Atea Pharmaceuticals, Inc. Q4 FY2021 Earnings Call

Good afternoon, ladies and gentlemen welcome to the Atea Pharmaceuticals Fourth Quarter and Full Year 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 Ms. Jonae Barnes, Senior Vice President of Investor Relations and Corporate Communications at Atea Pharmaceuticals. Please proceed.

Thank you, and good afternoon, everyone, and welcome to Atea Pharmaceuticals' fourth quarter and full year 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 Investor 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. I will begin on Slide 3. From the beginning Atea's goal has been to discover breakthrough drugs against severe viral diseases. Today with the evolving nature of COVID-19, it is clear that a combination of direct-acting antivirals will be needed to address this very challenging viral disease. So what we learned in the past year. We are dealing with a viral disease that is rapidly evolving from variant to variant within three to six months with major pandemic surges, such as what we have seen with Delta last summer and now with Omicron. We are also starting to see the significant public health and economic impact of long COVID which will continue to have long-term effects on individuals and society as well. This virus, which is constantly and rapidly mutating is now evading vaccines and most monoclonal antibodies. And it's clear that we urgently need several therapeutics with different mechanisms of action to deal with this challenging virus. While the protease inhibitor class has recently shown good efficacy against COVID-19, historically we have learned that this class of drugs has a low barrier to resistance with rapid development of resistant strains, especially in immunosuppressed individuals where we can see viral replication continue for weeks and even months. Nucleotide drugs have proven to be both effective in combination regimens against many severe RNA viral diseases and also to mitigate resistance issues and enhance efficacy. We believe that our nucleotide Bemnifosbuvir, or AT-527, has the potential to be a preferred nucleotide of choice for the combination regimen with protease inhibitors for the treatment of COVID-19. Our team has experience in leading development efforts in several combination therapies for RNA viruses over the years, and we believe that we can deliver once again a long-term solution with the combination of Bemnifosbuvir and the protease inhibitor for the treatment of COVID-19. Turning to HCV, the recent in-licensing of Ruzasvir combined with Bemnifosbuvir will accelerate the timeline of our HCV program and may result in the best-in-class pangenotypic hepatitis C combination regimen. There is still a need for improved HCV treatment which shows a shorter treatment duration and better convenience to eliminate in patients with advanced liver disease. As John will discuss later in the call, the hepatitis C market is substantial, and the global HCV market in 2021 approached $4 billion with the US representing about 50% of the market. We are also advancing our third clinical program AT-752, a nucleotide analogue generated from our purine platform. Dengue fever is the most prevalent mosquito-borne viral disease with a large global disease burden, and there is a lack of antiviral treatments. We have successfully completed the Phase 1 study late last year in AT-752 and will now progress to a Phase 2 clinical trial conducted in dengue-endemic countries as well as a challenge study conducted in the US. Let's now review our strategy for COVID-19. Moving to Slide 5, I envision Bemnifosbuvir to be the nucleotide of choice, as I've said, for the combination treatment with a protease inhibitor for COVID-19. Bemnifosbuvir targets the viral RNA polymerase which, as you may know, is a highly conserved enzyme, critical to viral replication and the transcription of these viruses. Uniquely, Bemnifosbuvir has a mechanism of action with dual targets. It is both a chain terminator without introducing inhibition or new mutations in the viral genome, especially in the spike protein, as has been shown with molnupiravir. It is also inhibiting the new function, which is also a function of the RNA polymerase and which is critical to viral replication. Thus we believe that this mechanism of action provides the potential to create a high barrier to resistance as well as provide antiviral activity across any variants of concern. Details relating to this mechanism of action were recently published in the peer-reviewed journal Nature Communications. So based on this unique mechanism of action, we can anticipate that Bemnifosbuvir will maintain its activity as this virus continues to evolve. In all clinical studies to date, Bemnifosbuvir was shown to be generally safe and well tolerated. Of note, it is not mitogenic with no reproductive toxicity and is non-teratogenic, and it is the safety profile which we believe makes Bemnifosbuvir uniquely well suited, not only for combination treatment regimens in COVID-19 but also for HCV which we will review during this presentation. I will now hand the call over to Janet.

Thank you, Jean-Pierre. Good afternoon, everyone. Let's turn to Slide 6. Advancing Bemnifosbuvir for COVID-19 remains a top priority for us. Combination therapy using multiple drugs with different mechanisms of action has proven important to limiting the development of resistance for many RNA viral diseases such as HCV and HIV. We are working diligently on our COVID-19 clinical development program, taking into account the continuously evolving COVID-19 landscape and we look forward to sharing with you further information on this plan in the future. Let's move to Hepatitis C, and I'm going to hand the call over to John.

