Atea Pharmaceuticals, Inc. Q3 FY2021 Earnings Call

Good afternoon, ladies and gentlemen. Welcome to the Atea Pharmaceuticals Third Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. I would now like to turn the call over to Jonae Barnes, Senior Vice President of Investor Relations and Corporate Communications at Atea Pharmaceuticals. Please proceed.

Thank you, operator. Good afternoon, everyone and welcome to Atea Pharmaceuticals third quarter 2021 financial results conference call. This afternoon, we issued a press release which outlines the topics we plan to discuss. You can access the press release as well as the slides that we'll be reviewing today by going to the Investors section of our website at ir.ateapharma.com. With me today from Atea are Chief Executive Officer and Founder, Dr. Jean-Pierre Sommadossi; Chief Development Officer, Dr. Janet Hammond; Chief Financial Officer and Executive Vice President of Legal, Andrea Corcoran; and our Chief Commercial Officer, John Vavricka. They will all be available for the Q&A portion of today's call. Before we begin the call, as outlined on Slide 2, I would like to remind you that today's discussion will contain forward-looking statements that involve risks and uncertainties. These risks and uncertainties are outlined in today's press release and in the company's recent filings with the Securities and Exchange Commission which we encourage you to read. Our actual results may differ materially from what is discussed on today's call. With that, I'll now turn the call over to Jean-Pierre.

Thank you, Jonae. Good afternoon, everyone and thank you for joining us today. In addition to the financial results, we have a number of updates for AT-527 to review, including an amendment to the Phase III MORNINGSKY trial protocol and the plan to accelerate its enrollment, quantitative infectious virus assay data from the MOONSONG trial confirming potent and rapid antiviral activity for AT-527 and new in vitro data for AT-527 demonstrating potent antiviral activity against the major variants of concern or interest, including Delta. I will begin on Slide 3. AT-527 our only administered product candidate for COVID-19 is a direct-acting antiviral agent derived from our purine nucleotide prodrug platform. AT-527 is designed to protect against disease progression and the development of long COVID complications. Given the evolving dynamics of COVID-19 which is becoming endemic, medical intervention and all therapeutics in particular will be essential in stemming the tide of this pandemic and future surges. AT-527 targets viral RNA polymerase, a highly conserved enzyme critical to viral replication and transcription. Uniquely, AT-527 has a mechanism with dual targets. It is a chain terminator without introducing new mutations in the base. And it also enables resistance across variants, as we will share with you in a few minutes. In all studies, AT-527 was shown to be generally safe and well tolerated. Of particular note, AT-527 is not mitogenic, with no reproductive toxicity and we expect minimal drug-drug interactions since AT-527 is a weak inhibitor of cytokines. No dose adjustment is expected for co-administration of drugs that account for the metabolism of more than 50% of clinically relevant drugs. So this should make our drug candidate prescriber friendly. On Slide 4, COVID variants of concern continue to create new challenges for treatment and prevention. These variants can also make the execution and evaluation of clinical trial results more challenging because of the differences in viral kinetics as well as clinical symptoms. Ongoing genomic surveillance worldwide has improved our ability to rapidly identify such variants. As you can see on this chart, almost 6,000 variants have been sequenced. The evolution of COVID-19 will make it endemic with the ability to continue circulating for years to come. Variants of interest have been associated with increased transmissibility, neutralization resistance, and disease severity. The continuing spread of Delta has led to a new subtype called AY.4.2 or Delta plus which carries additional mutations. Although the original Delta variant remains the most dominant on a global basis, this new mutant now accounts for 14% of infections in the U.K., up from less than 4% just early September and may be contributing to the recent surge of COVID in Western and Eastern Europe and other global areas. Preliminary evidence suggests that Delta plus spreads between 12% and 15% more frequently among household members compared with other Delta viruses and will likely become an important strain, including in the U.S. Moving to Slide 6. As you know, we have previously shown that AT-511, the free base of AT-527, is a potent inhibitor of SARS-CoV-2 in vitro. The average IC50 in primary human cells against the original virus isolated in early 2020 was around 0.5 micromolar with a fivefold assay variability. We recently evaluated our drug candidate against the major variants of concern or interest, including Alpha, Gamma, and more recently, Delta. Consistent with its dual mechanism of action, AT-511 maintained its potency against all the variants tested, including Delta. We believe that this data confirms the key mechanistic advantage of this drug candidate which targets the highly conserved viral RNA polymerase. In fact, we have analyzed over three million SARS-CoV-2 sequences deposited in the database to date and found that less than 0.01% show mutations near the active site of the SARS-CoV-2 polymerase. With that, I will now turn the call over to Janet for a more detailed review of our clinical programs.

