Atea Pharmaceuticals, Inc. Q4 FY2022 Earnings Call

Good afternoon, ladies and gentlemen. Welcome to the Atea Pharmaceuticals' Fourth Quarter and Full Year 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. Please be advised that today’s conference is being recorded. I’d now like to 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' fourth quarter and full year 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.atea.pharma.com. With me today from Atea are Chief Executive Officer and Founder; Dr. Jean-Pierre Sommadossi; Chief Development Officer, Dr. Janet Hammond; Chief Medical Officer, Dr. Arantxa Horga; 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, 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.

Good afternoon, everyone. And thank you for joining us. As you will see on slide 3, this year, we are poised to continue the meaningful progress made across our advanced clinical development programs following strong execution in 2022. Clinical efficacy results from the MORNINGSKY trial informed now of Phase 3 SUNRISE-3 trial of Bemnifosbuvir for the treatment of COVID-19, which was initiated in the first quarter of 2022. We anticipate an interim analysis from the SUNRISE-3 trial in the second half of this year, followed by completion of enrollment by year end. We also made meaningful progress, advancing our preclinical second generation protease inhibitor program, and we anticipate filing an IND for clinical candidates around the end of the year. With our HCV program, we completed preclinical and manufacturing work needed for the initiation of a Phase 2 combination trial of Bemnifosbuvir and Ruzasvir in the second quarter. With our Dengue program, we conducted two proof-of-concept studies for AT-752, and the results will be shared with you today. Let's now move to COVID-19. Turning to slide 5, Bemnifosbuvir is an all-nucleotide prodrug that targets viral RNA polymerase, a highly conserved enzyme critical to viral replication and transcription. We believe that Bemnifosbuvir's profile addresses the key limitations of current therapies. It has a low risk of drug-drug interactions and may be co-administered with commonly prescribed drugs for high-risk COVID-19 patients, a key limitation of Paxlovid. Scientific presentations demonstrating Bemnifosbuvir's lack of drug-drug interactions were presented last week at the Conference on Retroviruses and Opportunistic Infections, also called CROI. The US COVID-19 Public Health Emergency is set to expire on May 11, and the market dynamics with COVID continue to shift. Based on the current landscape, there are very limited treatment tools available, which essentially only include Paxlovid for outpatients or Remdesivir for hospitalized patients. The end of the public health emergency is going to make it even harder for this patient population to access diagnostic and treatment options, likely leading to further morbidity and mortality, particularly in the most vulnerable. Moving to slide 6, we believe COVID-19 will continue to remain endemic throughout the world and particularly impact the patient population that we are studying in SUNRISE-3. We believe that all therapeutics will remain a multibillion-dollar opportunity for years to come and projected annual COVID-19 antiviral demand in the US suggests a current estimated annual market opportunity of over $10 billion. Beyond that, we believe there is an opportunity to expand this market to patients with drug-drug interactions associated with Paxlovid's concerns, limiting and complicating prescribing. This includes commonly prescribed drugs such as seizure medications, antipsychotics, and anticoagulants. Let me remind you that Paxlovid currently holds 90% of the prescription market share, and there is still a significant unmet medical need as less than 30% of COVID-19 patients are currently being prescribed an antiviral. Turning to slide 7, as we are moving into a traditional payer market, it is clear that we will have to demonstrate a value proposition of the impact of Bemnifosbuvir against COVID. This will be achieved by using a primary endpoint of decrease in hospitalization and death. We believe that this will be the key consideration for drug reimbursement for COVID therapies in the future. This is why we are targeting the most vulnerable patient populations in SUNRISE-3, who are at the greatest risk for disease progression to severe COVID-19 or mortality, and for whom they have limited treatment options. Let's keep in mind that CMS estimates on average costs approaching $22,000 per hospitalization, and approximately 70% of COVID-19 related hospitalized patients were covered under Medicare. Moving to slide 8, let's now review our innovative SUNRISE-3 trial. Our Phase 3 registration trial is evaluating Bemnifosbuvir’s monotherapy and as combination antiviral therapy. Enrollment is continuing in this global Phase 3 randomized, double-blind, placebo-controlled study, which will evaluate Bemnifosbuvir versus placebo, administered at the same time as locally available standard of care. Patients will be randomized 1 to 1 to receive either Bemnifosbuvir at 550 milligrams twice daily or placebo. We expect to enroll at least 1,500 high-risk patients with mild or moderate COVID-19. Two study cohorts defined by the type of standard of care the patients receive would be studied. The first cohort is a monotherapy cohort comprised of patients receiving supportive care, which represents the primary analysis population. The second cohort is a combination antiviral cohort that would be comprised of patients receiving a compatible antiviral against COVID-19 as part of the standard of care. The primary endpoint of the study is all-cause hospitalization or death through day 29 in at least 1,300 patients from the monotherapy cohort. You will recall that we have already evaluated hospitalization in the MORNINGSKY trial, and Bemnifosbuvir showed a 71% reduction in hospitalization versus placebo. Importantly, a subgroup analysis showed an 82% reduction in patients over 40 years old. In SUNRISE-3, we are focused on high-risk patients at the greatest risk for disease progression to severe COVID-19 or mortality. The study is expected to have a large global footprint with up to 300 clinical sites in 25 countries, including the United States, Europe, Japan, and the rest of the world. Moving on to our Hepatitis C program, which we believe has the potential to become a best-in-class combination with the potential to improve upon the current standard of care by offering a shorter duration, protease inhibitor-free treatment for patients with HCV. Slide 10 outlines our Phase 2 open-label