Atea Pharmaceuticals, Inc. Q2 FY2022 Earnings Call

Good afternoon, ladies and gentlemen. Welcome to the Atea Pharmaceuticals Second Quarter 2022 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. Please note that today's conference is being recorded. 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.

Good afternoon, everyone, and welcome to Atea Pharmaceuticals' second quarter 2022 financial results conference call. Earlier today, we issued a press release outlining 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 and navigating to the Events and Presentations section. 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 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, 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 was going to start with our Bemnifosbuvir program where there is much to report, as you can see summarized on slide three. It is now evident that, as detailed on slide four, COVID-19 will likely remain a global concern for a very long time. Indeed, we see new variants and sub-variants emerging in shorter timeframes, and the rate of infection is increasing. The changing characteristics have caused the existing antibody treatment to fail and have reduced the efficacy of vaccine-induced immunity, creating the need for frequent and early engineered boosters to combat the emerging variants. Pandemic surges can be life-threatening for those at high risk over 65 years old, particularly those with risk factors, causing increased hospitalization and death. Right now, BA.5 accounts for the vast majority of infections. It is highly infectious, and new variants are expected to fuel a surge this fall. New oral antivirals with improved profiles are urgently needed due to the limitations of the current antiviral treatment options. These limitations include the issue of relapse, which was experienced by both President Biden and Tony Fauci among others after taking Paxlovid. Relapse can lead to a rebound of symptoms, as well as transmission of infection to others. Other limitations include drug-drug interactions with many commonly prescribed life-saving drugs. These drugs are frequently used among those that are the most vulnerable to COVID-19, limiting the ability for Paxlovid to be prescribed and raising the treatment duration for both patients and prescribers. With Bemnifosbuvir, we have the potential to address many of these limitations, and we are working diligently to deliver improvements over the current standard of care. Moving to slide five. We recently had an end of Phase 2 meeting with the FDA and met with the European Medicines Agency emerging task force to review the Bemnifosbuvir data package to date, including the MORNINGSKY results. Let me remind you that in the MORNINGSKY study, which we reported in May, the risk of hospitalization was 71% lower in the Bemnifosbuvir 550-milligram BID arm versus placebo with a p-value equal to 0.047 unadjusted and exploratory. Obviously, we are very encouraged by this outcome. The results were consistent in both standard and high-risk patients as well. We are now in the process of finalizing the design of a global late-stage clinical trial for the treatment of mild-to-moderate COVID-19. Bemnifosbuvir 150-milligram dose twice daily for five days in high-risk patients, including those who are immunocompromised regardless of vaccination status. The primary endpoint will be hospitalization and deaths. Operational planning is currently underway for this global trial, and we expect to initiate this study in the fourth quarter of this year. Turning to slide 6. We are confident that Bemnifosbuvir will remain fully active against future variants. This is based on the consistent potent antiviral activity that we continue to generate as newer variants of concern emerge as a test. Our most recent data set confirms antiviral activity against our Omicron surveillance similar to the potency demonstrated with alpha, beta, gamma, epsilon, and delta. This data reinforces our understanding of Bemnifosbuvir's potent inhibition of the two functional domains of the highly conserved viral RNA polymerase. Let me remind you that details related to the molecular mechanism were published in Nature Communications earlier this year. Moving to Slide 7. Based on the evolving nature of COVID-19 variants and unmet medical needs, we are pursuing a multi-pronged approach which places us at the forefront of developing a combination regimen to fill the treatment gap of COVID-19. In the future, we see a role for Bemnifosbuvir as monotherapy as well as in combination regimens. Right now, as previously noted, there are treatment gaps with first-generation protease inhibitors, including drug-drug interactions. We can also anticipate resistance to emerge with broad use, prolonged treatment, and weak treatment when protease inhibitors are administered as monotherapy. With Bemnifosbuvir's attractive profile, we believe that it has the potential to become the cornerstone therapeutic for both monotherapy and in combination therapy. This is our rationale for pursuing, in parallel to our late-stage monotherapy trial, a second-generation protease inhibitor with an improved profile to be used in combination with Bemnifosbuvir in specific patient populations. On Slide 8, as part of this effort, our target profile for the second-generation protease inhibitor is a highly potent drug with a good safety profile and limited drug-drug interactions that do not require ritonavir or any other booster. And I'm pleased to report today that we have made significant progress with our internal program. Indeed, in a short time period, we have achieved two essential properties with potency at nanomolar and sub-nanomolar levels and good metabolic stability leading to highly promising compounds. We are now working to combine this potency and metabolic stability in a clinical candidate which we hope to select later this year. Moving to Slide 9. The antiviral effect of Bemnifosbuvir in combination with the protease inhibitor Paxlovid was examined in vitro in a HCoV-229E surrogate model and the results indicate an additive antiviral effect. We are not only encouraged by this data, but this data also supports the potential benefit of the combination of Bemnifosbuvir with a protease inhibitor for the treatment of COVID-19. I will turn the call over to Janet for a review of our dengue fever and hepatitis C program. Janet?