Thank you, Jean-Pierre. Beginning with Slide 8. As you can see on this slide, our robust clinical program includes six studies of AT-527 which are running in parallel. We are leveraging lessons learned from each of these to better serve our patients and updating our program in real-time. There are two key updates on this slide which include advancing the AT-527 1100-milligram BID dose in the hospitalized study and we expect results from the next cohort in the first half of next year. In addition, we are amending the Phase III MORNINGSKY trial protocol with a new primary endpoint, a refined patient population, and an increased dosage. We have a plan to accelerate enrollment completion. I will review the MORNINGSKY update towards the end of my presentation. Turning to Slide 9. As COVID-19 has continued to evolve, so have the ways to quantify the virus. After considerable effort, an optimized infectious virus assay is now available to quantify infectious virus in addition to the RT-PCR assay which measures all forms of RNA obtained from the sample, regardless of whether it is from intact replicating virus or from non-replicating virus or simply viral fragments. This difference is important because it should provide a more accurate assessment of the impact of a direct-acting antiviral on the ongoing infection. Next, I will review the new results for AT-527 from the MOONSONG trial that we have obtained by using this infectious virus assay. As outlined on Slide 10, our methodology is quantitative and utilizes the highly sensitive SARS-CoV-2 live virus assay. Measuring live virus in the nasopharyngeal swab samples from patients has been very challenging for this evolving field but it is an important advance. Previously, qualitative data from a related type of assay was reported during the development of our drug candidate to assess more specifically the antiviral effect by using live virus. As illustrated in this slide, a modified cell line with enhanced susceptibility to SARS-CoV-2 was inoculated with swab samples so that we can determine infectious virus after six days of incubation. Positively infected cells were detected by SARS-CoV-2 specific immunostaining. This newly optimized assay has three key advantages: Firstly, it quantifies the infectious virus, thus eliminating the possibility of non-infectious virus or viral fragments by RT-QPCR as previously reported. Secondly, this is a very accurate measure. And thirdly, it is highly sensitive. The level of detection of the assay is equivalent to approximately 10 infectious virus particles per milliliter. Please note that the analysis includes approximately 71% of all patients in MOONSONG cohorts A and B who had positive baseline cultures. On Slide 11, today, we are reporting results from the MOONSONG study from Cohort B in the overall population, including both high- and low-risk patients with the majority being seropositive. AT-527 at 1,100 milligrams BID treated patients demonstrated a rapid and potent reduction of viral load of half compared to placebo at Day 3. Turning to Slide 12. We are able to see a treatment effect in the subgroup of high-risk patients with underlying health conditions. These results reinforce the exploratory analysis in the same population with RT-PCR in the MOONSONG and the Phase II study in hospitalized patients. In Cohort B, the actively treated patients administered 1,100 milligrams BID had a robust viral load reduction at Day 3. This data also shows a suggested dose response between Cohort A and Cohort B. Moving to Slide 13. As I have just outlined, these additional data from the Phase II MOONSONG trial support the rapid and potent antiviral effect of AT-527 as measured by a quantitative, highly sensitive infectious virus assay which detects live virus capable of replication. Leveraging the lessons from MOONSONG and as outlined in Slide 14, as well as other recent results, we are submitting amendments to the global Phase III MORNINGSKY trial. MORNINGSKY is a randomized, double-blind, multicenter, placebo-controlled Phase III trial evaluating the antiviral activity, safety, and pharmacokinetics of AT-527 in approximately 1,600 patients randomized 1:1 to receive AT-527 1,100 milligrams twice a day or placebo. We, together with Roche, plan to leverage the existing operational global infrastructure from the MORNINGSKY clinical trial site and expand its footprint to approximately 300 sites in new geographies. We expect to report the data from this trial in the second half of 2022. Amendments to our MORNINGSKY study include the following: Changing the trial's primary endpoint to COVID-19-related hospitalization or all-cause mortality. The previous primary endpoint of time to alleviation or improvement of COVID-19 symptoms will become a secondary endpoint. Refining the patient population to include only unvaccinated high-risk individuals. And lastly, increasing the dose of AT-527 to 1,100 milligrams twice daily from 550 milligrams BID. Patients enrolled in MORNINGSKY have the option to be enrolled in a long-term follow-on study conducted in collaboration with Roche to evaluate long COVID in patients who received AT-527 compared to placebo in MORNINGSKY. Let's now turn to AT-752, our program for the treatment and prophylaxis of dengue fever on Slide 16. Earlier this year, we initiated a randomized, double-blind, placebo-controlled single and multiple ascending dose Phase I study to evaluate the safety, tolerability, and pharmacokinetics of AT-752 in healthy subjects. We have completed Part 1 of the study, the single ascending dose cohort. In Part 2, the first two cohorts are complete and the last cohort is ongoing. We expect the conclusion of this study by year-end. During the first half of 2022, we expect to initiate our Phase II study of AT-752 for the treatment of dengue fever in Asia and South America. In this trial, we will enroll adults with fever greater than 38 degrees within 48 hours of probable dengue infection and positive results on the MS-1 antigen test and RT-PCR assay. The primary endpoint will be change in viral load from baseline. We look forward to keeping you apprised of our progress in this important study next year. With that, I will now turn the call over to Andrea for a review of the financials.