study of Bemnifosbuvir and Ruzasvir in HCV patients. The study will involve approximately 280 HCV-infected direct-acting antiviral naive patients across all genotypes, including a leading cohort of approximately 60 patients. Patients will be administered 550 milligrams Bemnifosbuvir in combination with 180 milligram Ruzasvir once daily for eight weeks. The primary endpoints of the study are safety and sustained biological response or SVR at week 12 post-treatment. Other biological endpoints include biological failure at week 24 post-treatment and resistance. Regulatory submissions for the initiation of the trial are ongoing, and dosing of patients in this clinical trial is expected to begin during the second quarter. Initial data from the leading cohort of approximately 60 patients is anticipated around the end of the year. Turning to slide 12, I will now provide an update on our program for AT-752 intervention against Dengue. We are pioneering the development of our novel antiviral therapeutic for Dengue. Our proof-of-concept study DEFEND-2 demonstrated that AT-752 treatment led to a faster resolution of fever, which is the major clinical sign of Dengue. However, DEFEND-2 also highlights the need for better diagnostics to identify patients earlier in the course of the disease and also the need for a large sample size to account for the high variability for treatment and prophylaxis. To address these factors, a robust Phase 2 study will require long clinical timelines with major associated costs, which has led to the business decision to deprioritize the Dengue program. Turning to slide 13, as you may recall, we have conducted two studies to assess the efficacy of AT-752 during the treatment and prevention of Dengue fever. First, the DEFEND-2 Phase 2 clinical trial was a randomized, placebo-controlled study in Dengue and Dengue carriers. It involved patients with Dengue fever within 48 hours of the onset of fever, and the diagnosis of Dengue was confirmed with a positive NS1 antigen test. The primary endpoint of this trial was the change in Dengue viral load from baseline, with an exploratory analysis looking at changes in viremia and NS1 levels. In the first cohort of DEFEND-2, we enrolled 21 patients in India, Thailand, and the Philippines. We have also been conducting a human infection challenge trial under USIND, where healthy subjects were treated on day one with AT-752 or placebo and then injected with a live attenuated strain of Dengue type one on the following day. Subjects were dosed with AT-752 or placebo for a total of 14 days. Subjects were then monitored for symptom viremia and NS1 levels in safety. Let's move to slide 14. This schematic depicts our understanding of the time course of Dengue illness. As you can see, there is a lag between infection and viremia; viremia precedes the development of symptoms and signs. Our study was designed to enroll patients around the basics of infection, and based on the data that we will now review, patients presented later in the course of the disease at enrollment. On slide 15, you can see that the viral load changes over time to day seven, as measured by PCR. Placebo patients are depicted in red, and AT-752 patients in blue. Please notice that the study enrolled patients with all four serotypes of Dengue, and it is well known that the viral kinetics of each serotype are quite different. At enrollment, patients presented late in the quarter with disease with high variability and low viremia levels at baseline, particularly in the placebo arm, which had three patients with viremia levels below the lower level of quantification. As a consequence, the primary endpoint of change in viral load from baseline is quite variable. Moving to slide 16, platelets are a biomarker of Dengue progression. You can see in this slide the trajectory of platelet counts from baseline through day 7 for both the AT-752 treatment and placebo arms. Consistent with the viremia data at baseline, platelets were already low or below the lower limit of normal in the majority of patients, further demonstrating late presentation of disease at enrollment. Turning to slide 17, as I have mentioned, fever is the major clinical sign of Dengue. This slide demonstrates the time to resolution of fever defined as a temperature of 37 degrees Celsius or less sustained for 24 hours. In a pre-specified exploratory endpoint, in patients who presented with a body temperature above 37 degrees Celsius, the median time to fever resolution was four days in the AT-752 arm and greater than five days in the placebo arm. Slide 18 shows the change in body temperature for those patients who presented with a temperature of more than 37 degrees Celsius at baseline. In a post hoc analysis, there was a difference in body temperature change from baseline of 0.9 degrees Celsius at day three in favor of the AT-752 group compared to the placebo. Also, at day 3, 100% of patients who presented with baseline body temperature above 37 degrees Celsius had a reduction in body temperature below that baseline level in the AT-752 arm versus only 33% of patients in the placebo arm. Moving to slide 19, the safety profile of AT-752 was favorable in the study, and there were no drug-related serious adverse events. Adverse events were largely mild to moderate and occurred at a similar frequency as those in the placebo group. Two non-drug-related serious adverse events occurred: hospitalization due to thrombocytopenia and disease progression to severe Dengue, with one out of seven in the placebo group and one out of 14 in the AT-752 arm. Other non-serious adverse events were mostly mild and moderate, self-limiting, and occurred with comparable frequency in both the active and placebo arms. Turning to slide 20, the human infection challenge study was also a randomized, double-blind placebo-controlled trial evaluating AT-752 at a dose of 750 milligrams TID, where dosing was initiated prophylactically 24 hours before subjects received an injection of attenuated live Dengue type 1 Virus. The available results in five healthy volunteers were uninterpretable due to the high variability observed in terms of viremia, antigenemia, and the onset and severity of symptoms. Additionally, we observed much lower drug exposures than those noted in the Phase 1 study with normal volunteers and in the DEFEND-2 study with treatment patients, likely due to a lack of dosing compliance. For this type of study, it is clear that a much larger sample size of greater than 50 healthy volunteers will be needed to account for this variability. I will now turn the call to Andrea Corcoran, our CFO, to review our financial update.

