider Fact Sheet was recently updated to show that sotrovimab’s neutralization activity was reduced an average fold change in EC50 value of 16-fold against the SARS-CoV-2 Omicron B.1.1.529/BA.2 spike variant compared to wild-type. The Fact Sheet also noted that the clinical relevance of the 16-fold reduction in sotrovimab activity against the SARS-CoV-2 Omicron B.1.1.529/BA.2 variant is unknown.

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As of February 28, 2022, the FDA noted on its EUA website that sotrovimab is currently authorized in all U.S. regions until further notice by the FDA.

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In November 2021, we announced the results of the Phase 3, randomized, open-label COMET-Treatment of Acute COVID-19 with Intramuscular monocLonal antibody, or COMET-TAIL trial, which achieved its primary endpoint, demonstrating that 500 mg intramuscular, or IM, administration of sotrovimab (n=376) was non-inferior to 500 mg IV administration (n=378) for the early treatment of mild to moderate COVID-19 in high-risk, non-hospitalized adults and adolescents. Low rates of serious adverse events (≤1% in both arms) were observed. Based on the results of the COMET-TAIL trial, in January 2022, we and GSK submitted an application to the FDA requesting an amendment to the EUA for sotrovimab to include IM administration.

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We and GSK plan to submit a Biologics License Application, or BLA, for sotrovimab to the FDA in the second half of 2022.

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We and GSK are collaborating to assess the use of sotrovimab in uninfected immunocompromised patients to determine whether sotrovimab can prevent symptomatic COVID-19 infection. Two Phase 3 trials are expected to start in the second quarter of 2022. One is a platform trial and one is a company sponsored trial, COVID-19 Monoclonal antibody Efficacy Trial – Stop Transmission of Acute SARS-COV-2, or COMET-STAR. The primary endpoint for both trials is incidence of symptomatic PCR-confirmed COVID-19. The analysis of the primary endpoint of COMET-STAR will be event driven, and could be as early as the second half of 2022.

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Sotrovimab is also being evaluated among patients hospitalized with COVID-19 in the U.K. as part of the Randomized Evaluation of COVID-19 Therapy, or RECOVERY, trial. Initial data are expected in the second half of 2022.

VIR-7832 is an investigational vaccinal SARS-CoV-2-neutralizing mAb that incorporates Xencor’s Xtend and other Fc technologies. VIR-7832 shares the same characteristics as sotrovimab and has been engineered to potentially be a therapeutic T cell vaccine to further help treat and/or prevent COVID-19. The U.K.'s National Health Service-supported AGILE

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initiative evaluating VIR-7832 in a Phase 1b/2a trial of adults with mild to moderate COVID-19 remains ongoing. To date, no safety signals have been reported for the 50 mg, 150 mg and 500 mg dose cohorts. The first patient in the Phase 2a portion of the trial was dosed in February 2022. Additional data are expected in the first half of 2022.

HBV

VIR-2218 is an investigational HBV-targeting siRNA.

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In June 2021, we announced clinical data from our Phase 2 trial of VIR-2218 alone and in combination with pegylated interferon alpha, or PEG-IFN-α. First, with VIR-2218 as monotherapy, the trial demonstrated a strong safety profile and a substantial, durable and dose dependent reduction of hepatitis B virus surface antigen, or HBsAg, through 48 weeks. Second, evaluating VIR-2218 alone and in combination with PEG-IFN-α for 12 weeks, more rapid and substantial declines in HBsAg compared to VIR-2218 alone were observed.

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In November 2021, we announced additional data evaluating VIR-2218 in combination with PEG-IFN-α for 24 weeks. New findings demonstrated that concurrent initiation of VIR-2218 and PEG-IFN-α therapy resulted in earlier and more substantial HBsAg reductions compared to VIR-2218 alone or with PEG-IFN-α following a VIR-2218 lead-in. Also, three participants achieved HBsAg loss below the lower limit of quantification by Week 24; two of three achieved anti-HBs seroconversion. Additional data are expected in the first half of 2022.

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VIR-2218 is also being evaluated in additional clinical trials with collaborators.

VIR-3434 is an investigational HBV-neutralizing mAb that incorporates Xencor’s Xtend and other Fc technologies.

