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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 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, XtendTM technology.

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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% (p<0.001) 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.

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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.

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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 Note6—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 revenuefrom 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:

Year Ended December 31,

(in thousands)

Revenues:

License revenue from a related party — 22,747 (22,747 )

Operating expenses:

Other income (expense):

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:

Year Ended December 31,

(in thousands)

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:

Year Ended December 31,

(in thousands)

Net cash provided by (used in):

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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rate and market price sensitivities.

Interest Rate Risk

We had cash, cash equivalents and restricted cash and cash equivalents of $363.4 million as of December 31, 2021, which primarily consisted of money market funds. We also had short- and long-term investments of $418.6 million as of December 31, 2021. The primary objective of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. Because our investments are primarily short-term in duration and our holdings in U.S. government treasury bonds mature prior to our expected need for liquidity, we believe that our exposure to interest rate risk is not significant, and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We had no debt outstanding as of December 31, 2021.

Foreign Currency

The functional currency of our foreign subsidiaries is the U.S. dollar. Monetary assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at period-end exchange rates and non-monetary assets and liabilities are translated to U.S. dollars using historical exchange rates. Revenue and expenses are translated at average rates throughout the respective periods. As of the date of this Annual Report on Form 10-K, we are exposed to foreign currency risk primarily related to the operations of our Swiss and Australian subsidiaries and consequently the Swiss Franc and Australian dollar. Transaction gains and losses are included in other income (expenses), net on the consolidated statements of operations and were not material for the years ended December 31, 2021, 2020 and 2019.

Equity Investment Risk

We hold ordinary shares of Brii Bio Parent, which we acquired in connection with our collaboration, option and license agreement. These equity securities are measured at fair value with any changes in fair value recognized in our consolidated statements of operations. The fair value of these equity securities was approximately $143.1 million as of December 31, 2021. Changes in the fair value of these equity securities are impacted by the volatility of the stock market and changes in general economic conditions, among other factors. A hypothetical 10% increase or decrease in the stock prices of these equity securities would increase or decrease their fair value as of December 31, 2021 by approximately $14.3 million.

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Item 8. Financial Statements and Supplementary Data.

Page

Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 138

Notes to Consolidated Financial Statements 145

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

of Vir Biotechnology, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vir Biotechnology, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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/s/ Ernst & Young, LLP

We have served as the Company’s auditor since 2017.

Redwood City, California

February 28, 2022

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VIR BIOTECHNOLOGY, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

December 31,

ASSETS

CURRENT ASSETS:

Restricted cash and cash equivalents, current 8,594 7,993

Receivable from collaboration 773,079 —

Prepaid expenses and other current assets 73,003 27,511

Restricted cash and cash equivalents, noncurrent 7,006 6,919

Long-term investments 201,388 —

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Deferred revenue, current portion 98,209 6,451

Contingent consideration, current portion — 10,600

Commitments and contingencies (Note 9)

STOCKHOLDERS’ EQUITY:

Accumulated other comprehensive loss (1,099 ) (1,278 )

The accompanying notes are an integral part of these consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Consolidated Statements of Operations

(in thousands, except share and per share data)

Year Ended December 31,

Revenues:

Collaboration revenue $ 917,194 $ — $ —

License revenue from a related party — 22,747 —

Operating expenses:

Cost of revenue 65,865 — —

Other income (expense):

Change in fair value of equity investments 138,049 — —

Net income (loss) per share, basic $ 4.07 $ (2.51 ) $ (5.76 )

Net income (loss) per share, diluted $ 3.96 $ (2.51 ) $ (5.76 )

The accompanying notes are an integral part of these consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

Year Ended December 31,

Other comprehensive income (loss):

Unrealized (losses) gains on investments (957 ) (50 ) 149

Amortization of actuarial loss 55 23 —

Adjustment to projected benefit obligations, net of tax 1,081 (650 ) (736 )

Other comprehensive income (loss) 179 (677 ) (587 )

The accompanying notes are an integral part of these consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

Settlement of fractional shares from reverse stock split — — — — (3 ) — — (3 )

Stock-based compensation — — — — 8,719 — — 8,719

Other comprehensive loss — — — — — (587 ) — (587 )

Issuance of common stock for cashless exercise of warrants — — 211,774 — — — — —

Other comprehensive loss — — — — — (677 ) — (677 )

Vesting of restricted common stock — — 89,261 — — — — —

Other comprehensive income — — — — — 179 — 179

The accompanying notes are an integral part of these consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Impairment of intangible assets — 832 —

Change in fair value of equity investments (138,049 ) — —

Change in estimated fair value of contingent consideration 91,848 38,394 8,330

Initial fair value of derivative liability — — 13,599

Change in estimated fair value of derivative liability — 16,796 (1,150 )

Change in deferred income taxes 15,186 (52 ) —

Gain from a sublease termination (4,844 ) — —

Common stock issued in connection with license agreement — — 617

Changes in operating assets and liabilities:

Receivable from collaboration (773,079 ) — —

Prepaid expenses and other current assets (3,665 ) (4,475 ) (4,619 )

Operating lease liabilities (535 ) (3,684 ) —

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from disposal of an asset held for sale — 180 —

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock, net of issuance costs — 323,214 126,411

Proceeds received from financing lease obligation — — 1,202

Payment of contingent consideration — (4,248 ) —

Payment of principal on financing lease obligations (259 ) (250 ) (95 )

Proceeds from repayment of promissory notes — — 3,265

Cash paid in lieu of fractional shares related to reverse stock split — — (3 )

NONCASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for payment of contingent consideration $ 1,860 $ — $ —

Restricted cash and cash equivalents, current 8,594 7,993 6,181

Restricted cash and cash equivalents, noncurrent 7,006 6,919 7,300

The accompanying notes are an integral part of these consolidated financial statements.

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VIR BIOTECHNOLOGY, INC.

Notes to 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.

In May 2021, the U.S. Food and Drug Administration (the "FDA") granted an Emergency Use Authorization (“EUA”) for 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. The Company also received a positive scientific opinion from the Committee for Human Medicinal Products in the European Union (“EU”) for sotrovimab. 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.

Initial Public Offering

On October 10, 2019, the Company completed its initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company issued and sold 7,142,858 shares of its common stock at an initial offering price of $20.00 per share. As a result of the IPO, the Company received approximately $126.4 million in net proceeds, after deducting underwriting discounts, commissions and offering expenses. At the closing of the IPO, 88,112,733 shares of outstanding convertible preferred stock were automatically converted into 88,112,733 shares of common stock and a warrant to purchase 244,444 shares of convertible preferred stock was converted into a warrant to purchase 244,444 shares of common stock.