Thank you, Janet. As Jonae mentioned in her introductory remarks this afternoon, we issued a press release containing our financial results for the third quarter of 2021. The statement of operations and the balance sheet are on Slides 18 and 19. For the third quarter of 2021, the increase in R&D expenses in comparison to the third quarter of 2020 was principally driven by an increase in external clinical development and manufacturing expenses, incurred primarily in conjunction with the advancement of AT-527 for the treatment of COVID-19 and, to a lesser extent, AT-752 which is being developed for dengue fever. These expenses include our share of costs incurred by Roche and increases in internal spending mostly due to an increase in personnel-related expenses. The increase in general and administrative expenses was primarily due to the expansion of our organization in 2021 and consists principally of an increase in payroll and personnel-related expenses. I'm pleased to report that we ended the third quarter with a strong balance sheet to support our clinical development programs. As of September 30, 2021, cash and cash equivalents were $839.7 million. This includes the $50 million development milestone the company received in July under our license agreement with Roche. I'll now turn the call back over to Jean-Pierre for closing remarks.

Thank you, Andrea. As Janet outlined, the protocol changes we are making to the Phase III MORNINGSKY study maximize our ability to demonstrate a positive clinical outcome. The updated inclusion criteria, dosing regimen, and primary endpoint should allow execution of a more focused and derisked trial. Importantly, the encouraging infectious virus data we have disclosed today give us further confidence in AT-527's rapid and potent antiviral activity against COVID-19 which is critical to stopping disease progression and transmission. We continue to be very excited by the opportunity for Atea to change the course of COVID-19, dengue fever, hepatitis C, and all of our infections. This is an exciting time to be bringing forth what we believe to be groundbreaking technologies and we look forward to updating you on our progress. As always, we thank you for your continued support as we build Atea into a global leader in the discovery, development, and commercialization of all therapies that address the unmet medical needs of patients with chronic diseases. With that, operator, we will now open the call up to your questions.

