Atea Pharmaceuticals, Inc. Q3 FY2022 Earnings Call

Good afternoon, ladies and gentlemen. Welcome to the Atea Pharmaceuticals' Third Quarter 2022 Financial Results and Business Update 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 will now turn the call over to Jonae Barnes, Senior Vice President of Investor Relations and Corporate Communications at Atea Pharmaceuticals. Ms. Barnes, please proceed.

Thank you, operator. Good afternoon, everyone, and welcome to Atea Pharmaceuticals' third quarter 2022 financial results and business update conference call. Earlier today, 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.ataepharma.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 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, outlined on slide two, 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. We have a number of updates to review with you today that demonstrate the considerable progress we have made so far this year across our three clinical programs. Turning to slide four, as we assessed the COVID-19 landscape with the rapid increase and dominance of multiple new variants in different regions of the world combined with social dynamics back to near pre-pandemic norms, epidemiologists predict that COVID-19 would persist with multiple waves, as we currently see today. The wanting ability associated with vaccines and natural infection and the low uptake in the number of people receiving their Omicron booster vaccine with only less than 10% in the US currently, we continue to close large numbers of infected individuals and reinforce the need for new direct acting oral antivirals. Looking forward, as we start enrollment of SUNRISE-3, our global Phase 3 durational trial, these ongoing waves with various susceptible populations to currently available preventive tools should enable timely enrollment of patients for this trial. Pandemic COVID-19 waves can be life-threatening to those at high risk over 65 years old, particularly to those with risk factors, causing increased hospitalization and thus. New oral antivirals with improved profiles are urgently needed due to the limitations of the current antiviral options. In addition to relapse and safety concerns, the major issue of drug-drug interactions between Paxlovid and commonly prescribed life-saving drugs lead to a major unmet need among patients that are at risk for severe disease. With bemnifosbuvir, we have the potential to address many of these limitations and it is our top priority to deliver this drug candidate as fast as possible. Turning to slide five as SARS-CoV-2 continues to spread, we're confident that bemnifosbuvir will remain fully active against ongoing and future new variants based on the consistent, potent in-vitro antiviral activity that has been demonstrated against variants of concern. Indeed, our most recent dataset demonstrated in-vitro antiviral activity against Omicron sub-variants BA.4 and BA.5. Similar to the potency observed with alpha, beta, gamma, epsilon, delta, and Omicron sub-variants BA.1 and BA.2. I will now turn the call over to John to review the oral antiviral market opportunity for COVID-19. John?

Good afternoon everyone. Turning to slide six, while initial COVID-19 revenues were driven by advanced government purchases, we believe the COVID-19 antiviral market will remain a very large market opportunity for years to come. Our Paxlovid and Lagevrio are each multibillion-dollar products despite the limitations associated with prescribing hesitancy. Turning to slide seven, over the next year, the US Department of Health & Human Services has suggested and we anticipate the U.S. market will transition from advanced government purchases to more traditional channels, which we expect will continue to be a multibillion-dollar opportunity. Projected annual COVID oral antiviral demand using IQVIA retail prescriptions suggest an estimated annual market between $10 billion and $20 billion. Beyond that, we believe there is an opportunity to expand this market by simplifying prescribing for patients where Paxlovid's drug-drug interactions are a concern. There are several important classes of commonly prescribed drugs that limit the ability to safely prescribe Paxlovid, including seizure medications, anti-psychotics, anticoagulants, and more. Additionally, the government is expected to move beyond advanced purchases to recurring stockpile purchases once oral antivirals against COVID-19 are fully approved. I'll now hand the call over to Janet.