Follow-On Offering

On July 10, 2020, the Company issued and sold 8,214,285 shares of the Company’s common stock pursuant to a registration statement on Form S-1 (File No. 333-239689) and a registration statement on Form S-1 filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”) (File No. 333-239747) (collectively, the “Registration Statements”). The Registration Statements became effective on July 7, 2020. The price of the shares sold in the follow-on offering was $42.00 per share and the Company received total gross proceeds from the offering of approximately $345.0 million. After deducting underwriting discounts and commissions of approximately $20.7 million and offering expenses of approximately $1.1 million, the net proceeds were approximately $323.2 million.

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 $300.0 million, through or to Cowen, acting as sales agent or principal. The shares will be offered and sold under the Company’s shelf registration statement on Form S-3 (the “S-3 Registration Statement”) and a related prospectus filed with the Securities and Exchange Commission on November 10, 2020. The Company 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.

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VIR BIOTECHNOLOGY, INC.

Notes to Consolidated Financial Statements

Need for Additional Capital

Although the Company recorded net income for the year ended December 31, 2021, it has otherwise incurred accumulated net losses since inception. The Company expects its earnings to be volatile and may continue to incur net losses over the next several years. As of December 31, 2021, the Company had an accumulated deficit of $138.6 million. Management expects to incur additional losses in the future to conduct research and development and recognizes the need to raise additional capital to fully implement its business plan. The Company had, excluding restricted cash, $909.5 million of cash, cash equivalents, and investments as of December 31, 2021, and after excluding the equity investment in Brii Biosciences Limited ("Brii Bio Parent"), the Company had $766.4 million. Based on the Company’s current operating plan, management believes that the $766.4 million as of December 31, 2021 will be sufficient to fund its operations through at least the next 12 months from the issuance date of these consolidated financial statements.

2.

Summary of Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. The consolidated financial statements include the accounts of Vir and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Monetary assets and liabilities of foreign subsidiaries are translated into U.S. dollars at period-end exchange rates and non-monetary assets and liabilities are translated to U.S. dollars using historical exchange rates. Revenue and expenses are translated at average rates throughout the respective periods. Transaction gains and losses are included in other income (expense), net on the consolidated statements of operations, and were immaterial for the years ended December 31, 2021, 2020 and 2019.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.

Segments

The Company operates as one reportable segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for purposes of allocating resources.

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 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, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States, Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease.

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VIR BIOTECHNOLOGY, INC.

Notes to Consolidated Financial Statements

Although the Company received 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 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 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 consolidated balance sheets. As of December 31, 2021 and 2020, 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 determined that the estimate of credit losses was not significantly impacted. There was no allowance for losses on available-for-sale debt securities attributable to credit risk for the years ended December 31, 2021 and 2020.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents, which consist of amounts invested in money market funds, are stated at fair value.

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 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 consolidated statements of operations. The cost of securities sold is based on the specific identification method.

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Notes to Consolidated Financial Statements

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 consolidated statements of operations.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents represent money market funds to secure standby letters of credit and security deposits with financial institutions, both under office and laboratory space lease agreements. Additionally, funds received from certain grants are restricted as to their use and are therefore classified as restricted cash and cash equivalents.

Property and Equipment, Net

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized over the lesser of their useful lives or the remaining life of the lease. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations in the period realized. Maintenance and repairs are charged to operations as incurred.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net undiscounted cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. No material impairment losses have been incurred to date.

Acquired Intangible Assets

The Company’s intangible assets were acquired via business combinations or asset acquisitions. Indefinite-lived intangible assets represent the estimated fair value assigned to in-process research and development (“IPR&D”) acquired in a business combination. The Company reviews indefinite-lived intangible assets for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, then it is written down to its adjusted fair value. As of December 31, 2021, there have been no such impairments. For IPR&D, if a product candidate derived from the indefinite-lived intangible asset is developed and commercialized, the useful life will be determined, and the carrying value will be amortized prospectively over that estimated useful life. Alternatively, if a product candidate is abandoned, the carrying value of the intangible asset will be charged to research and development expenses. IPR&D assets acquired as part of an asset acquisition are recorded at cost and expensed immediately if they have no alternative future uses.

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Notes to Consolidated Financial Statements

Finite-lived intangible assets acquired are initially recognized at their fair value at the acquisition date. Amortization is computed using the straight-line method over the estimated useful lives of the respective finite-lived intangible assets, generally seven to 15 years. Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired in a business combination. The Company tests goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that this asset may be impaired.

Revenue Recognition

Collaboration, License and Contract Revenue

Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when the Company’s customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods and services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs 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 the Company satisfies a performance obligation.

For collaborative arrangements that fall within the scope of ASC 808, Collaborative Arrangements (“ASC 808”), the Company first determines 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 subject to the guidance in ASC 606, the Company applies the revenue recognition model under ASC 606 or other guidance, as deemed appropriate. When the Company is considered an agent in elements of collaboration arrangements within the scope of ASC 808, it records its share of collaboration revenue in the period in which such sales occur. The Company is 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 the Company's 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, the Company utilizes certain information from its 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.

The Company has entered into a number of license and collaboration agreements that fall within the scope of ASC 606. The Company evaluates 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 the Company’s intellectual property.

Prior to recognizing revenue, the Company makes 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.

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VIR BIOTECHNOLOGY, INC.

Notes to Consolidated Financial Statements

If there are multiple distinct performance obligations, the Company allocates the transaction price to each distinct performance obligation based on their estimated standalone selling prices (“SSP”). The Company estimates the SSP for each distinct performance obligation by considering information such as market conditions, entity-specific factors, and information about its customer that is reasonably available. The Company considers estimation approaches that allow it 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. The Company also considers 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, discount rate based on weighted-average cost of capital) to estimate the SSP of a distinct performance obligation requires significant judgment.

For performance obligations satisfied over time, the Company estimates the efforts needed to complete the performance obligation and recognizes 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, the Company recognizes 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.

Grant Revenue

Grants received, including cost reimbursement agreements, are assessed to determine if the agreement should be accounted for as an exchange transaction or a contribution. An agreement is accounted for as a contribution if the resource provider does not receive commensurate value in return for the assets transferred. Contributions are recognized as grant revenue when all donor-imposed conditions have been met.

