Atea Pharmaceuticals, Inc. Q3 FY2023 Earnings Call

Good afternoon, everyone. Welcome to the Atea Pharmaceuticals Third Quarter 2023 Financial Results and Business Update Conference Call. I would 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 third quarter 2023 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.ateapharma.com. With me today from Atea are our Chief Executive Officer and Founder, Dr. Jean-Pierre Sommadossi; Chief Development Officer, Dr. Janet Hammond; Dr. Arantxa Horga, Chief Medical Officer; Andrea Corcoran, Chief Financial Officer and Executive Vice President of Legal; 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, and 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. Since the beginning of the year, we made great progress across our COVID-19 and HCV program. So as you can see on Slide 3, for our COVID-19 program, enrollment in SUNRISE, our global Phase III, reflects the inflection rates occurring globally and the study's global footprint, supported by clinical data, including favorable efficacy, safety, and a lack of drug interaction profile of bemnifosbuvir. We are pleased with the progression of the SUNRISE-3 study, and we look forward to several important milestones in 2024. Our goal for this program is to deliver an effective treatment to the millions of patients for whom the current standard of care is not adequate. COVID is here to stay. And the area where there is great vulnerability is the urgent need for additional oral antivirals. We believe that bemnifosbuvir has the potential to address the key limitations of current COVID-19 therapies, including safety and drug-drug interactions. New, safe, and well-tolerated oral therapies are also needed to keep up with the evolution of the virus. The SARS-CoV-2 virus indeed is accumulating mutations with amino acid substitutions faster than any other endemic RNA virus. To prevent the emergence of cross-resistance, we need a broader and more diversified arsenal of oral antivirals with various distinct mechanisms of action. As part of a multipronged approach against COVID-19, we continue to also make progress with our discovery program focused on the second-generation protease inhibitor that is highly differentiated and has a well-suited clinical profile, and we expect to share an update sometime early next year. For our HCV program, we are very pleased with the substantial progress made in our Phase II combination study of bemnifosbuvir and ruzasvir. We have quickly completed enrollment of the 60-patient leading cohort, and initial results are expected in early 2024. Our goal for this program is to substantially enhance the current standard of care by offering an 8-week pan-genotypic protease-3 treatment option for HCV patients. Despite treatment options, there remains a large underserved HCV patient population that continues to grow dramatically, even in the United States due to the opioid crisis, injection drug use, and HCV reinfection. For both our COVID-19 and HCV program, which each have multibillion-dollar commercial opportunities, we are well capitalized to achieve key inflection points with a cash runway well into 2026. As of September 30, we had $595.1 million of cash and cash equivalents, and Andrea will go over the details with you. I will now turn the call over to Janet for an update on our COVID-19 program.

Good afternoon, everyone. As Jean-Pierre just stated, COVID-19 variants are continuing to evolve at a very rapid pace. On Slide 5, you can see how, as quickly as every two weeks, the variant proportions in the United States are changing based on genomic sequencing results. These rates are faster than reported for any other RNA virus. And you can see why it isn't surprising that there are so many new variants circulating, and it isn't possible to predict how these variants might further evolve in terms of which mutations come next and the associated rates of infectivity and ability to cause severe disease. The CDC is currently monitoring 35 variants, of which HV.1 is the latest to be the dominant strain. But there are hundreds more that haven't yet reached the level of community spread to appear on their radar. Not showing up on this slide yet is the Omicron variant BA.2.86 and its new mutation, which is called JN.1, which contains a further 41 additional unique mutations compared to XBB.1.5. As you can see, as a result of this, we're caught in a perpetual game of catch-up with continued attempts at updated vaccines that are often outdated before they become available. Each new variant introduces mutations that can impact vaccine efficacy and durability. On top of this, first-generation monoclonal antibodies have quickly become obsolete with authorizations revoked due to waning efficacy. Alarmingly, it is apparent that some recently circulating variants seem to have resulted from the use of monoclonal antibodies. All of this underscores the important role for direct-acting oral antivirals, which are effective regardless of new mutations. Importantly, bemnifosbuvir has a high barrier to resistance due to its unique mechanism of action, maintaining potency against all variants tested to date. And we anticipate that this will be the case as new variants continue to emerge. Turning to Slide 6. Supported by our extensive global footprint, we're seeing promising enrollment trends in our SUNRISE-3 trial. We have strong patient enrollment in the U.S. where clinical sites have been responsible for approximately 50% of the patients to date. The majority of patients globally continue to be enrolled in the monotherapy arm despite their awareness and availability of current oral antiviral options. This clearly highlights the ongoing important unmet medical need, which continues due to safety concerns, tolerability, and potential drug-drug interactions, which limit the use of the currently available agents. Heading into this winter, forecasts from the U.S. CDC suggest that this respiratory season should be similarly high to last year, where our hospitals were fuller than at any other time point in the pandemic and worse than in pre-pandemic years. It's predicted that COVID-19 will likely account for approximately half of those hospitalizations, with flu and RSV combined accounting for the other half. There's a very low COVID-19 booster uptake with the latest vaccine at approximately only 7% of U.S. adults, which leaves many susceptible to the virus without a suitable treatment option. The most vulnerable to severe COVID infections are the elderly, the immunocompromised, and those with underlying risk factors for severe infection. Turning to Slide 7. As a reminder, SUNRISE-3 is focusing on high-risk patients, and its primary endpoint is all-cause hospitalization or death through day 29, in approximately 2,200 patients in the supportive care monotherapy arm. There are two planned interim analyses for DSMB review at approximately 650 patients and again at 1,350 patients in the supportive care monotherapy arm, with initial top-line data also anticipated next year. Please note that in the DSMB's review we do not expect to report efficacy results as these analyses are primarily geared towards safety and futility. In April, we were granted fast track designation for bemnifosbuvir, which reflects the recognized unmet medical need that remains for COVID-19 patients. We believe that the compelling profile of bemnifosbuvir has differentiated both clinically and pre-clinically with its lower risk for drug interactions and its good tolerability profile, as well as the absence of mutagenicity and embryo-fetal toxicity in the preclinical study. Our goal for COVID-19 is to deliver a safe, tolerable, and effective treatment to the millions of patients for whom this current standard of care is not a suitable option. I'm now going to hand the call over to John to review the COVID-19 commercial opportunity.