Good afternoon. Turning to slide eight, our COVID-19 strategy is focused on the current highest unmet medical need. We're targeting the most vulnerable patient populations who are at the greatest risk for disease progression to severe COVID-19 or mortality, and for whom there are the fewest treatment options available currently. When the first advanced results to date demonstrated a very favorable profile, including clinical benefits, safety, tolerability, and low risk for drug-drug interactions, this profile should allow bemnifosbuvir to become a cornerstone of mono and combination oral therapy for the treatment of COVID-19. Our combination antiviral cohort in the SUNRISE-3 trial will inform our future development strategies, and we are at the forefront of developing combination therapy for specific populations, such as the immunocompromised. Bemnifosbuvir has already demonstrated additive benefits in vitro in combination with authorized direct acting antivirals, including protease inhibitors, and we continue to advance our internal protease inhibitor program for combination therapy with bemnifosbuvir. Moving to slide nine, the statistics show unequivocally that hospital rates and deaths from COVID-19 remain highest in the population which returned to study, and these are the primary endpoints for the SUNRISE-3 trial. In the US, alarmingly, COVID-19 is now the third leading cause of death after heart disease and cancer, with hundreds still dying daily. According to the CDC, approximately 75% of COVID-19 deaths are in patients 65 years of age or older. The CDC has also stated that 50% of hospitalized patients over 65 have had at least three shots of vaccine, with rates of hospitalization three times higher in unvaccinated adults. It's important to note that in immunocompromised patients, rates of hospitalization in excess of 20% have continued to be reported with Omicron. Moving to slide 10, let's now review COVID-19 study designed for SUNRISE-3, our Phase 3 registrational trial that will assess bemnifosbuvir as first mono and combination antiviral therapy. This global Phase 3 trial is a randomized, double-blind, placebo-controlled study which we will evaluate bemnifosbuvir or placebo administered along with the local standard-of-care. We expect to enroll at least 1,500 high-risk patients with mild or moderate COVID-19. Patients will be randomized one-to-one to receive either bemnifosbuvir 550 milligrams or placebo, twice daily for five days. Two study cohorts defined by the type of standard-of-care patients receive will be studied. The first cohort is a monotherapy cohort, which will comprise patients receiving supportive care and this represents the primary analysis population. The second cohort is a combination antiviral cohort that will be comprised of patients who are receiving a compatible antiviral against COVID-19 as part of their locally available standard-of-care. The primary endpoint of the study is all-cause hospitalization or death through day 29 in the 1,300 patients from the monotherapy cohort. You will recall we have already evaluated hospitalization in the MORNINGSKY trial, and bemnifosbuvir showed a 71% reduction in hospitalization versus placebo. Importantly, in addition, a subgroup analysis showed an 82% reduction in patients over the age of 14. Moving to slide 11, SUNRISE-3 will focus on high-risk patients that are at a greater risk for disease progression to severe COVID-19 or mortality. This includes patients 80 years or older, patients 65 or older with one or more major risk factors for severe COVID-19, or immunocompromised patients over 18, all regardless of vaccination status. The study is expected to have a large global footprint with up to 300 sites in 25 countries, which will include the United States, Europe, Japan, and also the rest of the world. We will imminently begin enrollment of the SUNRISE-3 trial in the United States, and we have submitted or are in the process of submitting clinical trial applications in other countries. Turning to slide 12, let's now review our Dengue program. Dengue is the most prevalent mosquito-borne viral disease globally, and affects almost 400 million individuals on a yearly basis. Dengue is endemic in over 100 countries and more than half of the world's population is at risk. Despite all of this, there are no currently approved treatment options for dengue. DEFEND-2 is a randomized Phase 2 proof-of-concept study in patients with dengue fever, that is enrolling in dengue endemic areas. It is designed to assess antiviral efficacy, safety, and the pharmacokinetics of multiple doses of AT-751, with a primary endpoint of change in dengue virus viral load from baseline. AT-752 or placebo are administered orally for five days, and up to 60 patients in three cohorts may be studied. Our second dengue study is a Human Challenge model that is being conducted 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. Subjects are closely monitored within a very controlled setting, allowing assessment of viral load and the viral kinetics between the treatment groups. We expect to complete enrollment of the Challenge study and enrollment of the first cohort of 20 patients in the DEFEND-2 study around the year end with results to follow. Additionally, I would like to mention that we presented results from the AT-752 Phase 1 study in 65 healthy volunteers last week at the American Society of Tropical Medicine and Hygiene 2022 Annual Meeting. These data demonstrated that AT-752 was generally safe and well-tolerated without drug-related serious adverse events or discontinuations. Drug levels above the in vitro EC90 were rapidly achieved. Based on these data, we anticipate that AT-752 has the potential to rapidly inhibit dengue virus replication across all serotypes one through five. Turning now to our Hepatitis C program. As shown on slide 13, our HCV combination program looks very promising and has the potential to improve on the current standard-of-care. Our HCV combination profile includes the potential for convenient and short duration protease inhibitor-free treatment, and the possibility 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. Clinical trial applications will be submitted around the end of the year because the initiation of the phase two clinical trials is to follow. With that overview, I'll 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 third quarter of 2022. The statement of operations and balance sheets are on slide 17 and 18. R&D expenses decreased by $38.1 million from $43.0 million for the three months ended September 30, 2021 to $4.9 million for the three months ended September 30, 2022. The decrease in R&D expenses was primarily due to the elimination of the cost-share arrangement with Roche, our former COVID-19 program collaborator and includes a credit in the amount of $14.5 million related to the close-out by Roche of certain clinical trial activities that were previously the subject of the cost-sharing arrangements. General and administrative expenses remained relatively consistent at approximately $11.9 million for the three months ended September 30, 2021, and $11.4 million for the three months ended September 30, 2022. Also in Q3, we recorded interest income and other earnings on our cash reserves in the approximate amount of $4.4 million, and we expect to receive a tax refund of approximately $3.7 million associated with the 2021 tax returns. In closing, with $665 million in cash, cash equivalents, and marketable securities at quarter end, we are pleased to reiterate 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. This year we have made substantial progress, advancing our three clinical candidates, which will take us to a pivotal year in 2023. Our team is operating with a sense of urgency because there is an immediate need for new oral treatment options for COVID-19. We will immediately begin warming up our global SUNRISE-3 trial with a goal to deliver safe and effective direct-acting antivirals to patients as quickly as possible. In addition, we soon expect enrollment completion of the Challenge study and the first cohort of DEFEND-2 for dengue with results to follow and the initiation of our Phase 2 combination program in HCV. I would like to take the opportunity to thank the entire Atea team for their tireless dedication to our mission of transforming the treatment of several diseases and without whom none of this progress would be possible. With that, operator, we will now open the call up to your questions.