Research and Development Expenses

To date, research and development expenses have related primarily to discovery efforts and preclinical and clinical development of 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. Research and development expenses include expenses related to license and collaboration agreements; contingent consideration 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, facilities maintenance, and depreciation and amortization.

The Company has and may continue to acquire the rights to develop and commercialize new product candidates from third parties. Upfront payments and research and development milestone payments made in connection with acquired license or product rights are expensed as incurred, provided that they do not relate to a regulatory approval milestone or assets acquired in a business combination.

The Company’s expense accruals for clinical trials and manufacturing are based on estimates of contracted services provided by third-party vendors not yet billed. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of its outstanding obligations to those third parties as of the period end. The accrual estimates are based on a number of factors, including the Company’s 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. The Company obtains information regarding unbilled services directly from these service providers and performs procedures to support its estimates based on its internal understanding of the services provided to date. However, the Company may also be required to estimate these services based on information available to its internal clinical and manufacturing administrative staff if such information is not able to be obtained timely from its service providers.

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Notes to Consolidated Financial Statements

Stock-based Compensation

The Company recognizes stock-based compensation to employees and non-employees over the requisite service period based on the grant-date fair value of the awards. The Company calculates the estimated fair value of stock options and employees' purchase rights under the Company's 2019 employee stock purchase plan ("ESPP") using the Black-Scholes valuation model, which requires the use of subjective assumptions including volatility and expected term, among others. The fair value of restricted stock awards ("RSAs") and restricted stock units ("RSUs") is based on the market value of the Company's common stock on the date of grant. Stock-based compensation is recognized using the straight-line method for awards that vest only upon the employee’s or non-employee’s continued service to the Company. Stock-based compensation expense of the employees' purchase rights under the ESPP is recognized over the offering period. Forfeitures are recognized as they occur.

Acquisitions

Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, assets acquired, including IPR&D projects, and liabilities assumed are recorded at their respective fair values as of the acquisition date. Any excess fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Contingent consideration obligations incurred in connection with the business combination are recorded at their fair values on the acquisition date and are remeasured each subsequent reporting period until the related contingencies are resolved and are classified as contingent consideration on the consolidated balance sheets. The changes in fair values of contingent consideration related to the achievement of various milestones are recorded within research and development expenses or selling, general and administrative expenses based on the nature of the relevant underlying activities.

When the Company determines that entities acquired do not meet the definition of a business, the transaction is accounted for as an acquisition of assets. Therefore, the consideration paid to acquire IPR&D is expensed, and no goodwill is recorded. Any contingent consideration is generally recognized only when it becomes payable or is paid.

Embedded Derivatives

The Company evaluates its acquisitions, collaborative arrangements and other business development transactions to determine if embedded components of these contracts meet the definition of a derivative under ASC 815, Derivatives and Hedging. In general, embedded derivatives are required to be bifurcated from the host instrument if (i) the embedded feature is not clearly and closely related to the host contract and (ii) the embedded feature, if considered a freestanding instrument, meets the definition of a derivative. Embedded derivatives are reported on the consolidated balance sheets at their estimated fair values. Contingent consideration related to asset acquisitions that meet the definition of an embedded derivative is classified as contingent consideration on the consolidated balance sheets. Any change in estimated fair values, as determined at each measurement period, are recorded in the consolidated statements of operations based on the nature of the related contingencies.Changes in fair values of embedded derivatives related to the achievement of various milestones for product candidates are recorded within research and development expense or selling, general and administrative expenses based on the nature of the relevant underlying activities. Otherwise, changes in fair values are recorded within other income (expense), net.

Leases

In accordance with ASU No. 2016-02 (Topic 842), Leases, the Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset. Right-of-use ("ROU") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable. On the lease commencement date, the Company estimates and includes in its lease payments any lease incentive amounts based on future events when (1) the events are within the Company’s control and (2) the event triggering the right to receive the incentive is deemed reasonably certain to occur. If the lease incentive received is greater or less than the amount recognized at lease commencement, the Company recognizes the difference as an adjustment to right-of-use asset and/or lease liability, as applicable.

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Notes to Consolidated Financial Statements

As the implicit rate in the Company's leases is generally unknown, the Company uses an incremental borrowing rate estimated based on the information available at the lease commencement date in determining the present value of future lease payments. When calculating its estimated incremental borrowing rates, the Company considers its credit risk, the lease term, the total lease payments and the impact of collateral, as necessary. The lease terms may include options to extend or terminate the lease when the Company is reasonably certain it will exercise such options. ROU assets and lease liabilities are remeasured upon certain modifications to leases using the present value of remaining lease payments and estimated incremental borrowing rate upon lease modification. Rent expense for the Company's operating leases is recognized on a straight-line basis within operating expenses over the reasonably assured lease term.

The Company elected to not separate lease and non-lease components for any leases within its existing classes of assets and, as a result, accounts for the lease and non-lease components as a single lease component. The Company has also elected to not apply the recognition requirement to any leases within its existing classes of assets with a term of 12 months or less.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and net operating losses and credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse. Deferred income tax assets are reduced, as necessary, by a valuation allowance when management determines it is more likely than not that some or all of the tax benefits will not be realized.

The Company’s tax positions are subject to income tax audits. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not to be realized upon settlement with the taxing authority. The Company evaluates uncertain tax positions on a regular basis. The evaluations are based on several factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of the audit, and effective settlement of audit issues. The provision for income taxes includes the effects of any accruals that the Company believes are appropriate, as well as any related net interest and penalties.

Net Income (Loss) Per Share

Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net income per common share is computed by dividing the net income by the sum of the weighted average number of common shares outstanding during the period plus any potential dilutive effects of common stock equivalents outstanding during the period calculated in accordance with the treasury stock method.

New Accounting Pronouncement Not Yet Adopted

In November 2021, the Financial Accounting Standards Board ("FASB") issued ASU No. 2021-10, Government Assistance (Topic 832) (“ASU 2021-10”), which adds certain disclosure requirements with respect to government assistance, including (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on financial statements. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2021-10 may have on its consolidated financial statements and related disclosures.

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Notes to Consolidated Financial Statements

3.

Fair Value Measurements

The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

•

Level 1: Inputs which include quoted prices in active markets for identical assets and liabilities.

•

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of the Company’s financial instruments, including receivable from collaboration, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities.

Cash Equivalents and Available-for-Sale Debt Securities

The following tables summarize the Company’s Level 1 and Level 2 financial assets measured at fair value on a recurring basis by level within the fair value hierarchy:

(in thousands)

Assets:

(1) Includes $15.6 million of restricted cash equivalents.