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In July 2021, we initiated the Phase 2 Monoclonal Antibody siRNA Combination against Hepatitis B, or MARCH, trial to evaluate the combination of VIR-2218 and VIR-3434 as a functional cure regimen for chronic HBV infection. Initial data are expected in the first half of 2022. As some of our clinical trial sites are in Ukraine and Moldova, we are monitoring the situation to determine any impact resulting from the current conflict in this region.

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In November 2021, we announced that a single dose of six mg, 18 mg, or 75 mg of VIR-3434 resulted in rapid HBsAg reductions in most participants within approximately one week post-dose, and the largest and most sustained reductions in HBsAg were observed in the 75 mg cohort. Initial data are expected in the first half of 2022.

Influenza A virus

VIR-2482 is an investigational mAb designed for the prevention of influenza A that incorporates Xencor’s Xtend technology. In August 2019, we initiated dosing in the Phase 1/2 clinical trial for VIR-2482. VIR-2482 has been well-tolerated in the approximately 100 healthy volunteers dosed in Phase 1. Anticipating an increase in the incidence of influenza in the Northern Hemisphere this coming winter, we expect to initiate a Phase 2 trial in the second half of 2022.

Additionally, we and GSK are evaluating the potential of several next-generation mAbs for influenza treatment and prevention, functional genomics applications for respiratory targets, and mAbs for non-influenza diseases under the collaboration agreement with GSK executed in May 2021, or the 2021 GSK Agreement. For details regarding the 2021 GSK Agreement, see Note 7—Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

HIV

VIR-1111 is an investigational HIV T cell vaccine based on human cytomegalovirus, or HCMV. In December 2020, we initiated a Phase 1 trial of VIR-1111. No safety signals have been reported to date and we expect to have additional clinical data in the first half of 2022.

In January 2022, we announced an expansion of our collaboration with the Bill & Melinda Gates Foundation to include the advancement of innovative platform technologies in the development of broadly neutralizing antibodies designed to provide a “vaccinal effect” aimed at a functional cure of HIV and the prevention of malaria.

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Financial Overview

We were incorporated in April 2016 and commenced principal operations later that year. To date, we have focused primarily on organizing and staffing our company, business planning, raising capital, identifying, acquiring, developing and in-licensing our technology platforms and product candidates, and conducting preclinical studies and clinical trials.

We have financed our operations primarily through sales of our common stock from our initial public offering, subsequent follow-on offering and convertible preferred securities, and payments received under our grant and collaboration agreements. As of December 31, 2021, excluding restricted cash, we had $909.5 million in cash, cash equivalents and investments, and after excluding the equity investment in Brii Biosciences Limited, or Brii Bio Parent, we had $766.4 million. Based upon our current operating plan, we believe that $766.4 million as of December 31, 2021 will enable us to fund our operations for at least the next 12 months. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional financing to fund our long-term operations sooner than planned. See the section titled “Liquidity, Capital Resources and Capital Requirements—Future Funding Requirements” below for additional information.

Although we recorded net income for the year ended December 31, 2021, we have otherwise incurred accumulated net losses since inception and may continue to incur net losses in the foreseeable future. To date, sotrovimab has been granted EUA, temporary authorization or marketing approval (under the brand name, Xevudy®) in more than 40 countries. Although we (through our collaborator GSK) have recently entered into procurement agreements to supply sotrovimab to governments around the world and began to recognize revenue for sotrovimab, the extent of future revenue remains uncertain. We have not obtained regulatory approval for any other product candidates, 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. Our net income was $528.6 million for the year ended December 31, 2021. Our net losses were $298.7 million and $174.7 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $138.6 million. 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. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Although we began recognizing revenue for sotrovimab and have substantial deferred revenue under our 2021 GSK Agreement, we may continue to incur net operating losses for at least the next several years as the extent of future revenue remains uncertain. In particular, we expect our expenses and losses to increase as we continue our research and development efforts, advance our product candidates through preclinical and clinical development, seek regulatory approval, prepare for commercialization, as well as hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company. We also expect to increase the size of our administrative functions to support the growth of our business. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We are currently manufacturing product candidates from three of our platforms: antibodies, T cells and siRNAs. We have established our own internal process development, manufacturing and quality capabilities and are working with contract development and manufacturing organizations, or CDMOs, to supply our early- and late-stage product candidates in the near term. We continue to expand our internal capabilities and resources in process development, analytical development, quality, manufacturing and supply chain, which are supported by our San Francisco, California, and Portland, Oregon facilities that include laboratories for process development, production of HCMV research viral seed stock and selected quality control testing for our product candidates. We have established relationships with multiple CDMOs and have produced material to support preclinical studies and Phase 1 through Phase 3 clinical trials. Material for Phase 3 clinical trials and commercial supply will generally require large-volume, low-cost-of-goods production. For example, for our COVID-19 program, we and our collaborator GSK have executed manufacturing agreements with CDMOs having large-scale capacity to support future scale-up and product supply, particularly for potential commercialization.