Thank you, Sommadossi. As Jonae mentioned in her introductory remarks earlier today, we issued a press release containing our financial results for the fourth quarter and full year 2022. Those statements of operations and balance sheet can be found on slides 22 and 23. Our balance sheet remains strong with cash, cash equivalents, and marketable securities of $646.7 million at December 31, 2022, compared to $764.4 million at December 31, 2021. R&D expenses were $27.5 million and $81.9 million for the fourth quarter and full year 2022 respectively, compared to $57.8 million and $167.2 million for the corresponding period in 2021. The decrease in R&D expense was primarily due to the elimination of the cost share arrangement with Roche. Additionally, in Q4 2021, we recorded a $25 million expense due to the upfront payment related to our in-licensing of Ruzasvir from Merck. G&A expenses remained relatively consistent at $12.4 million and $48.7 million for the fourth quarter and full year 2022 compared to $13.2 million and $45.8 million for the corresponding period in 2021. Interest income and other was $5.6 million and $11.2 million for the fourth quarter and full year 2022 compared to less than $0.1 million and $0.2 million for the same period in 2021. The increase was primarily the result of investing in higher-yield marketable securities and higher interest rates. For 2023, our R&D spend will be driven principally by spending on clinical trials, including primarily our SUNRISE-3 Phase 3 clinical trials for COVID-19 and our Hepatitis C Phase 2 study with the combination of Bemnifosbuvir and Ruzasvir. In closing, due to the deprioritization of our Dengue program, we are extending our cash guidance into 2026. I'll now turn the call back over to Sommadossi for closing remarks.

Thank you, Andrea. In closing on slide 25, we have a busy year ahead of us as we continue to advance our antiviral programs to fight serious viral diseases, especially for patients with limited treatment options. Importantly, we are well capitalized to fund our program through key inflection points and beyond to the finish line with an extended cash runway now until 2026 due to the deprioritization of our Dengue program. With that, operator, we will now open the call up to your questions.

Our first question comes from Matthew Harrison of Morgan Stanley.

Hi, this is Deep for Matthew. Thanks for taking my question. So I want to ask, would you consider licensing out your Dengue program since you have deprioritized this one? Thanks.

I'm sorry, can you repeat the question?

Oh, sure. Would you consider licensing out your Dengue program?

Well, look, as you know, there are some nonprofit agencies, government agencies, and other parties that may have an interest in a collaboration partnership. We are not providing guidance on if and when this could happen, but certainly, we are interested in discussing this with third parties.

Our next question comes from Tim Lugo of William Blair.

Hi, this is John on for Tim. Thanks so much for taking our questions. So maybe two from us. So I'm wondering if you could just give us some color commentary on your confidence in enrollment of the SUNRISE study? I mean, obviously, we're seeing a lot more apathy towards COVID, and we are seeing less reporting that's going on. It seems like trends are going in our favor, but it's sometimes a little hard to tell with the lower reporting. So could you tell us something about what you're seeing coming through, especially in the higher risk populations?

Yes, Janet?

Thank you, John. Yes, enrollment is continuing in SUNRISE, and we're making good progress. We filed a clinical trial in all targeted countries for regulatory approval. We are continuing to see enrollment, but we're not going to provide specific numbers at this point. However, we will continue to report as the year goes through.