(in thousands)

Assets:

(1) Includes $14.9 million of restricted cash equivalents.

Accrued interest receivable excluded from both the fair value and amortized cost basis of the available-for-sale debt securities are presented within prepaid expenses and other current assets, and other assets in the consolidated balance sheets. Accrued interest receivable amounted to $1.1 million and $0.8 million as of December 31, 2021 and 2020, respectively. The Company did not write off any accrued interest receivable during the years ended December 30, 2021 and 2020.

The Company recognized total net unrealized loss of $0.9 million and net unrealized gain of $0.1 million in accumulated other comprehensive income (loss) as of December 31, 2021 and 2020, respectively. The gross unrealized losses related to U.S. government treasuries as of December 31, 2021 were due to changes in interest rates. As of December 31, 2021 and 2020, there were no investments that have been in a continuous unrealized loss position for longer than 12 months. The Company determined that the gross unrealized losses on our investments as of December 31, 2021 were temporary in nature. The Company currently does not intend, and it is highly unlikely that it will be required, to sell these securities before recovery of their amortized cost basis. As of December 31, 2021, no securities have contractual maturities of longer than two years.

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VIR BIOTECHNOLOGY, INC.

Notes to Consolidated Financial Statements

Equity Investments

As of December 31, 2021, the Company's equity investment consisted solely of ordinary shares of Brii Bio Parent. The Company acquired the securities as partial consideration for entering into the collaboration, option and license agreement (the “Brii Agreement”) with Brii Bio Parent and Brii Biosciences Offshore Limited (“Brii Bio”) in May 2018. The Company concluded it does not have a controlling interest or significant influence over Brii Bio based on its ownership percentage and other factors. See further discussion in Note 7—Collaboration and License Agreements. In July 2021, Brii Bio Parent completed its initial public offering ("Brii Bio Parent IPO") on the Stock Exchange of Hong Kong Limited, prior to which the securities were accounted for as equity securities without a readily determinable fair value. Upon the completion of the Brii Bio Parent IPO, the securities were considered to be marketable equity securities and subsequently remeasured at fair value at each reporting date. The Company classifies its equity investment in Brii Bio Parent as a Level 1 asset within the fair value hierarchy, as the value is based on a quoted market price in an active market. As of December 31, 2021, the Company remeasured the equity investment at a fair value of $143.1 million. For the year ended December 31, 2021, the Company recognized an unrealized gain of $138.0 million as other income in the consolidated statement of operations, net of an unrealized loss of $0.6 million related to foreign currency translation for the period.

Contingent Consideration

Contingent consideration includes potential milestone payments in connection with the acquisitions of Humabs Biomed SA (“Humabs”) and TomegaVax, Inc. (“TomegaVax”). See further discussion in Note 4—Acquisitions. The Company classifies the contingent consideration as Level 3 financial liabilities within the fair value hierarchy as of December 31, 2021 and 2020.

The estimated fair value of the contingent consideration related to the Humabs acquisition was determined by calculating the probability-weighted clinical, regulatory, and commercial milestone payments based on the assessment of the likelihood and estimated timing that certain milestones would be achieved. In December 2021, the Company achieved the regulatory milestone of $35.0 million related to sotrovimab. As of December 31, 2021, the Company calculated the estimated fair value of the remaining clinical and regulatory milestones related to the HBV product using the following significant unobservable inputs:

Unobservable input Range(Weighted-Average)1

Discount rates 3% - 5% (4%)

Probability of achievement 22% - 40% (31%)

(1) Unobservable inputs were weighted based on the relative fair value of the clinical and regulatory milestone payments.

For the commercial milestones, the Company used a Monte Carlo simulation because of the availability of a discrete revenue forecast. During the year ended December 31, 2021, the Company achieved the specified sales milestones totaling $60.0 million related to sotrovimab. As of December 31, 2021, the Monte Carlo simulation assumed a commercial product launch and associated discrete revenue forecast, as well as the following significant unobservable inputs for the remaining commercial milestones related to the HBV product:

Unobservable input Value

Volatility 65%

Discount rate 11%

Probability of achievement 22%

The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due. As of December 31, 2021 and 2020, the estimated fair value of the contingent consideration related to the Humabs acquisition was $17.1 million and $29.2 million, respectively, with changes in the estimated fair value recorded in research and development expense, and selling, general and administrative expense in the consolidated statements of operations.

The estimated fair value of the contingent consideration related to the TomegaVax acquisition was determined by using a Monte Carlo simulation model which included estimates of both the probability and timing to achieve the required per share price of the Company’s common stock, and incorporates assumptions as to expected volatility and discount rate. The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due. Although the TomegaVax acquisition was accounted for as an asset acquisition, such contingent consideration met the

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Notes to Consolidated Financial Statements

definition of an embedded derivative financial instrument. In February 2021, the Company achieved one of the milestones related to a specified per-share price of its common stock resulting in a $10.0 million payable to the former TomegaVax’s stockholders which was paid in July 2021. As of December 31, 2021, the fair value of the remaining contingent consideration was estimated using the following significant unobservable inputs:

Unobservable input Value

Discount rate 0.1%

As of December 31, 2021 and 2020, the estimated fair value of the contingent consideration related to the TomegaVax acquisition was $5.7 million and $6.8 million, respectively, with changes in the estimated fair value recorded in other income (expense), net in the consolidated statements of operations.

The estimated fair value of the contingent consideration related to the Humabs and TomegaVax acquisitions involves significant estimates and assumptions which give rise to measurement uncertainty.

The following table sets forth the changes in the estimated fair value of the Company’s Level 3 financial liabilities (in thousands):

ContingentConsideration

Changes in fair value 91,848

4.

Acquisitions

Acquisition of TomegaVax

In September 2016, the Company entered into an agreement and plan of merger (“TomegaVax Merger Agreement”) to acquire all of the equity interests of TomegaVax. The primary asset purchased in the acquisition was an in-process cytomegalovirus vector-based vaccine platform for use in HBV, HIV, and tuberculosis. The acquisition was accounted for as an asset purchase. The Company recorded the cash purchase price of $5.2 million in research and development expenses and incurred transaction costs of $0.5 million in 2016.