COVID-19 Business Update

We have implemented a number of plans and policies designed to address and mitigate the impact of the ongoing COVID-19 pandemic on our employees and our business. We continue to closely monitor the COVID-19 situation and will evolve our plans and policies as needed going forward. As a result of these developments, in March 2020, we implemented work-from-home policies for most of our employees. We have also implemented plans, which continue to evolve based on the current climate and response to the ongoing COVID-19 pandemic, to reopen our offices to allow employees to return when appropriate. Although these plans are based on a phased approach consistent with local government requirements, and

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focused on employee safety, and contemplate returning to remote work should new restrictions be implemented, there is uncertainty regarding the recent phased reopening, which may be rolled back, and restrictions re-implemented. We are also working to provide our employees with the support they need to ensure continuity of business operations. We are working closely with our CDMOs to manage our supply chain activities and mitigate any potential disruptions to our clinical trial supplies as a result of the COVID-19 pandemic. However, there are no assurances that our manufacturing and supply chain infrastructure will remain uninterrupted and reliable, or that the CDMOs will be able to satisfy demand in a timely manner and not have supply chain disruptions due to COVID-19 related shutdowns, stock-outs due to raw material shortages and/or greater than anticipated demand or quality issues given the operational challenges and raw material shortages that have been experienced during the COVID-19 pandemic. For some of our clinical development programs, we are experiencing, and may continue to experience, a disruption or delay in our ability to initiate trial sites and enroll and assess patients. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic.

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 the section titled “Business—Our Collaboration, License and Grant Agreements” and Note 6—Grant Agreements and Note 7—Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Our Acquisitions

We have completed various acquisitions. For details regarding our acquisitions, see the section titled “Business—Our Acquisition Agreements” and Note 4—Acquisitions to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Components of Operating Results

Revenues

To date, sotrovimab has been granted EUA, temporary authorization or marketing approval (under the brand name, Xevudy®) in more than 40 countries. We (through our collaborator GSK) have recently entered into procurement agreements to supply sotrovimab to governments around the world, and we have begun recognizing revenue from our profit share under our definitive collaboration agreement with GSK executed in June 2020, or the 2020 GSK Agreement. However, the extent of future revenue remains uncertain. We have not obtained regulatory approval for any other product candidates, and we do not expect to generate any significant revenue from the sale of our other product candidates until we complete clinical development, submit regulatory filings and receive approvals from the applicable regulatory bodies for such product candidates, if ever.

Our revenues consist of the following:

Collaboration revenue 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 revenue reported in the period by GSK, net of cost of goods sold and allowable expenses from both GSK and us (e.g., medical affairs, selling and marketing expenses) and adding back our expenses that appear elsewhere in the consolidated statement of operations (e.g., cost of revenue).

Contract revenue includes recognition of revenue generated from license rights issued to GSK, from research and development services under other third-party contracts, and from a clinical supply agreement with Brii Biosciences Offshore Limited, or Brii Bio.

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

License revenue from a related party is comprised of revenue related to Brii Bio’s exercise of its option to obtain exclusive rights to develop and commercialize compounds arising from VIR-2218 in greater China recognized in the prior year.