Good afternoon, everyone. On Slide 9, let's discuss the COVID-19 landscape of active oral antiviral programs in clinical development in the U.S. under FDA review. As you can see, SUNRISE-3 is the only Phase III program in the U.S. that is evaluating a new oral antiviral exclusively for the treatment of high-risk patients. Turning to Slide 10, the prescription demand for oral antivirals to treat COVID correlates with the infection rates. The demand for oral antivirals in 2023 has been considerable, averaging approximately 580,000 prescriptions per month from January through September. Turning to Slide 11, as of November 1, the market for COVID-19 oral antivirals began transitioning to traditional payer markets, such as Medicare, Medicaid, and private commercial insurance. Oral antiviral therapeutics for COVID-19 are expected to remain a multibillion-dollar opportunity for years to come. Projected annual COVID-19 oral antiviral U.S. demand suggests an estimated annual global market opportunity of approximately $10 billion. To our knowledge, this has become one of the largest antiviral markets, concentrated with only two products that have key limitations. We believe there is still an unmet need with critical gaps, and there is an opportunity to expand this market to patients where Paxlovid tolerability and drug-drug interactions are concerns, in addition to the safety concerns with Lagevrio. I'll now turn the call over to Arantxa to review our Phase II HCV program.

Thank you, John. Moving now to Slide 13, let's discuss our Phase II hepatitis C program, a novel combination of bemnifosbuvir and ruzasvir. We recently achieved an important milestone and completed enrollment of the 60-patient leading cohort. In this cohort, we are evaluating the combination of bemnifosbuvir and ruzasvir for safety, tolerability, and sustained biological response or SBR at week 4. The primary endpoint of the study remains at SBR week 12. But as you may know, there is an accepted correlation between SBR at week 4 and week 12. And utilizing this correlation allows us to accelerate the study. Patients will complete treatment this quarter, and factoring in the timeline for data analysis, we expect to announce initial results early 2024. We are expanding the study's geographical footprint to approximately 50 clinical sites in 15 countries, and we plan to reinitiate enrollment after we review the results from the leading cohort. We are receiving global regulatory approvals for the remainder of the trial, and our broad investigation network will help to lay the groundwork for the anticipated initiation of a global Phase III trial, which is expected in the fourth quarter of 2024. Slide 14 outlines our Phase II open-label study of bemnifosbuvir and ruzasvir in hepatitis C patients. This study is expected to enroll a total of approximately 280 antiviral naive patients across all genotypes, including the leading cohort of 16 patients. Patients are administered 550 milligrams of bemnifosbuvir in combination with 180 of ruzasvir once daily for 8 weeks. The primary endpoints of the study are safety and sustained biological response or SBR at week 12 post-treatment. Other biological endpoints include biological failure and viral resistance. We believe that the combination of bemnifosbuvir and ruzasvir has the potential to substantially improve upon the current standard of care by offering a protease inhibitor-free 8-week duration option for hepatitis C patients with and without cirrhosis. I would like to note, before I hand over the call to Andrea, that we will be presenting two posters at the 2023 Annual Meeting of the American Association for the Study of Liver Diseases later this week. They include supportive data for bemnifosbuvir and ruzasvir highlighting the potential to use these two drug candidates together as a novel treatment for hepatitis C. And with that, I will now turn the call over to Andrea to summarize Atea's financial position.