In connection with the entry into the TomegaVax Merger Agreement, the Company also entered into a letter agreement with TomegaVax (the “TomegaVax Letter Agreement”), which provides for certain payments to TomegaVax’s former stockholders before September 2024, in each case so long as the Company is continuing to pursue the development of the TomegaVax technology. Under the terms of the TomegaVax Letter Agreement, the Company will be required to pay to the former stockholders of TomegaVax milestone payments of up to an aggregate of $30.0 million if the per-share price of the Company’s publicly traded common stock, or implied price per-share of the Company’s Series A-1 convertible preferred stock (or common stock upon conversion) upon a certain asset sale, merger or stock sale, is at least $45 (as adjusted in the case of any stock dividend, stock split or other similar recapitalization), with the amount of such payments determined by the share price and/or the stage of the Company’s clinical development at the time of the relevant event triggering the payment. The share price of the Company’s publicly traded common stock will be determined using the average of the daily volume-weighted average trading price of the Company’s common stock for each trading day during a consecutive 90-day period. The foregoing payments are payable (i) during any date after the completion of an initial public offering by the Company or any successor or affiliate controlling the TomegaVax technology, provided that no payment will be due before the first anniversary of the initial public offering, (ii) upon the sale of all assets related to the TomegaVax technology or (iii) upon a merger or stock sale of the Company or any successor or affiliate controlling the TomegaVax technology, in each case subject to certain conditions with respect to the timing of the payments. The payments under the TomegaVax Letter Agreement can be made in cash or shares of the Company’s common stock, at the discretion of the Company’s board of directors.

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Notes to Consolidated Financial Statements

In February 2021, the Company achieved one of the milestones related to the specified per-share price of its common stock, which resulted in a $10.0 million payable to TomegaVax’s former stockholders. In July 2021, the Company made the milestone payment to the former TomegaVax stockholders through a combination of $8.1 million in cash and the issuance of 42,737 shares of common stock with a total fair value of $1.9 million. The remaining milestone payments of up to $20.0 million in the aggregate will be triggered if (i) the per-share price of the Company’s publicly traded common stock is at least $45 (as adjusted in the case of any stock dividend, stock split or other similar recapitalization) and upon the achievement of a certain milestone related to the stage of the Company’s clinical development at the time of the relevant event triggering the payment and/or (ii) the per-share price of the Company’s publicly traded common stock is at least $90 (as adjusted in the case of any stock dividend, stock split or other similar recapitalization).

The Company determined that the future milestone payments contain net settlement provisions and therefore, they were required to be accounted for as embedded derivatives under the relevant accounting guidance. As of December 31, 2021, the fair value of the embedded derivative was $5.7 million and is included in the contingent consideration liability on the consolidated balance sheet.

Acquisition of Humabs

In August 2017, the Company acquired all of the outstanding equity of Humabs, a private Swiss company, which discovers and develops monoclonal antibodies (“mAbs”) derived from individuals whose immune systems have successfully responded to major diseases. The Company acquired all of Humabs’ rights, title and interest in and to substantially all of the assets of Humabs except for rights under certain license agreements with third parties. The Company is obligated to pass through to the former Humabs shareholders any amounts received by Humabs under such license agreements, net of any program expenses. The transaction was accounted for as an acquisition of a business. The consideration paid consisted of $30.0 million in cash and 1,666,656 shares of common stock, valued at $2.5 million as of the date of the transaction, to former Humabs shareholders. In addition to the cash payment and issuance of common stock to the former Humabs shareholders at the acquisition date, the Company also agreed to pay additional amounts in cash upon the achievement of specified milestone events: (i) up to $135.0 million upon the achievement of clinical, regulatory and commercial milestones for an HBV product; and (ii) up to $105.0 million upon the achievement of clinical, regulatory and commercial milestones for another product, which the Company elected as a severe acute respiratory syndrome coronavirus 2 (“SARS-CoV-2”) product, or sotrovimab.

During the year ended December 31, 2020, the Company achieved two of the specified clinical milestones for the HBV product and sotrovimab totaling $20.0 million. During the year ended December 31, 2021, the Company achieved the specified regulatory milestone of $35.0 million and sales milestones totaling $60.0 million related to sotrovimab. The estimated fair value of the remaining contingent consideration was $17.1 million as of December 31, 2021. The Company paid the $35.0 million milestone and $60.0 million milestone in January and February 2022, respectively.

The acquired developed technologies that have associated patents issued are classified as finite-lived intangible assets and are amortized on a straight-lined basis over their estimated remaining useful lives, generally between seven to 12 years. The Company also acquired indefinite-lived intangible assets consisting of IPR&D. These assets will not be amortized until regulatory approval is obtained in a major market. At that time, the Company will determine the useful life of the asset and begin amortization. If the associated research and development effort is abandoned or otherwise impaired, the related IPR&D assets will be written-off and an impairment charge recorded. As of December 31, 2021, there have been no such impairments related to the IPR&D assets. The estimated fair value of the intangible assets was determined using the replacement cost method. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. None of the goodwill is expected to be deductible for income tax purposes.

5.

Goodwill and Intangible Assets

Goodwill

Goodwill of $16.9 million represents the excess of the purchase price over the estimated fair value of the net assets acquired from Humabs. The Company tests goodwill for impairment on an annual basis or sooner, if deemed necessary. There was no impairment for the year ended December 31, 2021.

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VIR BIOTECHNOLOGY, INC.

Notes to Consolidated Financial Statements

Intangible Assets

The following table summarizes the carrying amount of the Company’s finite-lived intangible assets (in thousands):

December 31, Weighted-AverageRemaining Useful

Finite-lived intangible assets, gross 7,502 7,502

Less accumulated amortization (4,114 ) (3,581 )

Less impairment of intangible assets (832 ) (832 )

Finite-lived intangible assets, net $ 2,556 $ 3,089

Finite-lived intangible assets are carried at cost less accumulated amortization. The contract-based intangible asset resulted from the product approval of a sublicensed intellectual property right in December 2020. The intellectual property right was previously accounted for as IPR&D. Amortization expense related to finite-lived intangible assets, included in research and development expenses on the consolidated statements of operations, totaled $0.5 million, $1.0 million and $1.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Management reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, like that of property and equipment. During the third quarter of 2020, as a result of the availability of other research and analytics platforms, the Company abandoned certain of its acquired developed technologies and concluded that the full remaining book values of the assets were impaired. Therefore, $0.8 million was written off as an impairment charge, which was classified as research and development expenses during 2020.