Thank you, Janet. Good afternoon. Let's turn to Slide 8. The market for hepatitis C is large with the 2021 global HCV market approaching $4 billion with the US representing approximately 50% of the market. This market size was achieved even during the height of the COVID pandemic. Despite the availability of direct-acting antiviral oral combination regimens for the treatment of HCV, there remains a large underserved HCV patient population that continues to grow in the United States. A large portion of this increase in incidents is attributed to the opioid crisis, IV drug use, and HCV re-infection, especially among younger adults. We believe that a new best-in-class Pan-genotypic HCV regimen that has a shorter treatment duration and is more convenient has the potential to achieve blockbuster status. Additionally, a more potent nucleotide-based regimen should eliminate the need for ribavirin in patients with decompensated cirrhosis. I will now hand the call back to Janet.

Thanks, John. Moving to Slide 9. We're very pleased to have obtained an exclusive worldwide license from Merck to develop, manufacture, and commercialize Ruzasvir, an oral NS5A inhibitor. We're excited about Ruzasvir's profile. It is one of the most potent NS5A inhibitors with in-vitro activity in the picomolar range against all seven HCV genotypes. Extensive clinical studies of Ruzasvir conducted by Merck demonstrated potent antiviral activity in HCV-infected patients. In over 1200 patients, daily doses of up to 180 milligrams for 24 weeks showed a favorable safety profile with no consistent treatment-related changes in laboratory parameters. To further support the combination of Bemnifosbuvir and Ruzasvir in patients, we've conducted in vitro experiments either renewing or in combination. As shown in the figure on the slide, these experiments demonstrate that the combination resulted in substantially greater inhibition of HCV replication than either agent alone, suggesting a significantly synergistic antiviral effect between the two inhibitors. Once again, a key reason why we in-licensed Ruzasvir was this advanced development stage which decreases development risks and also provides the opportunity to create a best-in-class pan-genotypic combination therapy with Bemnifosbuvir in a shorter timeframe. Now let's move to Bemnifosbuvir's profile in HCV which is shown on Slide 10. Bemnifosbuvir was the primary purpose of Atea's original program before COVID hit. It's about 10-fold more potent than sofosbuvir in vitro against a panel of laboratory strains and clinical isolates and remained fully active against sofosbuvir-resistant strains. In monotherapy, Bemnifosbuvir demonstrates a potent response and uniquely viral kinetics consistent across all genotypes including genotype three as well as in patients with compensated cirrhosis. As you can see in the chart, there is a rapid and steep viral decline of around 4 logs within 72 hours. This rapid and steep decline is important to prevent potential development of NS5A resistance, especially in the hard-to-treat genotype three population. Bemnifosbuvir at 550 milligrams supports once daily dosing, and based on its safety, tolerability, and efficacy profile to date, it’s an ideal candidate to develop in combination with Ruzasvir. Moving to Slide 11. We're very excited about our HCV combination development plan and believe that there is still room to improve on the standard of care. A significant data set has been generated for both drug candidates, and as soon as synthesis has been completed for the Ruzasvir clinical trial material, we will move quickly into Phase 2 combination studies. We anticipate initiating the study in the second half of the year. Our Phase 2 development program will evaluate treatment of shorter duration and will include patients with both compensated and decompensated liver disease. Next, I'll move to our third Phase 2 program with dengue fever. And I'll hand the call over to John.

Thanks, Janet. Dengue fever is the most prevalent mosquito-borne viral disease and infects almost 400 million individuals on a yearly basis. Dengue is endemic in over 100 countries, and greater than half the world's population is at risk. There is significant unmet medical need, and the global economic burden is estimated to be between $8 billion and $9 billion. There are no treatments for dengue, and the approved vaccine has less than an optimal profile with safety concerns and a restricted label. Our breakthrough drug candidate, AT-752, is a purine nucleotide prodrug derived from our platform. It has shown potent in vitro activity against all serotypes tested and demonstrated strong efficacy in an animal model. I'll now hand the call back to Janet to review our program.

