.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s Telephone Number, Including Area Code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 2, 2022, the registrant had
Table of Contents
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Page |
PART I. |
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Item 1. |
5 |
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Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited) |
5 |
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6 |
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7 |
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8 |
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9 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
10 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
35 |
Item 3. |
45 |
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Item 4. |
46 |
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PART II. |
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Item 1. |
47 |
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Item 1A. |
47 |
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Item 2. |
87 |
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Item 3. |
87 |
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Item 4. |
87 |
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Item 5. |
87 |
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Item 6. |
88 |
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89 |
1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, research and development, planned clinical trials and preclinical studies, technology platforms, the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, the potential benefits of collaborations, projected costs, prospects, plans, objectives of management, expected market growth, the timing of availability of clinical data, program updates and data disclosures, the ability of sotrovimab to treat and/or prevent COVID-19, the expected number of therapeutic doses that Vir will be able to supply to patients, and the ability of sotrovimab to maintain activity against circulating COVID-19 variants or subvariants of concern and interest, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. Other sections of this report may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.
In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the section titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
2
RISK FACTOR SUMMARY
Investing in our securities involves a high degree of risk. Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, as well as other risks that we face, can be found under the heading “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q.
Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common stock. These risks include, among others, the following:
3
4
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
VIR BIOTECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
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March 31, |
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December 31, |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Restricted cash and cash equivalents, current |
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Receivable from collaboration |
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Equity investments |
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Prepaid expenses and other current assets |
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Total current assets |
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Intangible assets, net |
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Goodwill |
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Property and equipment, net |
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Operating right-of-use assets |
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Restricted cash and cash equivalents, noncurrent |
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Long-term investments |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Accrued and other liabilities |
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Deferred revenue, current portion |
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Contingent consideration, current portion |
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Total current liabilities |
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Deferred revenue, noncurrent |
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Operating lease liabilities, noncurrent |
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Contingent consideration, noncurrent |
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Deferred tax liability |
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Other long-term liabilities |
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TOTAL LIABILITIES |
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STOCKHOLDERS’ EQUITY: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings (accumulated deficit) |
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( |
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
VIR BIOTECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Revenue: |
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Collaboration revenue |
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$ |
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$ |
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Contract revenue |
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Grant revenue |
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Total revenue |
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Operating expenses: |
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Cost of revenue |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Income (loss) from operations |
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( |
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Other income (expense): |
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Change in fair value of equity investments |
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( |
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Interest income |
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Other income (expense), net |
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( |
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Total other expense |
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( |
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( |
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Income (loss) before provision for income taxes |
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( |
) |
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Provision for income taxes |
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( |
) |
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( |
) |
Net income (loss) |
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$ |
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$ |
( |
) |
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Net income (loss) per share, basic |
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$ |
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$ |
( |
) |
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Net income (loss) per share, diluted |
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$ |
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$ |
( |
) |
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Weighted-average shares outstanding, basic |
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Weighted-average shares outstanding, diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
VIR BIOTECHNOLOGY, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Net income (loss) |
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$ |
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$ |
( |
) |
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Other comprehensive income (loss): |
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Unrealized loss on investments |
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( |
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( |
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Amortization of actuarial (loss) gain |
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( |
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Other comprehensive loss |
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( |
) |
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( |
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Comprehensive income (loss) |
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$ |
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$ |
( |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
VIR BIOTECHNOLOGY, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(unaudited)
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Accumulated |
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Additional |
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Other |
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Retained Earnings |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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(Accumulated |
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Stockholders' |
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Share |
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Amount |
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Capital |
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Loss |
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Deficit) |
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Equity |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of common stock in connection with a |
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— |
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Vesting of restricted common stock |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders' |
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Share |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Issuance of common stock in connection with a |
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— |
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— |
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— |
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Vesting of restricted common stock |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at March 31, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
8
VIR BIOTECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Three Months Ended March 31, |
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2022 |
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2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of intangible assets |
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Amortization of premiums (accretion of discounts) on investments, net |
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Payment for contingent consideration in excess of acquisition date fair value |
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( |
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Noncash lease expense |
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Change in fair value of equity investments |
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Change in estimated fair value of contingent consideration |
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( |
) |
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Stock-based compensation |
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Other |
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Changes in operating assets and liabilities: |
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Receivable from collaboration |
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( |
) |
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Prepaid expenses and other current assets |
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( |
) |
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Other assets |
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( |
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( |
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Accounts payable |
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( |
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Accrued liabilities and other long-term liabilities |
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( |
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Operating lease liabilities |
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( |
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Deferred revenue |
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Net cash provided by (used in) operating activities |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Proceeds from sale of an equipment |
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— |
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Purchases of property and equipment |
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( |
) |
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( |
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Purchases of investments |
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( |
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( |
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Maturities of investments |
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Net cash provided by (used in) investing activities |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from issuance of common stock in connection with a grant agreement |
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Proceeds from issuance of common stock in connection with a collaboration agreement |
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Payment of principal on financing lease obligation |
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( |
) |
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( |
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Proceeds from exercise of stock options |
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Payment of contingent consideration |
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( |
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Net cash provided by financing activities |
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Net increase in cash, cash equivalents and restricted cash and cash equivalents |
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Cash, cash equivalents and restricted cash and cash equivalents at beginning of period |
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Cash, cash equivalents and restricted cash and cash equivalents at end of period |
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$ |
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$ |
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NONCASH INVESTING AND FINANCING ACTIVITIES: |
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Property and equipment purchases included in accounts payable and accrued liabilities |
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$ |
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$ |
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Operating lease liabilities obtained in exchange of right-of-use asset |
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$ |
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$ |
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RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash and cash equivalents, current |
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Restricted cash and cash equivalents, noncurrent |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
9
VIR BIOTECHNOLOGY, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Organization
Vir Biotechnology, Inc. (“Vir” or the “Company”) is a commercial-stage immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases. Its 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 coronavirus disease 2019 (“COVID-19”), hepatitis B virus (“HBV”), influenza A virus, and human immunodeficiency virus (“HIV”). Vir has assembled four technology platforms that are designed to stimulate and enhance the immune system by exploiting critical observations of natural immune processes.