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Operating Expenses

Cost of Revenue

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

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expenses related to license and collaboration agreements, and change in fair value of certain contingent consideration obligations arising from business acquisitions;

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personnel-related expenses, including salaries, benefits and stock-based compensation for personnel contributing to research and development activities;

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expenses incurred under agreements with third-party contract manufacturing organizations, contract research organizations, and consultants;

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clinical costs, including laboratory supplies and costs related to compliance with regulatory requirements; and

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

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our product candidates into and through preclinical studies and clinical trials and pursue regulatory approval of our product candidates. 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. To date, sotrovimab has been granted EUA, temporary authorization or marketing approval (under the brand name, Xevudy®) in more than 40 countries. However, we may never succeed in achieving BLA or other similar approvals for sotrovimab or any of our product candidates. In addition, COVID-19 treatment standards are susceptible to rapid changes in epidemiology and the emergence of new variants, thus, sotrovimab may be rendered inferior or obsolete in the future. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate significant revenue from the commercialization and sale of sotrovimab or 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, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

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

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whether a collaborator is paying for some or all of the costs;

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per patient trial costs;

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the number of trials required for approval;

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the number of sites included in the trials;

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•
the countries in which the trials are conducted;

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the length of time required to enroll eligible patients;

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the number of patients that participate in the trials;

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the number of doses that patients receive;

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the drop-out or discontinuation rates of patients;

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potential additional safety monitoring requested by regulatory agencies;

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the duration of patient participation in the trials and follow-up;

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the cost and timing of manufacturing our product candidates;

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the phase of development of our product candidates; and

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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 substantially in absolute dollars in the foreseeable future as we continue to support our continued research and development activities, and commercialization activities for our EUA product or any of our product candidates, if approved, and to grow our business. We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Change in Fair Value of Equity Investments

Change in fair value of equity investments consists of the remeasurement of our investment in Brii Bio Parent's 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 Income (Expense), Net

Other income (expense), net consists of gains and losses from foreign currency transactions and the remeasurement of contingent consideration related to our acquisition of TomegaVax, Inc., or TomegaVax.

Provision for Income Taxes

Provision for income taxes consisted primarily of income tax on our domestic and foreign operations.

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Results of Operations

Comparison of Years Ended December 31, 2021 and 2020

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

Revenues

The increase in collaboration revenue for the year ended December 31, 2021 compared to the same period in 2020 was due to our profit-sharing arrangement with GSK for the sale of sotrovimab under our 2020 GSK Agreement, for which there were no comparable revenues recognized in the prior year. Our contractual share of 72.5% from the sales of sotrovimab is applied to the revenue reported in the period by GSK, net of cost of goods sold and allowable expenses from both GSK and us (e.g., medical affairs, selling, and marketing expenses) and adding back our expenses that appear elsewhere in the consolidated statement of operations (e.g., cost of revenue).

The increase in contract revenue for the year ended December 31, 2021 compared to the same period in 2020 was primarily due to $168.3 million related to the license granted to GSK upon execution of the 2021 GSK Agreement, partially offset by $43.3 million related to the license granted to GSK upon execution of our 2020 GSK Agreement in the prior year.

The decrease in grant revenue for the year ended December 31, 2021 compared to the same period in 2020 was primarily due to a decrease of $3.4 million recognized under the amended grant agreement, originally entered into in January 2018, with the Bill & Melinda Gates Foundation relating to our HIV program attributable to a supplemental award received in the first quarter of 2020, partially offset by $2.2 million recognized in the fourth quarter of 2021 under the grant agreement entered into in November 2021 with the Bill & Melinda Gates Foundation.

The decrease in license revenue from a related party for the year ended December 31, 2021 compared to the same period in 2020 was due to the $22.7 million of revenue related to Brii Bio’s exercise of its option to obtain exclusive rights to develop and commercialize compounds arising from VIR-2218 in greater China recognized in the prior year.

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Research and Development Expenses

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

The increase in research and development expenses for the year ended December 31, 2021 compared to the same period in 2020 was primarily due to the following factors:

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clinical costs increased by $67.8 million, which was primarily attributable to activities related to our sotrovimab, VIR-2218 and VIR-3434 clinical trials;

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personnel-related expenses increased by $52.2 million, which was primarily attributable to an increase in our headcount;