Thank you. At this time, we will conduct the question-and-answer session. Our first question comes from the line of Ms. Hannah Adeoye with JPMorgan. Hannah?

Hi, this is Hannah on for Eric. Thanks for taking the questions, just a few from us. So first, can you speak to just the rationale behind doing this Challenge study? And what caution do you think it is going to address separate from that of the inpatient NV study? And how informative do you think that human trial might be in you're seeing on the clinical activity of AT-752? And then also, can you characterize the data sets that we might be seeing from both Phase 2 Studies? Should we anticipate data from exploratory endpoints as well? And when might we expect an update on subsequent cohorts? Thank you.

Janet, you have to take the questions.

Thank you. So in regard to the rationale for the Challenge study, we think it's very complementary to the treatment study and has provided us with a really good idea of how AT-752 performs in Dengue. As mentioned, the patients or the volunteers in the Challenge study are administered a live dose of Dengue, but on the background of either treatment with 752 or placebo. And so I think here, we really have a good example of the natural biokinetic study of infection in the placebo patients, the potential for protection against infection altogether, but also, I think, a good glimpse of whether 752 is efficacious against the infection. And so I think together, we get a good sense of what happens in a dengue infection and also what is likely to happen if the drug is administered prophylactically. So I think altogether, the two studies together should give us a very good understanding of how 752 performed against the dengue virus and allow us to make the decisions around whether we need further cohorts and what type of dosing we're looking at for those in terms of treatment durations and so forth. So, I think they're going to be very informative. It's unfortunately a disease which is not all that well understood. And so I think having some real-world evidence in this I think will be very important for us. And with regards to when we'll have datasets available, as we mentioned, we plan to complete the Challenge study as well as the initial cohort of patients in the Phase 2 trials by year end. And then we will analyze and incorporate those data. And that will allow us to make decisions around what questions, if any, we need to answer as we plan the enrollment of subsequent cohorts if they're needed.

Okay. So we won't be adding data this year from any of those programs?

We have not made any commitments regarding the data. It will be available early next year, as we've stated multiple times. I want to emphasize what Janet mentioned: we aim to be pioneers in the treatment of Dengue. Currently, there isn't a successful direct-acting antiviral; all attempts have failed. We are leading in terms of treatment duration, which is set at five days, with two weeks for prophylaxis. We are gathering insights from experts who noted there might be some rebound effects from the disease. As Janet stated, we are waiting for both studies to provide clarity, as they are highly complementary. This will help us understand how to proceed with larger studies.