Based on the finite-lived intangible assets recorded as of December 31, 2021, the estimated future amortization expense for the next five years is as follows (in thousands):

Year Ending December 31:

Indefinite-Lived Intangible Assets

As of December 31, 2021 and 2020, the Company had indefinite-lived intangible assets of $30.7 million, respectively, related to the purchased IPR&D from the Humabs acquisition. In December 2020, $0.5 million was reclassed as a finite-lived intangible asset due to the product approval of a sublicensed intellectual property right. No impairment losses have been recorded for the years ended December 31, 2021 and 2020.

6.

Grant Agreements

Bill & Melinda Gates Foundation Grants

Campylo/EPEC/EAEC Grant

As part of the Company’s acquisition of Humabs in August 2017, the Company acquired a grant agreement with the Bill & Melinda Gates Foundation under which it was awarded a grant totaling up to $4.7 million (the “2017 Grant”). The 2017 Grant supported the Company’s discovery, characterization and selection of human monoclonal antibodies with pre-clinical efficacy against three enteric pathogens responsible for life-threatening diarrhea in neonates. The 2017 Grant expired on May 31, 2019.

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VIR BIOTECHNOLOGY, INC.

Notes to Consolidated Financial Statements

Payments received in advance that were related to future research activities were deferred and recognized as revenue when the donor-imposed conditions were met, which was as the research and development activities were performed. The Company recognized grant revenue of $0.9 million for the year ended December 31, 2019.

HIV Grant

On January 26, 2018, the Company entered into a grant agreement with the Bill & Melinda Gates Foundation under which it was awarded a grant totaling up to $12.2 million for its HIV program (the “HIV Grant”). In February 2020, the parties amended the HIV Grant under which the Company was awarded a supplemental grant of $8.6 million. In June 2021, the parties further amended the agreement under which the grant term was extended from December 31, 2021 to October 31, 2022, unless earlier terminated by the Bill & Melinda Gates Foundation for the Company’s breach, failure to progress the funded project, in the event of the Company’s change of control, change in the Company’s tax status, or significant changes in the Company’s leadership that the Bill & Melinda Gates Foundation reasonably believes may threaten the success of the project.

In December 2020, the Company achieved a specified milestone under the HIV Grant which triggered a $1.9 million payment from the Bill & Melinda Gates Foundation. As of December 31, 2020, the Company recorded a receivable, which is included within prepaid expenses and other current assets, and current portion of deferred revenue for the $1.9 million, which was subsequently received in January 2021.

Payments received in advance that are related to future research activities are deferred and recognized as revenue when the donor-imposed conditions are met, which is as the research and development activities are performed. The Company recognized grant revenue of $3.0 million, $6.4 million and $3.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021 and 2020, the Company has deferred revenue of $2.3 million and $3.8 million, respectively, under HIV Grant.

Tuberculosis (“TB”) Grant

On March 16, 2018, the Company entered into a grant agreement with the Bill & Melinda Gates Foundation under which it was awarded a grant totaling up to $14.9 million for its TB program (the “TB Grant”). The parties amended the agreement in May 2020, in June 2021 and in December 2021 to extend the grant term. The TB Grant will remain in effect until March 31, 2022, unless earlier terminated by the Bill & Melinda Gates Foundation for the Company’s breach, failure to progress the funded project, in the event of the Company’s change of control, change in the Company’s tax status, or significant changes in the Company’s leadership that the Bill & Melinda Gates Foundation reasonably believes may threaten the success of the project. As of December 31, 2021, the Company had $1.8 million of unused funds received in advance and previously recorded as deferred revenue within accrued and other liabilities. As of December 31, 2021 and 2020, the Company has deferred revenue of $1.3 million and $2.6 million, respectively, under TB Grant.

Payments received in advance that are related to future research activities are deferred and recognized as revenue when the donor-imposed conditions are met, which is as the research and development activities are performed. The Company recognized grant revenue of $3.0 million, $2.2 million and $1.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

HCMV-Vaccine Platform Grant

On November 5, 2021, the Company entered into a grant agreement with the Bill & Melinda Gates Foundation under which it was awarded a grant totaling up to $10.0 million to support the manufacturing and clinical activities of its HIV and TB vaccine programs. This grant agreement will remain in effect until August 30, 2023, unless earlier terminated by the Bill & Melinda Gates Foundation for the Company’s breach, failure to progress the funded project, in the event of the Company’s change of control, change in the Company’s tax status, or significant changes in the Company’s leadership that the Bill & Melinda Gates Foundation reasonably believes may threaten the success of the project.

Payments received in advance that are related to future research activities are deferred and recognized as revenue when the donor-imposed conditions are met, which is as the research and development activities are performed. The Company recognized grant revenue of $2.2 million for the year ended December 31, 2021. As of December 31, 2021, the Company has deferred revenue of $3.3 million under this grant agreement.

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VIR BIOTECHNOLOGY, INC.

Notes to Consolidated Financial Statements

National Institutes of Health

As part of the Company’s acquisition of TomegaVax in September 2016, the Company acquired grant agreements related to TomegaVax’s research effort in infectious diseases and cancer that entitled them to several awards under the Small Business Innovation Research Program from the National Institutes of Health (“NIH”). Through July 2021, the Company has acquired or been awarded grants from NIH totaling $5.1 million. These grants were cost plus fixed fee agreements in which the Company was reimbursed for its direct and indirect costs. Only costs that were allowable under certain government regulations and NIH’s supplemental policy and procedure manual may be claimed for reimbursement, subject to government audit.

The Company recognized grant revenue of $0.1 million, $0.6 million and $0.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

7.

Collaboration and License Agreements

Collaboration Agreements with GSK

2020 GSK Agreement

On June 9, 2020, the Company, Glaxo Wellcome UK Limited and Beecham S.A. (referred to individually and together, as “GSK”) entered into a definitive collaboration agreement under the terms set forth in the preliminary collaboration agreement entered into by the Company and certain GSK entities in April 2020 (the “2020 Preliminary Agreement”) (such definitive collaboration agreement, the “2020 GSK Agreement”). Concurrently with the execution of the 2020 Preliminary Agreement, the Company entered into a stock purchase agreement (the “2020 Stock Purchase Agreement”) with Glaxo Group Limited (“GGL”), an affiliate of GSK, under which GGL purchased 6,626,027 shares of the Company’s common stock on April 29, 2020, at a price per share of $37.73, for an aggregate purchase price of approximately $250.0 million. After receipt of antitrust clearance on April 22, 2020, the 2020 Preliminary Agreement became effective as of April 29, 2020, which was also the closing date for the associated 2020 Stock Purchase Agreement between the parties (“Effective Date”). Under the terms of the 2020 GSK Agreement, the Company and GSK agreed to collaborate to research, develop and commercialize products for the prevention, treatment and prophylaxis of diseases caused by SARS-CoV-2, the virus that causes COVID-19, and potentially other coronaviruses. The collaboration is focused on the development and commercialization of three types of collaboration products under three programs: (1) antibodies targeting SARS-CoV-2, and potentially other coronaviruses (the “Antibody Program”); (2) vaccines targeting SARS-CoV-2, and potentially other coronaviruses (the “Vaccine Program”), and (3) products based on genome-wide CRISPR screening of host targets expressed in connection with exposure to SARS-CoV-2, and potentially other coronaviruses (the “Functional Genomics Program”).