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licenses, collaborations and contingent consideration expenses increased by $22.0 million, which was primarily attributable to increases of $58.9 million in costs under our collaboration agreements with GSK, $9.2 million in fair value of the contingent consideration from our acquisition of Humabs Biomed SA, or Humabs, due to the achievement of certain milestones in 2021 as well as changes in assumptions and probabilities used in calculating the fair value of the remaining liability, and $1.0 million in third-party milestone payments, partially offset by decreases of $31.8 million due to achievement of the first development milestone under our amended collaboration agreement with Alnylam Pharmaceuticals, Inc., or the Amended Alnylam Agreement, in the first quarter of 2020, $10.0 million payment to Alnylam resulting from Brii Bio's exercise of its option for VIR-2218 in the second quarter of 2020, and $6.4 million in collaboration costs under our Amended Alnylam Agreement;

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other research and development expenses increased by $9.0 million, which was primarily attributable to increases of $6.4 million in the allocation of facilities and other costs due to an increase in our headcount and higher lease expense, and $2.7 million in sublicense fees due under a license agreement; and

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contract manufacturing expense decreased by $5.4 million, which was primarily attributable to a decrease of $13.5 million in costs related to our COVID-19 product candidates mainly resulting from the completion of clinical manufacturing activities in the third quarter of 2020, partially offset by an increase of $8.2 million related to our HBV drug supply in the fourth quarter of 2021.

Selling, General and Administrative Expenses

The increase in selling, general and administrative expenses for the year ended December 31, 2021 compared to the same period in 2020 was primarily due to increases of $39.4 million in fair value of the contingent consideration related to sales-based milestones from our acquisition of Humabs that were achieved in the fourth quarter of 2021, $39.0 million in personnel-related expenses resulting from additional headcount, and $10.6 million in external consulting services.

Change in Fair Value of Equity Investments

In July 2021, Brii Bio Parent became a publicly traded company on the Stock Exchange of Hong Kong Limited. In connection with the initial public offering, our investment in shares of Brii Bio Parent became a marketable equity investment and subsequently remeasured to fair value at each reporting period. For the year ended December 31, 2021, we recognized an unrealized gain of $138.0 million due to the change in fair value of the equity investment. No comparable amount was incurred for the same period in 2020.

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Interest Income

The decrease in interest income was primarily due to lower interest rates and higher amortization of premium on investment balances for the year ended December 31, 2021 compared to the same period in 2020.

Other Expense, Net

The increase in other expenses for the year ended December 31, 2021 compared to the same period in 2020 was primarily related to the change in fair value of the contingent consideration related to our acquisition of TomegaVax.

Provision for Income Taxes

The increase in provision for income taxes for the year ended December 31, 2021 compared to the same period in 2020 was primarily due to taxable income for 2021 attributable to significant collaboration revenue from the sale of sotrovimab as well as unrealized gain from the equity investment in Brii Bio Parent.

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 follow-on offering; sales of our convertible preferred securities; and payments received under our grant and collaboration agreements. As of December 31, 2021, excluding restricted cash, we had $909.5 million cash, cash equivalents and investments, and after excluding the equity investment in Brii Bio Parent, we had $766.4 million. In addition, as of December 31, 2021, we had a positive working capital balance and an accumulated deficit of $138.6 million. We have also entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, in 2020 pursuant to which we may from time to time offer and sell shares of our common stock for an aggregate offering price of up to $300.0 million, through or to Cowen, acting as sales agent or principal. We will pay 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 Cowen with customary indemnification and contribution rights. As of December 31, 2021, no shares have been issued under the Sales Agreement.

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.

Future Funding Requirements

Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments as of December 31, 2021 as noted above will enable us to fund our operations for at least the next 12 months. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional financing to fund our long-term operations sooner than planned. Moreover, it is particularly difficult to estimate with certainty our future revenue and expenses given the dynamic and rapidly evolving nature of our business and the COVID-19 pandemic environment generally. We may also 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 anticipate raising additional capital through the sale of our equity securities, incurring debt, entering into collaboration, licensing or similar arrangements with third parties, or receiving research contributions, grants or other sources of financing to fund our operations. 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. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. There can be no assurance that sufficient funds will be available to us on attractive terms or at all. If we are unable to obtain additional funding from these or other sources, it may be necessary to significantly reduce our rate of spending through reductions in staff and delaying, scaling back, or stopping certain research and development programs. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. In addition, the COVID-19 pandemic

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continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments. Market volatility, inflation, interest rate fluctuations and concerns related to the COVID-19 pandemic may have a significant impact on the availability of funding sources and the terms on which any funding may be available.