Okay, great. Thanks for taking the question.

Thank you. Our next question comes from the line of Matthew Harrison of Morgan Stanley. Matthew, please stand by.

So what level of viral load reduction of dengue is meaningful or are the kinetics more important? Thank you.

Janet.

First, an interesting question, as I didn't know the answer to it necessarily. I think we're going to learn a lot, as I said, from having both the patients on the placebo group as well as on the active in the prophylactic study. And also in this treatment study, I think, to be able to compare and contrast. We know that the viral load declined very rapidly naturally after a couple of days. But what we're interested to see is whether we can get it to come down more quickly. But some of what you're asking, I think we don't really know the answer because as there are no effective therapies, I don't think it's possible really to make that assessment yet.

Okay. Thank you.

Okay. Our next question comes from the line of Umer Raffat with Evercore. Umer, please standby. Umer, your line is open.

Thank you. A couple of questions, if I may. First, we saw Gilead post the Phase 3 trial of their oral Remdesivir pill. And there are a couple of things that stand out versus your trial design. First, Gilead is using almost 2x the powering. And second, they're limiting the trial to patients with at least four months or more since the last vaccine dose. Maybe if you could speak to those dynamics in those two dimensions, as you thought about your trial design, number one? And secondly, back on dengue, perhaps just to pick up on the prior question. If the viral load truly is declining so rapidly after a couple of days, is that consistent in patients that do end up getting hospitalized too? Because I got to imagine some sort of hospitalization endpoint is what leads to ultimate utilization and perhaps even approval? And if you could also speak to the human Challenge study that you were attempting to run, there's only 12 patients. I didn't hear you say much on that. Where do we stand on that?

Janet?

So with regards to the Gilead Phase 3 trials, I haven't seen the study design, so I can't comment on how their population compares to us. So with regard to the powering, I'm really unable to comment. With regard to the more than four month requirements into the last vaccination, again, I don't know where they are doing that study. But I can say that for our study, we have a truly global footprint, as I mentioned, in more than 25 countries. And I think you'll be very aware of the fact that not everybody is getting the same vaccines and not everybody is getting them on the same schedule. So we think that in order to allow the study to enroll the most pragmatic way is really to allow patients to come in regardless of vaccination status if they get COVID-19 because that's really what we care about. And we'll see what the hospitalization rates are like. Unfortunately, I think in the patient population that we're planning to study in this study; the immune response to the vaccine can be quite limited anyway. So we think that many of these patients are unfortunately still going to be fairly susceptible to COVID-19. And you'll recall, I mentioned on the call around the data for 50% of patients over the age of 65 being hospitalized, having had at least three shots of vaccine in the US. And so I think we're still likely, unfortunately, to see a fairly good representation of patients being hospitalized even if they have been vaccinated. And again, it's a pragmatic approach in order to be able to help us to take the study forward, and we'll have to see how that translates. With regards to viral load and the rapidity of the declines, we know that the viral load does decline rapidly. And I think to some extent, we don't yet know how that translates into the need for hospitalization. What we do know is that if patients are repeatedly infected with Dengue, what really causes the hospitalization is the infection leading to a cytokine storm. And how cytokine storm relates to rapidity of decline in viral load, I think is uncertain. I think the main thing is that it's important to eradicate the virus as quickly as possible to help reduce the transfers for that path of immune response. But again, I think this is really the front end of the learning curve for everybody with therapeutics for dengue.

Just to add, there has been a correlation suggesting that viral loads are important for the severity of the disease. The two strains, Dengue 1 and Dengue 2, have the highest viral loads compared to others and are responsible for most severe cases. However, the correlation is not very direct. I'll let Janet address the Challenge part as well.

So with regard to the Challenge study, we're still in the process of enrolling the cohort of 12 patients into that cohort. So there isn't much more that I can provide in the way of an update, but we anticipate that wrapping up fairly shortly now.

Thank you. Our next call will come from the line of Tim Lugo with William Blair. Tim, please stand by while I open your line up. Tim?

Taking my question. Yes. Can you hear me?