Thank you, Arantxa. As Jonae mentioned in her introductory remarks, earlier today, we issued a press release containing our financial results for the third quarter of 2023. The statement of operations and balance sheet are on Slides 16 and 17. For the third quarter of 2023, G&A expenses remained relatively consistent with the third quarter of 2022. There was an increase in R&D year-over-year for the third quarter related to the advancement of our COVID-19 and HCV clinical programs. We do anticipate that R&D expenses will continue to increase in a measured way as these programs continue to advance. We are exercising focused financial discipline to manage spending as we invest in both of these programs. At the end of the third quarter of 2023, our cash, cash equivalents, and marketable securities balance was $595.1 million. Based on our current plans, we are reiterating our cash guidance with a runway well into 2026. I'll now turn the call back over to Jean-Pierre for closing remarks.

So in closing, we have made great clinical and operational progress across our COVID-19 and HCV programs so far this year. We have also published and presented significant scientific and clinical evidence in support of the potential of our clinical programs among an audience of leading virologists and infectious disease specialists at several scientific conferences this year. We will continue to highlight the potential of our programs at upcoming scientific conferences, including AASLD later this week, and through the publication of our data. We know the clinical data are very important, and the number of interim analyses and data readouts starting in early 2024 will be transformational for Atea. As always, we thank you for your continued interest and support of Atea as together, we strive to address the unmet medical needs of patients with serious bowel diseases. With that, operator, we will now open the call up to your questions.

Our first question comes from Eric Joseph with JPMorgan.

I guess just having pushed out the timeline for the first interim analysis here a little bit for SUNRISE-3, can you talk about the pace of enrollment in the study and ultimately your level of confidence in being able to fully enroll the trial should the interim analysis support? And I guess, with respect to the interim analysis itself, other than for fertility ruling that out, how does the interim sort of derisk the study?

So Eric, related to the timelines, I'd like to remind you that on our last earnings call for SUNRISE-3, we said our first interim analysis will be around year-end '23 or Q1 '24. We are planning for Q1 '24. So I don't think that we changed any timeline, and we are on track with this timeline. Related to the detail for the interim analysis, what the DSMB will do and our projections. Janet, can you address the rest of the question, please?

Sure. So first of all, thanks for the questions, Eric. With regards to the pace of enrollment, I think the pace of enrollment is very commensurate with what one is seeing worldwide in terms of surges. There was I think a perception, and I think a great hope by everybody really that towards the beginning of summer that COVID might actually at last be going away. But then I think we all experienced the fact that there was a huge surge at the end of July into August and early September. I think this has somewhat subsided now, but we are starting to hear reports of the next surge really starting up in Europe. And we anticipate that there will be a considerable surge as we head into the holiday season, unfortunately. So we have a very broad geographical footprint for this trial. And as was mentioned, I think previously, we have the anticipation of having in excess of 300 sites across the world available to enroll patients as these surges occur. And so we're pretty confident that we can, assuming all else goes well, as you mentioned, with regards to the DSMBs, enroll the trial. And unfortunately, it does seem that one surge is going to follow another.

Okay. That's helpful. I guess could you assumably frame the second interim as well in terms of what that might inform from an efficacy perspective, if not the first interim?

I think both interim analyses are really designed primarily towards ensuring that the study is able to achieve its primary endpoint of hospitalization, and that these hospitalizations are being distributed in a way where we should be able to continue the trial and achieve a readout at the end. But beyond that, we will not have any efficacy information. So they will just allow us to proceed, assuming it's not futile.

Your next question comes from the line of Maxwell Skor with Morgan Stanley.

Great. So I'm trying to put SUNRISE-3 into context given lower hospitalization rates in the competitive landscape. Specifically, Gilead announced that their oral Phase III trial is fully enrolled with approximately 1,900 participants at standard risk, I think their data is expected in early '24. So have you thought about revisiting standard risk patients with a primary endpoint other than viral load to accelerate development?

Janet, do you want to address the question? And thank you, Maxwell, for your question.

Thank you for the question. We have considered that. However, we believe that reducing hospitalization is likely the most significant benefit of using the direct oral antiviral. There are key differences between our trial and Gilead's trials. They had one trial that was terminated in higher-risk patients and another ongoing trial focused on reducing symptoms in an advanced-risk patient population. Our study resembles the one they terminated, but unlike theirs, we are enrolling patients in the U.S. It's noteworthy that approximately 50% of our trial participants are from the U.S., likely due to increased education, better testing availability, and heightened awareness of COVID among high-risk populations in the U.S. We believe our study can effectively enroll this patient group, partly due to these distinctions. We are continually monitoring and learning from what others observe and will assess any necessary adjustments. At this time, we think this is the patient population with the greatest need, and given our geographical footprint, we should be able to achieve our goals.