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 2022 and 2033. As of December 31, 2021, we expect to make total lease payments of $185.4 million through 2033.

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 the sections titled “Business—Our Collaboration, License and Grant Agreements” and “Business—Our Acquisition Agreements,” as well as Note 4—Acquisitions and Note 7—Collaboration and License Agreements to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. For information related to our future commitments under our facilities and manufacturing agreements, see Note 9—Commitments and Contingencies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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:

Operating Activities

During the year ended December 31, 2021, net cash used in operating activities was $47.6 million. This consisted primarily of net income of $528.6 million and non-cash charges of $203.3 million, offset by an unrealized gain of $138.0 million on our equity investment, payment of contingent consideration of $8.1 million for the achievement of a milestone related to our TomegaVax acquisition, a gain of $4.8 million from a sublease termination, and an increase in our net operating assets of $628.4 million. The change in our net operating assets of $628.4 million was primarily due to an increase in receivable from collaboration by $773.1 million resulting from our profit share from the sale of sotrovimab, and an increase in prepaid expenses and other current assets of $3.7 million, partially offset by an increase in deferred revenue of $92.0 million driven by the upfront fee received under the 2021 GSK Agreement, and an increase in accrued liabilities and other long-term liabilities of $58.5 million due to timing of payments. The non-cash charges of $203.3 million primarily consisted of $91.8 million for revaluation of contingent consideration, $83.8 million for stock-based compensation expense, $15.2 million for deferred income tax expense, $6.2 million for noncash lease expense, and $5.3 million for depreciation and amortization.

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During the year ended December 31, 2020, net cash used in operating activities was $190.9 million. This consisted primarily of a net loss of $298.7 million and payments on contingent consideration of $15.8 million related to the milestones achieved related to our Humabs acquisition, partially offset by a decrease in our net operating assets of $29.5 million and non-cash charges of $94.0 million. The change in our net operating assets of $29.5 million was primarily due to an increase in accrued liabilities and other long-term liabilities by $46.6 million, which was partially offset by a decrease in deferred revenue of $7.0 million related to revenue recognized from the Bill & Melinda Gates Foundation grants, a decrease in operating lease liabilities of $3.7 million due to lease payments, and an increase of $4.5 million in prepaid expenses and other current assets primarily related to prepayment of clinical trial cost for our research and development activities. The non-cash charges of $94.0 million primarily consisted of $38.4 million for revaluation of contingent consideration related to our Humabs acquisition, $16.8 million for the change in fair value of the derivative liability under the Alnylam Agreement, $27.6 million for stock-based compensation expense, and $4.4 million for depreciation and amortization.

Investing Activities

During the year ended December 31, 2021, net cash used in investing activities was $140.8 million. This consisted primarily of purchases of investments of $420.2 million and property and equipment of $21.8 million, partially offset by $301.2 million in proceeds received from investments that matured during the period.

During the year ended December 31, 2020, net cash used in investing activities was $9.9 million. This consisted primarily of purchases of investments of $403.8 million and purchases of property and equipment of $6.5 million, partially offset by $400.3 million in proceeds received from investments which matured during the period.

Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities was $100.3 million. This consisted primarily of proceeds received from the issuance of our common stock to Glaxo Group Limited (an affiliate of GSK) of $85.2 million in March 2021, from exercises of stock options of $13.1 million, and from issuance of common stock under our employee stock purchase plan of $2.3 million.

During the year ended December 31, 2020, net cash provided by financing activities was $529.5 million. This consisted primarily of proceeds received from the issuance of our common stock to GSK of $206.7 million in April 2020, the issuance of our common stock related to our follow-on offering of $323.2 million and from exercises of stock options of $4.1 million, partially offset by payments of contingent consideration related to our Humabs acquisition of $4.2 million.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our 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. The critical accounting policies, estimates and judgments that we believe to have the most significant impacts to our consolidated financial statements are described below. For more detail on our critical accounting policies, refer to Note 2—Summary of Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Revenue Recognition

Collaboration, License and Contract Revenue

Under Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, or ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods and services. To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy a performance obligation.