Yes. Your line is open.

Okay. Great. So the combination of patients that you're going to be getting out of SUNRISE-3, is it safe to assume that those are going to be mostly elderly and immune compromised? Or is that more of just the geographic kind of, I guess, division between who would receive combination therapy and who wouldn't?

Janet?

I believe the decision will largely depend on the prescriber's discretion. Access to effective antivirals and standard care can vary geographically. In the United States, many patients may only receive monotherapy due to significant drug interactions that prevent the use of Paxlovid. However, molnupiravir can still be prescribed, although it appears to be less frequently used. We expect more combination therapies to be utilized in certain regions worldwide. Nevertheless, there seems to be a reluctance to prescribe based on the profiles of the currently available drugs, even in those areas with unmet needs.

Okay. And do you have a sense of rebound? I know that's obviously very topical, but do we really have any good data on rebound rates for oral antiviral?

Janet?

Yes, I think you're probably reading the same research here that I am. And quite honestly, I think it's perplexing still. The rates seem to be variable. One has also of patients not perceiving therapies who also experienced relapses. So I think it's difficult to be certain and the anecdotal experience that one has of people experiencing relapses or rebounds and what is written in the literature also seem to be somewhat divergent. So no, I don't have a good idea yet.

Understood. Thank you.

Our next question will come from the line of Nik Gasic with SVB Securities. Nik, please stand by while I open up your line. Nik?

Hi. This is Nik Gasic on for Roanna Ruiz, SVB Securities. Thanks for taking our questions. First off, for the new Phase 3 COVID-19 program, I was just curious, are you planning to feature both the primary and secondary endpoint data in the interim analysis? And if so, when do you expect to share these results?

Janet?

So we're anticipating that we'll have results from the interim analysis in the second half of next year. And I don't think we've discussed whether we're going to showcase data from both primary and secondary endpoints, so I can't answer that today.

Got it. Thanks, Janet. And then one follow-up on the COVID-19 program. Are you planning to stratify results based on individual patient or status?

Janet?

No. We're not going to stratify based on anything. And I think the serious testaments will take a little while to get. So no, we will not be doing that.

Got it. That's very helpful. And then a couple of questions on dengue, if you don't mind. Are there any adverse events or safety signals you're watching for, in particular, at some of the higher doses of 752, maybe GI related for the two ongoing clinical trials?

Janet?

Sure. The dose that we selected for our clinical trials with 752 is safe and well tolerated. And no, we don't believe that there will be a GI signal of the doses selected.

All right. That's very helpful. And lastly, how might, I guess, broader availability of Takeda's new vaccine, I guess, impact the landscape for new therapeutics in this space? And maybe what implications could this have for the development of 752 in the future?

Janet, do you want to address or John?

So I can start and then perhaps John, you might like to take over. So I think that the vaccine is unfortunately following on the heels of Avastin, which led to some severe adverse actions. And so I think there was the concerns initially about vaccine uptake. I think that may be a problem, unfortunately, for people. And I think the population is largely intended for is starting with children, which makes a lot of sense, but I think leaves a large unmet need for many people who live in dengue endemic areas. And certainly, I think, secondly, the question is around the durability of the vaccine and people who don't live in dengue endemic areas potentially visiting dengue endemic areas and needing something shorter-term for treatment or prevention. So I think the awareness to the vaccine may actually drive people being more aware of the need for therapy. John, I'll hand it over to you.

Yes. So I think a lot was said. So obviously, in the endemic areas, we welcome the fact that they could have a vaccine because there's been nothing there. But there is durability specifically looking at the created vaccine after three years, it is starting to come down. Given the past experience in those areas with the Sanofi vaccine and the disappointment by many of those countries, it's going to be interesting to see what the uptake is there. But for wealthier countries where it might be more of a travelers' market, particularly if you look at the travelers' market in the United States, a lot of travelers are reluctant to get vaccinated, particularly as serious before they travel. We saw this with Hepatitis A; we saw it with others. So an oral prophylactic for the prophylaxis of travel is really what would be preferred there. And then, of course, even with the military and so forth, where maybe you're not going to be able to schedule.

Thank you again for joining us today. Thank you.

Thank you for your participation in today's conference call. This concludes the call. You may now disconnect.