Thank you, John. As shown on Slide 14, last year we initiated and successfully completed a randomized double-blind placebo-controlled, single and multiple ascending dose Phase 1 study to evaluate the safety, tolerability, and pharmacokinetics of AT-752 in healthy subjects. In the Phase 1 trial, AT-752 was well tolerated in 65 healthy subjects who were administered either single or multiple doses. There were no serious adverse events reported, and most adverse events were considered mild with no changes in laboratory parameters. In addition to the clinical work, we also published reports in vitro and in vivo data of AT-752 in peer-reviewed journals. The data published in Antimicrobial Agents and Chemotherapy showed that AT-752 has potent in vitro activity against all dengue virus serotypes and also other viruses tested. AT-752 was also shown to reduce viremia and improve animal health and survival in a mouse model of dengue virus. In addition, this demonstrating the in vivo efficacy of AT-752 against dengue virus was recently published in the peer-reviewed journal Neglected Tropical Diseases. The published data showed that AT-752 reduced viremia and improved disease outcomes in the hamster model of the virus. There are two key studies that we are planning to conduct in 2022 for the dengue program. On Slide 16, the first study is a human challenge study we're planning in the United States. In this study, healthy volunteers are dosed with AT-752 or placebo and then administered the dengue virus. Subjects are closely monitored within a highly controlled trial, allowing the assessment of viral load and the viral kinetics to be compared between the treatment groups. Results are expected in the second half of the year. Pictured on Slide 16 is the second key study we plan to initiate during the first half of this year. It is a Phase 2 proof of concept treatment study in patients with dengue fever, and this study will be conducted in dengue-endemic countries around the world. The study is designed to assess antiviral activity, safety, and pharmacokinetics of multiple doses of AT-752 with the primary endpoint of change from baseline in viral load. AT-752 or placebo will be administered orally for five days in patients with dengue infection who present within 48 hours of developing fever. The study will be initiated soon, with initial results anticipated later in 2022. I'm going to hand the call now to Andrea to review our financial information.

Thank you, Janet. As Jonae mentioned in her introductory remarks this afternoon, we issued a press release containing our financial results for the fourth quarter and full year of 2021. Statements of operations and balance sheet can be found on Slide number 18 and 19. For the fourth quarter of 2021, the increase in R&D expenses compared to the fourth quarter of 2020 was principally driven by an increase in external clinical development and manufacturing expenses, incurred primarily in conjunction with the development of AT-527 for the treatment of COVID-19 and to a lesser extent AT-752 which is being developed for dengue fever. We also had an increase in internal spending primarily attributable to an increase in Atea personnel-related expenses. Of note, our external expenses include our share of costs incurred by Roche, relating to Bemnifosbuvir Phase 2 MOONSONG, Phase 3 MORNINGSKY, and Phase 2 MEADOWSPRING clinical trials. These shared costs include external costs incurred by Roche in connection with the conduct of the studies and FTE costs for Roche personnel who are working on this program. The increase in G&A expenses quarter-over-quarter was primarily due to an expansion of our organization and consists principally of an increase in payroll and personnel-related expenses. I am pleased to report that we ended the year with a strong balance sheet to support our clinical development programs. As of December 31, 2021, cash and cash equivalents amounted to $764.4 million. For financial guidance going forward, please note, during the first quarter of 2022, we expect to incur residual costs from Roche associated with the wind down and close out of the MOONSONG, MORNINGSKY, and MEADOWSPRING trials. The timing of R&D expenses in 2022 is expected to be back-end loaded. This assumption is driven by clinical plans, which currently contemplate the initiation of the Phase 2 dengue trial as Janet just discussed in the challenge study during the first half of the year, as well as initiation during the second half of the year of the Phase 2 Bemnifosbuvir combination trial for COVID-19 and initiation of the Phase 2 combination trial of Bemnifosbuvir and Ruzasvir for HCV, which will likely be later in the year. For spending going forward, we will be taking a disciplined biotech-focused approach. As previously mentioned, expenses in 2021 included cost sharing with Roche relating to external spending associated with the MOONSONG, MORNINGSKY, and MEADOWSPRING COVID-19 clinical trials and Roche FTEs involved in the COVID-19 program, which was a big pharma model. We anticipate having cash runway through 2025 and we plan to be very dilution-sensitive as we move forward. I'll now turn the call back over to Jean-Pierre for closing remarks.

Thank you, Andrea. In closing, we are building a pipeline with the vision to be a leading anti-viral company. We plan to continue to build out our pipeline of anti-viral product candidates by broadening our nucleotide pipeline with other classes of antiviral that may be used in combination with our nucleotide product candidates. In 2022, we expect to make meaningful progress across our three Phase 2 programs for COVID-19, HCV, and dengue. These programs have the potential to provide global solutions for patients suffering from severe viral diseases. The data set for these clinical trials will be important readouts and should be key inflection points for our company. Importantly, as Andrea has indicated and presented, we have the financial strength with a cash runway through 2025 and the seasoned management team to advance these programs. As always, we thank you for your continued support as we build Atea to be a global leader in the discovery, development, and commercialization of therapies that address the unmet medical needs of patients with severe viral diseases. With that, operator, we will now open the call up to your questions.