Thank you, Jean-Pierre. Turning to Slide 11. I'll begin with a review of our program to treat dengue fever. In recent weeks, hundreds of thousands of cases of dengue have been reported across Southeast Asia owing to the flooding and other climate-related issues experienced there. In the United States, in Miami Dade County, a mosquito-borne illness advisory was issued for dengue in late July after the first case was confirmed this year in a Florida resident. There are no treatments for dengue. Dengue is the most prevalent mosquito-borne viral disease and affects almost 400 million individuals on an annual basis. Dengue is endemic in over 100 countries and more than half of the world's population is at risk. There is a significant unmet medical need, and the global economic burden is estimated to be between $8 billion to $9 billion annually. As noted on Slide 12, we continue to enroll patients in the DEFEND-2 trial, which is a randomized Phase II proof-of-concept study in patients with dengue fever. The study is designed to assess antiviral efficacy, safety, and the pharmacokinetics of multiple doses of AT-752 with a primary endpoint of change in dengue virus viral load from baseline. AT-752 or placebo will be administered orally for five days in up to 60 patients with dengue infection. We expect to report initial results from the study later in the year. We also initiated a second dengue study which is a human challenge model in the United States. In this study, healthy volunteers are dosed with AT-752 or placebo and then administered a live dose of dengue virus. The subjects are closely monitored within a very controlled setting, allowing for the assessment of viral load and the viral kinetics between the treatment groups. We also expect to report the preliminary results from this study later in the year. Turning now to our Hepatitis C program. As shown on Slide 14, our HCV combination development plan looks very promising, and we believe that there is still room to improve upon the standard of care for Hepatitis C. Our HCV combination profile includes convenient and short treatment duration with the potential for the first ribavirin-free therapy for decompensated disease. We believe Ruzasvir in combination with Bemnifosbuvir provides the opportunity to create a best-in-class pan-genotypic HCV therapy. We're continuing to make progress with our program and have completed a required combination preclinical toxicology study. We are currently manufacturing users via clinical trial and are finalizing the Phase II clinical trial design. We expect the Phase II combination program to evaluate convenient and short treatment durations in both non-cirrhotic and compensated patients with cirrhosis. We anticipate initiating the study later this year. With that overview, I will now hand the call over to Andrea to review our financial information.

Thank you, Janet. As Jonae mentioned in her introductory remarks, earlier today we issued a press release containing our financial results for the second quarter of 2022. The statement of operations and balance sheet are on Slide 16 and 17. For the second quarter of 2022, the decrease in R&D expenses in comparison to the second quarter of 2021 was driven principally by the discontinuation of our cost-share arrangement with Roche. This cost-sharing arrangement ceased when the collaboration with Roche ended earlier this year. The decrease was partially offset by an increase in R&D employee payroll and personnel-related expenses. The nominal increase in G&A expenses in the second quarter of 2022 over the second quarter of 2021 was primarily due to an expansion of our organization and reflects an increase in payroll and personnel-related expenses. We ended the quarter with a strong balance sheet, including cash resources in the amount of $684.5 million to support our clinical development programs. The cash expenditures during the quarter were $21.1 million. We are reiterating our cash guidance with a runway through 2025. I'll now turn the call back over to Jean-Pierre for closing remarks.

Thank you, Andrea. Throughout the first half of 2022, we made considerable progress advancing our oral antiviral platform with the aim of transforming the treatment of severe viral diseases. As the global demand for COVID-19 treatments continues to abate, we remain confident in the opportunity for Atea to deliver a multi-pronged approach with best-in-class oral antivirals to treat COVID variants as the virus continues to evolve. On Slide 19, as we look to the balance of the year, we expect to build on this momentum by achieving a number of value-creating milestones, including the initiation of our late-stage clinical trial of Bemnifosbuvir for COVID-19, reporting preliminary clinical data from our dengue fever program, and the initiation of our Phase II combination program in HCV. In addition, our goal is to select the second-generation protease inhibitor clinical candidate for COVID-19 combination therapy with Bemnifosbuvir. These programs have the potential to provide global solutions for patients suffering from severe viral diseases. And I look forward to reporting our progress in the months ahead. With that, operator, we will now turn the call to your questions.