First question comes from the line of Eric Joseph from JPMorgan. Your line is now open.

Hi, good afternoon. This is Hannah on for Eric. Thanks for taking the questions. Just a few from us. So first, I just wanted to get your thoughts on the feasibility of conducting the Phase III trial, where we have the Pfizer pill accessible? How confident are you in the stated timelines that you've given? And then, also with the recently reported remdesivir outpatient trial which showed a meaningful effect in hospitalization or death despite a minimal or really no effect on viral load. Just wanted to get your take on this data set. And then from a theoretical perspective, what other than viral load reduction do you think might translate to an effect on clinical outcomes?

Janet, could you address both questions, please?

Thank you. Yes. So with regard to the feasibility of conducting the study, we believe that it's still feasible. In some ways, I think it's unfortunate that it is. Vaccine rollout across the world, while impressive in many places, is lagging in many others. This provides an opportunity for many high-risk patients still to be susceptible to the disease. We have an extensive footprint already and plan to have an even greater footprint as we move forward. As I mentioned, we will have more than 300 sites or thereabouts in the trial. We believe that the study ought to be able to be enrolled and completed in the timeframe that we suggested. With regards to remdesivir; I wasn't completely sure that I understood your question. I think that what remdesivir showed very elegantly in a large study was that there was really no correlation between viral load and clinical outcomes. This probably holds true for direct-acting antivirals, particularly when measured by RT-PCR. Some of what we have attempted to demonstrate today is that in addition to RT-PCR, which seems to be a rather blunt tool, the live virus assay that we have reported on seems to be more capable of distinguishing between viral fragments and actual live virus. Clinical endpoints are what it's all about, ultimately. That's what we care about is whether the patient gets better. If we can prevent hospitalization and achieve some target endpoint, that would be great. The remdesivir data is supportive of the field in general and what others are experiencing.

Okay, great. That's helpful. Thanks for taking the questions.

Next one on the queue is Jonathan Miller from Evercore ISI. Your line is now open.

Thanks so much for taking the questions, guys. I have a couple of maybe more detailed ones on some of the data you released today. You mentioned that your Phase II cohort is majority seropositive. I think you said 71% seropositive at baseline. How different are the results there between seropositive and negative patients at baseline for one? Then secondly, it seems like the majority of the patients on the 1.1 gram arm in the Phase II were high risk. Is it fair to say that the viral load impact in low-risk patients is really pretty modest? If you think that there's not a good read-through from viral load to clinical efficacy, do you expect that direct-acting antivirals broadly will have a meaningful clinical impact in low-risk patients? And I guess I'll pause there.

Janet?

So thanks, John. Regarding your question around the seropositivity, the seropositivity was very high and perhaps not surprisingly increased, I think, as the study progressed. We're still awaiting some of the final serology data from Cohort A. But certainly, in Cohort B, 87 of the treated patients were seropositive and I think 80% in the placebo group, so very high numbers. This can blunt what you're able to see. It may have blunted less in the high-risk patients than in the others. What we're seeing does answer some of your second question regarding the viral load impact in the low-risk patients. If you're low risk, you might be able to clear the virus more effectively without the need for direct-acting antiviral. However, if you can prevent hospitalization, as others have demonstrated, you're clearly achieving benefits. The duration of symptoms is something we are hoping to demonstrate in our Phase III trial. While the harder endpoints are easier to document, if you're showing benefits in high-risk patients, you're likely also showing some benefits in lower-risk patients, even if the measures may not be perfect.

Yes, somewhat. And then I guess one final one. How are you defining higher risk in the new criteria?

The definition is pretty standard: elderly, obese, diabetic, immunosuppressed, and potentially asthmatic patients with underlying renal disease, tumors, and so forth.

And hypertension.

And hypertension, yes, cardiovascular disease.

Well, thanks very much, guys.

So for the next question we do have Tim Lugo from William Blair. Your line is now open.