We have the first question comes from the line of Matthew Harrison of Morgan Stanley. Your line is now open. You may ask your question.

I guess two from me. So first, when you're thinking about potential combination partners in COVID, what do you think you need in terms of an agreement here? I mean are there - do they - I don't know, just give me some sense in terms of how you get access to drug and how you might think about those studies? Do you need a formal agreement or could you get access otherwise? And then second on dengue, just give us a sense of what sort of I guess clinical outcome here would be meaningful in these patients? Is it about duration of disease, symptoms, et cetera? Thanks very much.

Thank you, Matt, for your questions. Related to the first question, we are open to partnership. But at the same time, as you have seen, we are going to be very opportunistic to evaluate externally as we are doing right now internally in terms of a combination. So as we speak, we are evaluating several opportunities, and I foresee, preferably in-licensing rather than partnership, but we are definitely open to potential interaction with some of the players, which may have more advanced candidates. If we believe that there leads to a potential best-in-class regimen and it compares favorably with the evaluations that we are doing right now in vitro, obviously from in vitro studies. Related to the second question, I'll let Janet address the second question. Janet?

Thanks, Jean-Pierre. So I think we have two studies, as I mentioned, the challenge study and the treatment study. In the challenge study, we are looking for the absence of the development of viremia in patients who have been pre-administered AT-752. In the treatment study, in patients who already have symptoms, we will be looking for a reduction in viremia and also the prevention of progression to more severe dengue in these patients and reduction in symptoms.

We have the next question coming from the line of Mr. Tim Lugo of William Blair. Your line is now open. You may ask your question.

This is Lachlan on for Tim. Thanks for taking the question. A couple on the dengue program. How do you see the challenge that you're facing through a regulatory process? Do you see that as a Phase 2 or kind of informing your plans for a Phase 2? And second, after the Phase 1 data, have you sort of narrowed down a dose or multiple doses and dose regimens that you plan to evaluate in Phase 2 for dengue?

Janet?

Sure. Thank you, Tim. So I think we would consider the study probably to be somewhat of a hybrid, the challenge study. I think the healthy volunteers who are being administered the challenge there. So I'm not sure how you would classify from a regulatory perspective. But I think it's going to be very informative because I think there's scope certainly for an effective drug for dengue fever to be able to serve both as your first full treatment and also for prophylaxis. So I think it will be important in showing that we are effectively able to inhibit the development of viremia in patients who are administered the dengue virus. Therefore, I think provide some element of proof of concept for treatment as well as for prophylaxis. For both those reasons, it's quite an important and intriguing study to do. And then with regard to dose, the Phase 2 treatment studies that I outlined actually will be looking at a couple of doses as we determine what the best dose is.

We have the next question coming from the line of Roanna Ruiz of SVB Leerink. Your line is now open. You may ask your question.

So one for your COVID program, could you just update us a little bit on what you've learned so far with your preclinical testing of combination use of Bemnifosbuvir with the protease inhibitor? And I'm also curious, have you done any testing or plan to do testing of the omicron sub-variants that are emerging right now?

Roanna, thank you for your question. Number one, we have ongoing data. So I think it's too early to share related to combination with some protease inhibitors. So we are evaluating actually several of them, and we will share very likely by let's say in the hopefully near future when we believe that we have a critical mass of data. And I'm sorry, and the second question, Janet, if you can address the second question, please.

Okay. The second question is on the same line of testing for Omicron, and I think that is still in the works and we haven't yet seen the results, but I think they are anticipated shortly.

Okay, that's fair. No worries. And then I also wanted to ask a question about your HCV program. So thinking ahead with this Phase 2 combination trial that you're going to initiate, what types of features are you considering or can you just ballpark, give us a sense of how big this trial might be, what you're hoping to look for in the data in terms of the results?

Janet, do you want to address it?

Yes. But I'm afraid it's not going to be an answer that will be very satisfactory because we're in the process of working that out. And so I think we'll be able to give you information later but probably not today.

Thank you. I am now showing - I am showing no further questions at this time. I would now like to turn the conference back to you, CEO Jean-Pierre Sommadossi. Sir?

Thank you again for joining us and for your continued support for Atea.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating and have a wonderful day. You may all disconnect.