Thank you. At this time, we will conduct a question-and-answer session. Our first question comes from the line of Tim Lugo from William Blair. Your line is open.

Thank you for answering my question, and congratulations on the progress made this quarter. From a broad perspective, it appears there may have been a shift in the agency's regulatory stance, suggesting they might now be more receptive to the monotherapy trial, which wasn't the case earlier this year. Can you discuss whether this is due to the updated MORNINGSKY data that impressed them, issues with the PI, or a combination of both?

Janet, would you like to address the question?

Thank you. Yes, Kate, and thanks, Tim. No, I think to clarify, we have not had discussions about combination therapy versus monotherapy with any agency. So these were in the Phase 2 discussions that we reported now. And so I don't believe there was any issue one way or the other with that. I think they see a path forward for us as monotherapy and then potentially as combination therapy also.

Okay. Fair enough. And can you just talk about using your own PI versus partnering with one of the other PIs? Obviously, there’s Paxlovid, but there are other development stage candidates out there? Is there something that just makes those not quite right for combination?

Look, we'll see in the next six to 12 months. As you know, the issues with Paxlovid are going to remain whether monotherapy or combination, and mostly, it's drug-drug interaction. Very likely, we foresee that the combinations are very likely when we are talking about specific populations, particularly immunocompromised patients or transplant patients where you can have long-term viral replication. So already, you start with a major limitation, which is the drug interaction issues of Paxlovid. As you have seen, we are moving very fast with our second generation. Our goal is to have, like we said, a highly potent drug which will lead to a low dose. We foresee potential co-formulation with Bemnifosbuvir. Let's not forget we have a low pill burden with Bemnifosbuvir; it's two pills twice a day. If you combine with Paxlovid, you're talking about five pills twice a day. That's quite a bit. So, we keep this in mind. But we believe that we will have a best-in-class product. To my knowledge, this is the first time reporting sub-nanomolar potency. We are starting to see even binding at the picomole level which is what we would like to see as we have in HIV and HCV. So, let's see where we stand in the next six to 12 months. But we believe that our proprietary combination will lead and help create major benefits for patients, especially in those very high-risk patients with COVID.

Thank you, Jean-Pierre.

Thank you, Tim. Our next question comes from the line of Umer Raffat from Evercore.

I would love to get a little bit more clarity about your expectations for the continuing market for antivirals. I mean obviously, there's still unmet need in COVID, but by the time your either monotherapy or proposed combination is eligible for launching, what do you think the ongoing COVID market is going to look like at that stage?

Sure. John, do you want to address that question?

Yes, sure JP. Yes, I understand your question. We believe that the COVID endemic will really continue throughout the world. And recently you've seen the multibillion dollar opportunity, and that's just for treatment. There’s no medicine stockpiling there. But even if you look at the current landscape, which is the dominant player, at least in the United States, with Paxlovid. As JP said, due to the drug-drug interactions with many commonly prescribed medicines, that is not going to go away. These drugs are frequently used among those who are the most vulnerable to COVID-19. Unfortunately, it's limiting the ability of Paxlovid to be prescribed, creating treatment dilemmas for both patients and prescribers. Just to reiterate, I think we always have seen that the commercial opportunity for COVID will really come from two areas: one from the active disease, which is what you see now, and then once NDA approval comes, that the government will stockpile that and the stockpiling will likely be similar to other pandemics that we've seen before, which usually is a percentage of the population that will be ongoing. So, we don't see anything really changing at least on the current landscape that you see right now. The liabilities of those assets we see are continuing.

Okay, great. That makes sense. I have one more question. Apologies if you already covered this, but can you discuss viral rebound and whether the risk will be different in combination therapy?

Viral rebound and what? Say that again please.

I'd love to talk a little bit about the expectations that other antivirals have had with viral rebound. And obviously it's not just Paxlovid; you've seen similar reports from Bemnifosbuvir, although it's not as widely used. So, I'm wondering what you think about the risks there, and whether combo will meaningfully address that?