Maybe just one more from us. I'm seeing some articles now coming out that viral rebound is more common than we initially might have thought, regardless of treatment with an antiviral, such as Paxlovid. I am wondering if you maybe have any updated thoughts about this, or is the time course just too short? Is this maybe fixed with a combination? And how are you thinking about this longer term?

Janet, you want to address the question?

Yes, thank you. Yes. We've been watching the reports with interest, and there seems to be a variety of theories. I think you would probably have to call experts to determine what the cause of viral rebound may be. This is something that we're certainly watching in our study; we're going to be collecting biological samples and continuing to watch patients for symptoms of rebound, along with evaluating the overall viral load as we conduct the study. We hope to gather more insight on this, but I think the jury is still out regarding what happens here. It may depend on viral load and perhaps necessitate longer treatment durations. This is still something we don't fully understand. But thank you for the question.

If I may just add, it seems that there is some post hoc analysis indicating that rebound is highly dependent on the age of the patients. Hence, we hope that with our high-risk patient population, which is mostly elderly, we can evaluate these potential rebounds and the impact of the combination treatment.

This question comes from Roanna Ruiz of SVB Securities.

Great. Thanks, and good afternoon, everyone. I appreciate you walking us through the Dengue results. So I'll start there. I was curious if you could clarify which factors seemed to contribute the most to the variable results for DEFEND-2, considering different aspects like trial execution and possibly trends in the placebo arm that were difficult to interpret. Were you able to gain any insights into the potency of 752 in this trial?

I'm going to let Arantxa speak to this, but in terms of potency as I have indicated, let's not forget that fever is the major clinical sign of Dengue. So Arantxa, please address the question.

Yes, thank you for the question. One factor contributing to variability was that patients usually presented later in the course of the disease. As you can see from the slide, many in the placebo group already had low or undetectable viral levels by the time of enrollment, indicating late presentation of the disease. Another factor involved the diagnostic tests we used for enrollment; the NS1 antigen test's sensitivity is limited and does not match that of PCR, but many sites do not have PCR available. We need to develop better, more sensitive diagnostic tests if we want to advance programs like this. Regarding efficacy, we observed a rapid resolution of fever, which is promising and noteworthy in this small data set.

Got it. Thanks for clarifying. Another question on the COVID program. Could you remind us what you want to see in the SUNRISE-3 interim to encourage you to move forward? If we fast-forward to positive final results, do you still think EUA is on the table with the FDA?

Janet?

So we're planning to do an interim analysis once we achieve enrollment of 60% of the patient population in the study. The primary endpoint is the proportion of patients who require hospitalization, and we're looking for indications that we're going to achieve an overall hospitalization rate in the patient population of ideally 4% to 6%, which we do not think is unreasonable given our targeted group. There have been some recent articles that support this.

This question comes from the line of Umer Raffat of Evercore ISI.

Hi. This is Jessica Hui on for Umar. Just one question. We're trying to reconcile the SUNRISE-3 study design with that of a competitor oral COVID antiviral, especially in light of the announcement last month about the COVID public health emergency ending in May. Specifically, the FDA raised concerns about a placebo-controlled study in the US. So, I just want to confirm that in the SUNRISE-3, the randomized monotherapy population will still include US patients, and you don’t expect the FDA to require a change in your trial design?

The short answer is no; Janet wanted to expand on my answer.

Sure. Yes, the answer is no. The FDA has endorsed and reviewed our Phase 3 clinical trial, and I think, as we described, patients are being randomized to drug or placebo on top of what is the available standard of care for the patients where they are. There are a significant number of people, particularly in the most vulnerable patient population, who are unable to take Paxlovid due to drug interactions. For these patients, our drug is administered along with standard of care, which would not include a direct-acting antiviral. We allow patients to access monoclonal antibodies if those are considered effective, and patients are also allowed to be vaccinated. However, many patients will likely not be taking anything other than our drug or placebo because of these circumstances.

We have another question from Roanna Ruiz of SVB Securities.

Hey, thanks for taking that extra question. I just want to circle back about the possibility of an EUA for Bemnifosbuvir. Do you have any updated thoughts on that?

Janet?

I'm sorry. I realized as soon as I finished that I hadn't completely answered your question. Yes, we believe that an emergency use authorization is still possible. I think it is at the discretion of the Health and Human Services to allow for EUAs, even with the passing of the pandemic health emergency. We believe it will be data-driven, depending on what we observe in terms of our results, but we believe it is still a possibility should we achieve good results, even at the interim analysis.

Thank you. That concludes our Q&A segment. I'll now turn it back over to the Atea Pharmaceuticals team for any closing remarks.

Again, thank you all for joining us today.

And thank you for your participation in today's conference. This does conclude the program. You may now disconnect.