Sales Agreement
In November 2020, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), under which the Company may from time to time offer and sell shares of its common stock for an aggregate offering price of up to $
Need for Additional Capital
2. Summary of Significant Accounting Policies
Basis of Presentation
The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. The unaudited condensed consolidated financial statements include the accounts of Vir and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial information. The condensed consolidated results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other future annual or interim period.
Certain information and footnote disclosures typically included in the Company’s annual consolidated financial statements have been condensed or omitted. As such, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.
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VIR BIOTECHNOLOGY, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
Use of Estimates
Concentration of Credit Risk, Credit Loss and Other Risks and Uncertainties
The Company has implemented a number of plans and policies designed to address and mitigate the impact of the ongoing COVID-19 pandemic on its business. The Company anticipates that the COVID-19 pandemic and geopolitical events, including civil or political unrest (such as the ongoing war between Ukraine and Russia), will continue to have an impact on the clinical development timelines for some of its clinical programs. The extent to which the COVID-19 pandemic impacts the Company’s business, clinical development and regulatory efforts, corporate development objectives and the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time.
Although the Company received Emergency Use Authorization (“EUA”), temporary authorization or marketing approval for sotrovimab (under the brand name Xevudy®), it is still subject to a number of other challenges and risks similar to other biopharmaceutical companies in the early stage, including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its other product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of sotrovimab and other product candidates and protection of proprietary technology. If the Company does not successfully obtain regulatory approval, commercialize or partner sotrovimab or any of its other product candidates, it will be unable to generate significant revenue from product sales or maintain profitability. In addition, to the extent the ongoing COVID-19 pandemic, including the emergence of new variants or subvariants, adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and investments. Cash and cash equivalents are deposited in checking and sweep accounts at a financial institution. Such deposits may, at times, exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.
The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and investments, and issuers of the investments to the extent recorded on the unaudited condensed consolidated balance sheets. As of March 31, 2022, the Company has no off-balance sheet concentrations of credit risk.
The Company is exposed to credit losses primarily through receivables from customers and collaborators and through its available-for-sale debt securities. The Company’s expected loss allowance methodology for the receivables is developed using historical collection experience, current and future economic market conditions, a review of the current aging status and financial condition of the entities. Specific allowance amounts are established to record the appropriate allowance for customers that have a higher probability of default. Balances are written off when determined to be uncollectible. The Company’s expected loss allowance methodology for the debt securities is developed by reviewing the extent of the unrealized loss, the size, term, geographical location, and industry of the issuer, the issuers’ credit ratings and any changes in those ratings, as well as reviewing current and future economic market conditions and the issuers’ current status and financial condition. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and interest rate policies and determined that the estimate of credit losses was not significantly impacted. During the three months ended March 31, 2022 and 2021, there was
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VIR BIOTECHNOLOGY, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
Investments
Investments include available-for-sale debt securities and equity investments, which are carried at estimated fair value.
Available-for-Sale Debt Securities
The Company’s valuations of marketable securities are generally derived from independent pricing services based on quoted prices in active markets for similar securities at period end. Generally, investments with original maturities beyond three months at the date of purchase and which mature at, or less than 12 months from, the unaudited condensed consolidated balance sheet date are considered short-term investments, with all others considered to be long-term investments. Unrealized gains and losses deemed temporary in nature are reported as a component of accumulated comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the unaudited condensed consolidated statements of operations. The cost of securities sold is based on the specific identification method.
Equity Investments
Under Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, the Company measures its investment in equity securities at fair value at each reporting date based on the market price at period end if it has a readily determinable fair value. Otherwise, the investments in equity securities are measured at cost less impairment, adjusted for observable price changes for identical or similar investments of the same issuer unless the Company has significant influence or control over the investee. Changes in fair value resulting from observable price changes are presented as change in fair value of equity investments and changes in fair value resulting from foreign currency translation are included in other income (expense), net on the unaudited condensed consolidated statements of operations.
Restricted Cash and Cash Equivalents