For four years following the Effective Date, the parties agreed to conduct certain research and development activities under mutually agreed development plans and associated budgets for each of the three programs, and under the oversight of a joint steering committee (“JSC”). The Company is primarily responsible for the development and clinical manufacturing activities for the Antibody Program, and for conducting the initial development activities directed to a vaccine in the Vaccine Program. GSK is primarily responsible for the commercialization activities for the Antibody Program (except in connection with sales of antibody products licensed to WuXi Biologics (Hong Kong) Limited in greater China), the later-stage development, manufacturing and commercialization activities for the Vaccine Program and the development, manufacturing and commercialization activities for the Functional Genomics Program. Subject to an opt-out mechanism, the parties share all development costs, manufacturing costs and costs and expenses for the commercialization of the collaboration products, with the Company bearing 72.5% of such costs for the antibody products, 27.5% of such costs for the vaccine products, and equal sharing of such costs for the functional genomics products.

On a collaboration product-by-collaboration product basis, each party has the one-time right, at specified points in development, to opt-out of its co-funding obligations, and the other party may, at its election, either pursue such program unilaterally, or also cease research and development activities and funding of such collaboration product. If the opt-out provisions are not exercised by either party subject to the terms of the 2020 GSK Agreement, the parties share all profits and losses arising from any collaboration product in the same ratios in which the parties bore development costs for such collaboration program. For each collaboration product as to which a party exercises its opt-out right, the commercializing party pays to the opt-out party royalties on net sales of the applicable collaboration product at rates based on factors such as the stage of development of such collaboration product at the time the opt-out party exercises such right, and whether the opt-out party is the lead party, or a portion of the sublicense revenue if the commercializing party chooses to sublicense or otherwise divest rights to such collaboration product. On an antibody product-by-antibody product basis, the Company has a

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Notes to Consolidated Financial Statements

co-promotion right for such antibody product in the United States, under which the Company has the right to perform up to 20% of details in connection with such antibody product.

The 2020 GSK Agreement will remain in effect with respect to each collaboration program for as long as there is a collaboration product being developed or commercialized by the lead party, or the non-opt-out party, in such program. Either party has the right to terminate the 2020 GSK Agreement in the case of the insolvency of the other party, an uncured material breach of the other party with respect to a collaboration program or collaboration product, or as mutually agreed by the parties. The 2020 GSK Agreement superseded and replaced the 2020 Preliminary Agreement between the parties. In December 2021, Beecham S.A. assigned and transferred all its rights, title, interest, and benefit in the 2020 GSK Agreement to GlaxoSmithKline Biologicals S.A., including all its rights to bring claims under such agreement.

The Company considered the ASC 606 criteria for combining contracts and determined that the 2020 GSK Agreement and 2020 Stock Purchase Agreement should be combined into a single contract because they were negotiated and entered into in contemplation of one another. The fair market value of the common stock issued to GGL was $206.7 million, based on the closing stock price of $36.70 on the date of execution of the 2020 Preliminary Agreement and 2020 Stock Purchase Agreement and taking into account a discount for the lack of marketability due to the restrictions in place on the underlying shares, resulting in a $43.3 million premium received by the Company. The Company accounted for the common stock issued to GGL based on its fair market value on the transaction date and determined that the premium paid by GSK should be attributed to the transaction price of the 2020 GSK Agreement.

The Company concluded that the 2020 GSK Agreement contained four units of account: (i) the license granted to GSK under the Antibody Program (the “Antibody License”); (ii) the research and development activities (including clinical manufacturing) under the Antibody Program; (iii) the research and development activities under the Vaccine Program; and (iv) the research and development activities under the Functional Genomics Program. The Company considered the guidance in ASC 606 to determine which of these elements of the 2020 GSK Agreement are performance obligations with a customer. The Company determined that the Antibody License is within the scope of ASC 606 and accordingly, accounted for the Antibody License as a distinct performance obligation under ASC 606. The Antibody License is a functional intellectual property and is distinct from the associated research and development activities to be performed under the program due to its significant standalone functionality. All other elements of the 2020 GSK Agreement including the research and development activities, and participation in the JSC and subcommittees for each collaboration program were not determined to be distinct performance obligations with a customer.

The transaction price for the Antibody License at inception was determined to be $43.3 million, representing the premium on the sale of common stock to GSK. The Company determined that GSK can benefit from the Antibody License at the time of grant and therefore, the related performance obligation is satisfied at a point in time. As such, the Company recognized the $43.3 million as contract revenue during the second quarter of 2020. Additionally, the Company is entitled to consideration from GSK related to profit and loss sharing arrangements (including royalties) contingent upon future sales of collaboration products under the Antibody Program.

The remaining units of account of the 2020 GSK Agreement were determined to be within the scope of ASC 808 as the Company and GSK are both active participants in the development, manufacturing and commercialization activities and are exposed to significant risks and rewards that are dependent on the commercial success of the activities of the arrangement. Furthermore, the Company and GSK participate in the commercial profit and loss sharing arrangement for each program commensurate with each party’s cost-sharing responsibilities during research and development. Because ASC 808 does not provide recognition and measurement guidance, the Company determined that the guidance in ASC 730, Research and Development, was appropriate to analogize to, based on the nature of the cost-sharing provisions of the agreement. The Company has concluded that payments to or reimbursements from GSK related to these services will be accounted for as an increase to or reduction of research and development expenses, respectively. The Company also concluded that any payments from GSK related to the profit and loss sharing arrangement (including royalties) contingent upon the commercialization of the products under the Vaccine and Functional Genomics Programs will be analogized to ASC 606 and therefore, will be recognized when the related sales occur.