For collaborative arrangements that fall within the scope of ASC 808, Collaborative Arrangements, or ASC 808, we first determine which elements of the collaboration are deemed to be a performance obligation with a customer within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808 and are not

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subject to the guidance in ASC 606, we apply the revenue recognition model under ASC 606 or other guidance, as deemed appropriate. When we are considered an agent in elements of collaboration arrangements within the scope of ASC 808, we record our share of collaboration revenue in the period in which such sales occur. We are considered an agent when the collaboration partner controls the product before transfer to the customers and has the ability to direct the use of and obtain substantially all of the remaining benefits from the product. In these instances, collaboration revenue is based upon the revenue reported by our collaboration partners, net of cost of goods sold and allowable expenses (e.g. medical affairs, selling and marketing expenses) in the period. In order to record collaboration revenue, we utilize certain information from our collaboration partner, including revenue from the sale of the product, and costs incurred for development and sales activities. For the periods covered in the financial statements presented, there have been no material changes to prior period estimates of revenues and expenses.

We have entered into a number of license and collaboration agreements that fall within the scope of ASC 606. We evaluate the promised goods or services in these agreements to determine which ones represent distinct performance obligations. These agreements may include the following types of promised goods or services: (i) grants of licenses, (ii) performance of research and development services, and (iii) participation on joint research and/or development committees. They also may include options to obtain licenses to our intellectual property.

Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required. These agreements may include the following types of consideration: non-refundable upfront payments, reimbursement for research services, research, development or regulatory milestone payments, profit-sharing arrangements, and royalty and commercial sales milestone payments.

If there are multiple distinct performance obligations, we allocate the transaction price to each distinct performance obligation based on their estimated standalone selling prices, or SSP. We estimate the SSP for each distinct performance obligation by considering information such as market conditions, entity-specific factors, and information about our customer that is reasonably available to us. We consider estimation approaches that allow us to maximize the use of observable inputs. These estimation approaches may include the adjusted market assessment approach, the expected cost plus a margin approach or the residual approach. We also consider whether to use a different estimation approach or a combination of approaches to estimate the SSP for each distinct performance obligation. Developing various assumptions, including treatable patient population, expected market share, probability of success and product profitability, and discount rate based on weighted-average cost of capital, to determine the estimated SSP of a distinct performance obligation requires significant judgment. Accordingly, these assumptions are subject to uncertainty, and changing the methodology and/or assumptions could materially impact the estimated SSP for distinct performance obligations, and as a result, the amount and/or timing of revenue recognition.

For performance obligations satisfied over time, we estimate the efforts needed to complete the performance obligation and recognize revenue by measuring the progress towards complete satisfaction of the performance obligation using an input measure. For arrangements that include sales-based royalties, including commercial milestone payments based on pre-specified level of sales, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon the performance of the licensee.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the SSP of identified performance obligations, and estimating the progress towards satisfaction of performance obligations.

Contingent Consideration and Embedded Derivatives

Contingent consideration related to business combinations and obligations required to be accounted for as embedded derivative financial instruments under Topic ASC 815, Derivatives and Hedging, are considered to be Level 3 instruments that are initially measured at their estimated fair values on the transaction date and subsequently remeasured with changes recorded in the consolidated statement of operations each subsequent reporting period.

The estimated fair value of the contingent consideration related to the Humabs acquisition was determined by calculating the probability-weighted clinical and regulatory milestone payments based on the assessment of the likelihood

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and estimated timing that certain milestones would be achieved, as well as the use of Monte Carlo simulation model that includes significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs are the probabilities of achieving clinical and regulatory approval of the development projects and the subsequent commercial success and discount rates.

The estimated fair value of the contingent consideration related to our acquisition of TomegaVax was determined based on a Monte Carlo simulation model that includes significant estimates and assumptions pertaining to probability and timing to achieve the required share price of our common stock, expected volatility and discount rate. Although the TomegaVax acquisition was accounted for as an asset acquisition, such contingent consideration met the definition of an embedded derivative financial instrument.

For the periods covered in the financial statements presented, there have been no material changes to prior period estimates of the fair value of our contingent consideration liability.

Recent Accounting Pronouncements Not Yet Adopted

See Note 2—Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition or results of operations.