Thanks for the question and the additional data. I'd like maybe a broader question on targeting direct-acting antivirals versus the recent impressive inhibitor data. Given the correlations between HCV and HIV and other more chronic diseases, would suggest the RNA polymerase was the correct target for minimizing resistance. But is that still the case? Can we really extrapolate those diseases to SARS-CoV-2 and COVID-19?

Sure. We welcome all progress in developing treatments as part of a multipronged approach to frame the COVID-19 pandemic. There are several vaccines, and we believe that multiple treatment options will be needed. I don't think one target is going to be better than the other. You have seen the data I just mentioned about remdesivir and its outpatient results. That drug can only be given IV, so we know the limitations. We have not yet seen detailed analysis from Pfizer regarding viral load or potential resistance emergence. What we believe is that clinical reality may differ from what we are seeing in clinical trials. Protease inhibitors used in immunocompromised patients, for instance, may present challenges. It's important to note that with any antiviral drug, a single mutation can lead to resistance. The example of Tamiflu shows that. What we know today may change in the coming months; so, I would be cautious.

Okay, that's understood and I agree. I think we're all looking towards the first combination that is going to be incredibly interesting. But generally, when we look across the oral trials and even remdesivir as well, the patient numbers that have been enrolled in other trials have just been so much higher. I know MOONSONG took a while to get underway. Can you just maybe comment on how MORNINGSKY will be different in terms of patient enrollment?

Yes. You're absolutely right, Tim. We are very aware of it. Janet, would you share what we are putting in place to accelerate the MORNINGSKY enrollment after we have filed and finalized the amendments with the regulatory authorities?

Sure. We have increased the sample size somewhat. But we are doubling down on the geographical footprint, particularly looking at areas where we can enroll patients who are unvaccinated. We believe we should be able to execute the timelines we are committing to and are confident this is something we can achieve. We realize that the window is limited as more people become vaccinated and therapies become more accessible. But we're committed to this and believe we can do it.

Okay, that's understood. How many patients have been enrolled in MORNINGSKY by the time you filed the protocol amendments? And I think the higher dose had a bit of a nausea signal. Are you going to be allowing antiemetics in MORNINGSKY? Can you provide more details on this additional cohort from MOONSONG that we'll be expecting early next year?

Janet?

Firstly, regarding the number of patients, it's not something that we've disclosed. Secondly, regarding the use of antiemetics, we are going to educate physicians about the GI signal. We don't believe it is particularly significant but it is something that we are actively managing. We don’t believe we fully understand its significance as adverse events came from the same site, which is unusual. We are working on how to best manage it. We will allow the use of antiemetics but we also don't want to give the impression that this is something they will experience because it may be subject to auto-suggestions. Regarding MOONSONG, we are not planning to enroll any further cohorts in the study at the moment.

Okay. Thank you for all the granularity and all the answers. Best of luck.

Thank you, Tim. Thank you.

Next one on the queue is Roanna Ruiz from SVB Leerink. Your line is now open.

Hi, thanks for taking the question; a couple regarding MORNINGSKY. I was curious, in your protocol amendment plan, would you possibly explore going for an even shorter time period than five days of symptom onset? I believe Pfizer's interim had less than three days of symptom onset or less.

Janet?

We will allow patients who have had symptoms for five days or less. We may analyze by shorter duration and see if that has an impact. There was a small impact in the size study but it was surprisingly close, I think it was 87% versus 89%. Short is obviously better but it doesn't seem to make as much difference as anticipated.

Okay, makes sense. In the remarks, it sounded like you will run the new MORNINGSKY protocol by the FDA. So does that mean you're taking steps toward opening some trial sites in the U.S.? Can you provide an update on where that stands right now?

We continue to engage with the FDA and will be sharing the protocol. Our dialogue remains positive, and we hope to enroll patients in the U.S. but that’s about the extent of what I can say.

Okay, fair. Thanks.

And there are no further questions on the queue. I will now turn the call back over to the presenters.

So again, thank you very much for your participation. I would like to thank everyone and thank you again. Good night.

This concludes today's conference call. Thank you for participating. You may now disconnect.