In May 2021, the FDA granted an EUA in the United States for sotrovimab, the first collaboration product under the Antibody Program. As the lead party for all commercialization activities, GSK incurs all of the sales and marketing expenses and is the principal on sales transactions with third parties. As the Company is the agent under the 2020 GSK Agreement, the Company recognizes its contractual share of the profit-sharing amounts or royalties (in case of an opt-out) as revenue, net of

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VIR BIOTECHNOLOGY, INC.

Notes to Consolidated Financial Statements

any cost of sales and allowable expenses (including distribution, selling, and marketing expenses) in the period the sale occurs. During the year ended December 31, 2021, the Company recorded its share of net profit of $917.2 million as collaboration revenue in the consolidated statement of operations.

Costs associated with co-development activities performed under the agreement are included in research and development expenses on the consolidated statements of operations, with any reimbursement of costs by GSK reflected as a reduction of such expenses. Under the 2020 GSK Agreement, the Company recognized additional net research and development expenses of $77.3 million and $25.4 million during the years ended December 31, 2021 and 2020, respectively.

2021 Expanded GSK Collaboration

On February 14, 2021, the Company and GSK entered into a binding preliminary collaboration agreement (the “2021 Preliminary Agreement”), under which the parties agreed to expand the 2020 GSK Agreement to collaborate on three separate programs: (1) a program to research, develop and commercialize mAbs for the prevention, treatment or prophylaxis of the influenza virus (the “Influenza Program”), excluding VIR-2482 unless GSK exercises its option as described below; (2) an expansion of the parties’ current Functional Genomics Program to focus on functional genomics screens directed to targets associated with respiratory viruses (the “Expanded Functional Genomics Program”); and (3) additional programs to develop neutralizing mAbs directed to up to three non-influenza target pathogens selected by GSK (the “Selected Pathogens” and such programs, the “Additional Programs”).

Concurrently with the execution of the 2021 Preliminary Agreement, the Company entered into a stock purchase agreement (the “2021 Stock Purchase Agreement”) with GGL under which GGL agreed to purchase shares of the Company’s common stock for an aggregate purchase price of approximately $120.0 million. The consummation of the transactions under each of the 2021 Preliminary Agreement and the 2021 Stock Purchase Agreement were subject to the satisfaction of customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which expiration was effective on March 24, 2021. The 2021 Preliminary Agreement and 2021 Stock Purchase Agreement consummated on March 25, 2021, which the Company used as the measurement date for accounting purposes. On March 31, 2021, the Company closed the sale of 1,924,927 shares of its common stock to GGL.

The 2021 Preliminary Agreement was superseded on May 18, 2021 upon execution of the definitive collaboration agreement (the “2021 GSK Agreement”, or collectively with the 2021 Preliminary Agreement, the “2021 GSK Collaboration”). The material terms of the 2021 GSK Agreement, including the promised goods and services, are discussed below and is consistent with those of the 2021 Preliminary Agreement.

Under the 2021 GSK Collaboration, the parties will conduct certain research and development activities under mutually agreed development plans and associated budgets for the programs within the expanded collaboration for a period of three years following the effective date. Under the Influenza Program, the parties will collaborate to research, develop and commercialize mAbs for the prevention, treatment or prophylaxis of influenza, including the Company’s influenza mAbs (with respect to VIR-2482, only if GSK exercises its option). The Company may conduct the development and clinical manufacturing activities for VIR-2482 up to the completion of a Phase 2 clinical trial. Provided that the Company conducts and completes a Phase 2 clinical trial for VIR-2482, GSK will have the exclusive option to obtain exclusive rights to co-develop and commercialize VIR-2482 under the Influenza Program (the “VIR-2482 Option”). GSK will be the lead party for development, clinical and commercial manufacturing and commercialization activities for products under the Influenza Program (other than VIR-2482 unless and until GSK exercises the VIR-2482 Option, if applicable). The parties will mutually agree upon the allocation of responsibility for the development of products under the Expanded Functional Genomics Program, and for the development and early-stage manufacturing of products under the Additional Programs if and when GSK decides which Selected Pathogens to pursue. GSK will be primarily responsible for commercial manufacturing and commercialization activities for products under the Expanded Functional Genomics Program and Additional Programs, if and when selected by GSK. For each collaboration program, upon execution of the definitive agreement, the Company will grant GSK certain license rights related to the development, manufacturing and commercialization of products arising from the program.

The parties will share 50% of all development costs in accordance with the budget for each of the collaboration programs (other than for the Selected Pathogens and VIR-2482, unless GSK exercises the VIR-2482 Option), with each party having the right to opt-out of its co-funding obligations at specified points in development. In such case, the party continuing

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Notes to Consolidated Financial Statements

with the program will pay to the opt-out party a royalty on net sales of products arising from such program at specified rates based on the stage of development at which the opt-out is exercised. Following the exercise of an opt-out right by a party, the other party may, at its election, either pursue development and commercialization of such product or program unilaterally, or also cease the conduct and funding of such collaboration product or program. In the absence of any opt-out, the parties will also share 50% of all profits and losses arising from any collaboration product.

GSK was obligated to make an upfront payment to the Company of $225.0 million, 50% of which became payable at the effective date of the 2021 Preliminary Agreement and 50% of which became payable following the execution of the 2021 GSK Agreement. If GSK exercises the VIR-2482 Option, GSK will pay the Company an option exercise fee of $300.0 million unless certain agreed product criteria for VIR-2482 are not met, in which case the parties will negotiate an alternative option exercise fee. Upon achievement of a pre-defined regulatory milestone for the first product in the Influenza Program, which may be (i) VIR-2482 (if GSK exercised the VIR-2482 Option), (ii) a next-generation mAb, or (iii) any other influenza mAb approved by the JSC to be included in the collaboration, arising from the Influenza Program, GSK will make a milestone payment to the Company of up to $200.0 million.

The Company concluded that the 2021 GSK Agreement is a collaboration arrangement as defined in ASC 808, Collaborative Agreements, under which certain elements are required to be accounted for under ASC 606 where the counterparty is a customer for a good or service that is a distinct unit of account. In addition, the 2021 GSK Agreement is considered a contract modification to the 2021 Preliminary Agreement and will be accounted for prospectively, as a termination of the 2021 Preliminary Agreement and commencement of a new contract. There was no impact to the accounting assessment of the original contract as no goods or services had been delivered to GSK, no performance obligations were satisfied, and accordingly, no contract revenue was recognized under ASC 606 prior to the execution of the 2021 GSK Agreement.