And your next question comes from the line of Jon Miller with Evercore.

Given that we won't have efficacy results in the interim reviews, do you have any idea when we might have a clearer understanding of efficacy that could be shared at SUNRISE-3? I know it's dependent on the event rate, but can you provide any insights based on your expectations for the data trends and potential surges on when we might see that?

Janet? Thank you, Jon, for the question. Janet?

So Jon, I think probably the answer is, unfortunately, no. I think that's the difficulty with COVID, is that the surges are somewhat unpredictable. The study will need to remain blinded in order for us to be able to take it across the finishing line.

Fair enough. Maybe transitioning to that novel PI that we'll get an update for in the first quarter. Do you expect to have a candidate at that time? Will there be preclinical data for us to talk about it? I'm just trying to get a sense what you might be communicating in that update.

Well, Jon, it would be preclinical data. To be honest, since the profile will be quite different from any approved or clinically developed PI, we prefer to take a bit more time before releasing this information. We are concerned about competitive intelligence that could open up a field we believe we will be pioneering. It's not going to be the standard peptidomimetic or small molecule taken once or twice a day, and it is mostly resistant to Paxlovid. This represents a new generation with a very different target profile that we are working on. For competitive reasons, we prefer to hold off for now and share details when we feel more secure about the field and have made further progress in preclinical development.

And your next question comes from the line of Roanna Ruiz with Leerink Partners.

This is Rosa Chen on for Roanna Ruiz, Leerink Partners. Just a quick one on COVID and then a follow-up on your HCV program. So do you have a sense for how much your recent trial amendments for SUNRISE-3 have maybe impacted your enrollment where you expanded your patient eligibility requirements?

Janet? Do you want to address the question?

So the amendment is achieving regulatory approvals, and we are seeing in the places where the regulatory approvals have been achieved that we are certainly enrolling patients with a slightly broader profile than initially. But I think we have yet to see the full benefit of it as it takes a little while in some cases for the approvals to come all the way through. I think we've certainly benefited from the surge. We can see and also I think from the fact that we have as many sites open as we do. And so we're well positioned, I think, to take advantage of these surges now as they come through. And we're seeing enrollment moving forward quite well.

And regarding HCV, can you remind us who are the early adopters that you're hoping to target in the market? And separately, do you see your combination as differentiated enough from what's currently available to be able to possibly take larger market share in the future, if launched?

John, do you want to address the question?

Yes. Thank you for the question. As you know, the global net sales market for hep C is large, and in 2022, the net sales were approximately $3.5 billion, with the U.S. representing roughly 50% of that. So there's definitely room for more than just two players. But for our profile that we believe we should be, hopefully, be able to achieve, it's going to be pangenotypic, protease-free, and also to have no food effect. Being an AV therapy, it should be able to compete quite well within that market for share. Obviously, how much share will depend on the final clinical profile that is demonstrated. But we feel very confident that a market of that size can easily accommodate three products.

That's helpful. And if I could with a follow-up, do you have a sense for what the FDA is looking for in your Phase III trial design? Because previously, you mentioned the combo has the potential to be less than 8 weeks of treatment, which would be quite a differentiating factor. Is that something you'll build into the Phase III trial design?

We haven't made any definitive statements about our plans without first understanding our potential. Currently, we don't have enough data, so we should wait for more information. As John mentioned, there is not, as of now, an 8-week version that matches the standard of care represented by Epclusa. It's important to note that the market environment has changed significantly compared to a decade ago, particularly regarding new patients and compliance issues related to IV drug use and the opioid crisis, which can lead to reinfection. The shorter treatment duration of 8 weeks is distinctly advantageous. We may explore the possibility of a 6-week treatment in parallel to the Phase III study. However, we expect to pursue the 8-week duration for the Phase III trial against Epclusa, which is widely recognized as the standard of care by hepatologists and infectious disease specialists. At this moment, we cannot disclose any interactions with regulators beyond the Phase II phase. Once we have data from Phase II, we'll share it, and after that, we plan to go head-to-head with Epclusa in the Phase III trial. Following that, we'll engage with regulators regarding their perspective on the Phase III study design.

And the last question will come from Tim Lugo with William Blair.

This is John on for Tim. I was just wondering if you could remind us on what you'll announce for the interim DSMB analysis in the first quarter. Will you just announce that the DSMB either recommended continuing or stopping the study, or will you provide some initial safety data as well?

Janet, you want to address the question?

I think we'll just really announce that we can continue or not. Yes.

And we have no further questions at this time. I will now turn the call back over to Jean-Pierre Sommadossi.

Thank you again for joining us today. This is the end of our earning call. Thank you.

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