Well, look we will have to conduct the study to see if this benefit can be realized. We just see, recently, potential for a rebound although it has not been clearly documented. Recently, a review paper noted that Paxlovid's situation is clear. And I think that it's really related to the mechanism of action. When we talk about protease inhibitors, we are talking about the likely incomplete suppression and incomplete viral replication. Let's not forget that Paxlovid has an off-rate of one hour. That means when the clearance occurs within one hour, you are back to full viral replication. That's the major difference with nucleoside analogs, where you have chain termination leading to an irreversible process. So, again, we need to have first a good handle on the real rates. There are several reports talking about 2%, 5%, 10%. It would be very important to know exactly where we are targeting as some have mentioned 20% or 30%. I believe, most likely, if there is a difference among different patient populations, we may see higher rates in immunocompromised patients due to potentially long-term viral replication. Combination treatments should lead to those benefits. But obviously, the studies will have to be conducted.

Thank you.

Thank you. Our next call comes from the line of Nik Gasic with SVB Securities. Your line is open.

Hey, good morning. This is Nik Gasic on for Roanna Ruiz. Thanks for taking our question. Maybe first off on Bemnifosbuvir. How do hospitalization and death event rates impact primary endpoint data for Bemnifosbuvir in Phase III?

Janet?

I'm sorry, Nik. I just couldn't clearly hear your question. How might hospitalization and death rates impact Bemnifosbuvir? Was that your question?

Hey, Janet, yeah I'm just curious how might lower hospitalization and death event rates impact the primary endpoint data in Phase III?

So I think obviously as an endpoint, it may mean that we will need to explore more patients. But I think one can also probably enrich for patient populations where these events are more likely to occur. So we – once we have a final study design and we are on our way, we'll give you some idea of what we're anticipating to do. But I think just at a broad level that would be how we hope to address that.

Got it. That's very helpful. And I think you previously mentioned optimizing 527, the compound itself, to get better exposures, with a lower cost of goods. Curious if you're moving forward with those plans and with the optimized molecule in Phase III?

Yeah. Basically, we are moving forward with the new formulation and improved API. The API is just an improved production process to synthesize at multiple levels. The formulation is also a much more straightforward formulation process. We are currently in the process to complete Phase I with this formulation. We will basically include the new CMC in the package for the global trial as well.

Got it. So this new compound won't be assessed in the Phase III; it will still be the prior 527 compound.

Correct. Exactly the same.

Got it. And then lastly, on potency data for Bemnifosbuvir against BA4 and BA5 variants. When do you expect to share this data? And how do you expect Bemnifosbuvir's ability to hold up against future variants of concern?

Look, as you have seen in the slide, regardless of the variant, we search for major differences in the sequence. Especially when we compare the Omicron with the alpha, the beta, and the delta, there is no difference at all. Not surprising, as the RNA polymerase is highly conserved. I'd like to remind you that any surveillance shows exactly 100% homology in the RNA polymerase sequence. The only variation is in the spike protein. It will take a couple of months to develop data for BA5. We have activity against BA1 and against BA2. I believe that I can share data about BA5 soon. Again, it's crucial to note that we have not seen any significant mutation in the RNA. The only one compared to the original Wuhan strain is the 323 mutation, which is the interface between the new variant and the polymerase. In fact, we reported that in one of our clinical trials, we had 98% of these patients with that mutation. This is why the nucleoside analog, especially targeting the RNA polymerase with a chain termination mechanism, does not anticipate any variational differences regardless of future variants.

Got it. That's helpful. And then lastly on 752 in dengue, maybe I'm just curious about what you're hoping to see in the Phase 2 data set in terms of efficacy, and are there any particular safety signals you're watching for closely?

Janet, would you like to address the question?

In the treatment trial, we're looking primarily to see a decline in viral load. This happens naturally fairly quickly, but we believe that with clinical effect, you should see a more rapid and deeper drop in viral load, so that would be the primary endpoint. We'll also be looking at symptoms. We have a fair amount of experience in our Phase I trials with the drug. So we are confident in its profile being well-tolerated and safe. We will obviously monitor for that and also look at the pharmacokinetics. But the viral kinetics are really the primary endpoint and the main aspect we're evaluating. We'll also look at a couple of different doses and dosing regimens depending on how we proceed from cohort to cohort. But those will be the things that we will be looking for.

Got it. Super helpful. Thank you, Janet. I'll hop back in the queue.

Thank you, Nik. If there are no further questions at this time, I'd like to hand it back to Jean-Pierre for closing remarks.

Thank you again for joining us today, and we look forward to reporting more progress in the fall. Thank you.

Thank you everyone for your participation in today's conference. This concludes the program and you may now disconnect.