Earnings Call Transcript - AVIR Q2 2021

Operator, Operator

Good afternoon, ladies and gentlemen. Welcome to Atea Pharmaceuticals Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open up for your questions. 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.

Jonae Barnes, Senior Vice President of Investor Relations and Corporate Communications

Thank you, Operator. Good afternoon, everyone and welcome to Atea Pharmaceuticals second quarter 2021 financial results conference call. This afternoon, we issued a press release which outlines the topics that 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 Relations section of our website at ir.ateapharma.com. With me today from Atea, our Founder, Chairman and Chief Executive Officer, Dr. Jean-Pierre Sommadossi; Chief Development Officer, Dr. Janet Hammond; Chief Financial Officer, 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. On the call today, we’ve a lot of important content to review. Jean-Pierre will provide an overview on the current COVID-19 environment and AT-527's potential to address these key challenges. Janet will review our clinical progress and results for AT-527 for the treatment of COVID and discuss AT-752 for the treatment of dengue fever. John will then provide an overview of the U.S commercial opportunities for AT-527; Andrea will provide a financial update and Jean-Pierre will provide closing remarks. Before we begin the call, I’d 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.

Jean-Pierre Sommadossi, Founder, Chairman and CEO

Thank you, Jonae. Good afternoon, everyone, and thank you for joining us today. I will begin on Slide 3 of the presentation. Since Atea's founding, we’ve remained steadfast in our mission to discover and develop antiviral drugs for the treatment, cure and prophylaxis of severe viral diseases where there is a significant unmet medical need and where we can make a meaningful impact for patients. Earlier last year, our antiviral platform put us at the forefront in the fight against COVID-19, and we believe a multipronged approach including therapeutics and vaccine will be essential solutions in this pandemic which is now becoming endemic. It has become abundantly clear in most countries and regions like Southeast Asia, South America and India, where we’re seeing a devastating impact from COVID-19 of lower vaccination rates, which have become a source for variants and create new challenges for treatment and prevention. It is projected that the Delta variant currently accounts for 93% of all new cases in the United States, and we are now back to 100,000 new infections per day. Obviously, this is a particular concern, given recent publications demonstrating lower efficacy rates for vaccines against the new strain. For example, the Delta variant has also been reported to be highly contagious, almost as contagious as chickenpox, and it has more rapid replication than earlier strains. And for this, we are seeing a significant number of breakthrough cases in fully vaccinated patients, accounting for as much as 15% of all hospitalized patients, and even 15% of the new cases are now in children, which further expands the infected population. In addition to the Delta variant, the lambda variant, first identified in Peru and now spreading in South America is highly infectious as well, and particularly concerning. I'm sure that in six months or so, we will probably talk about another dominant variant in the U.S and other countries. Turning to Slide 4, given these evolving dynamics, intervention at oral therapeutics, in particular, will be essential in stemming the tide of this pandemic. We believe that AT-527, our orally administered direct acting antiviral agent, derived from a pure nucleotide project platform is uniquely positioned to help meet this challenge and become the solution. As I'm sure by now you know, AT-527 targets viral RNA polymerase, which is a highly conserved enzyme critical to viral replication and transcription. Its dual mechanism affecting both functional domains of this RNA polymerase, inhibiting both NiRAN and the RdRp, we believe that would provide a high barrier to resistance, along with broad antiviral coverage for different variants of SARS-CoV-2. To date, the predominant mutation actually in this RNA polymerase is the P323L. And please note, at baseline in a hospitalized Phase 2 trial, 98% of the patients had this mutation. We believe that all responded to AT-527 treatment. Essentially we can say today that the original Wuhan virus is basically gone. We believe that this bodes very well for antiviral activity against the variants as well. We are currently validating this hypothesis. As reported in recent press releases, significant compelling clinical data has been reported for our drugs, demonstrating antiviral efficacy in our Phase 2 study in hospitalized patients. Janet will review the Phase 2 interim results as well as new data from a Bronchoalveolar lavage study showing that AT-527 is, we believe, the first investigational DAA being developed for COVID-19, demonstrating that target drug levels effectively reach the lungs, which, as you know, is the primary site of SARS-CoV-2 infection. I want to emphasize that this is the lower respiratory tract in contrast, where we are measuring the RNA as Janet will show you and share with you the data we are discussing of the respiratory tract. So that's why we've used this data as very important for our development program as it provides further confidence not only for the treatment, but also for planned prophylaxis studies for COVID-19. As we continue to advance multiple global clinical studies in parallel with our partner Roche, we are one step closer to achieving our goal of providing an easily administered oral direct acting antiviral in the fight against this global pandemic. And now, I would like to turn the call to Janet for a review of this data.

Janet Hammond, Chief Development Officer

Thank you, Jean-Pierre. I'll begin with Slide 6. As the COVID-19 pandemic evolves, and we generate more data from AT-527 program, we are acting nimbly to optimize the design and conduct of our technical development program. As you can see here, we have six studies of AT-527 currently running in parallel, and we're leveraging lessons learned from each study to better serve our patients and improve our probability of success. Slide 7 outlines our global Phase 2 study of AT-527 in the hospitalized setting. Before we review the interim results, as a reminder, this is a randomized, double-blind, placebo controlled, multicenter study to evaluate AT-527 in patients with moderate COVID-19. Study objectives are to assess safety, tolerability, clinical, and antiviral efficacy. We are amending the protocol to reflect the evolving COVID environment by changing the primary endpoint virology from its former progression to respiratory insufficiency, given the limited number of cases that now progress due to changes in the standard of care. We will also be exploring alternative doses and adding a Part B cohort comprised of up to 110 patients. Moving to Slide 8. In June, we were delighted to announce positive interim results from our global Phase 2 study of AT-527, indicating rapid and sustained antiviral activity against SARS-CoV-2 in hospitalized patients. The interim analysis of the Phase 2 study included data from 70 hospitalized high-risk patients with COVID-19, from which 62 patients were valuable for virological analysis. These patients were infected with a broad array of virus lineages representing over 20 variants, including the alpha and beta variants of concern. They were enrolled from seven countries in North America, Europe, Africa, and South America, representing a diverse geographic footprint. 46% of patients were SARS-CoV-2 seropositive by IgM measurement at baseline and were equally distributed across the treatment arms. As expected and observed in other studies, seropositive patients had a lower baseline viral load. Continued viral load decline from the onset of respiratory tract infection is part of the natural history of these diseases and is to be expected. What is important is the differential rate of decline of virus driven by the administration of a direct acting antiviral. The lower the virus, the lower the risk of transmitting infection, and the greater the likelihood that the immune system is able to deal with whatever remaining virus is present, helping to shorten and attenuate the disease. On Slide 9, in all valuable patients with Phase 2, those receiving AT-527 experienced a 0.7 log10 drop in viral load, which is an 80% greater mean reduction from baseline viral load in comparison with the placebo group. A sustained difference in viral load reduction between the two cohorts was maintained all the way through Day 8. What we are seeing is a rapid and strong antiviral signal. This is critical as the value and immediate health impact of the DAA is to rapidly inhibit viral replication in the early phase of infection and reduce disease progression. AT-527's SARS-CoV-2 potent antiviral activity was consistent across multiple pre-specified analyses. As expected, on Slide 10, the effect was more pronounced in subjects with higher viral loads. On Slide 11, as measured by nasopharyngeal swab in an RT-qPCR test, with a lower level of quantification of less than 500 copies. You can see in the graph to the left as early as Day 2 and at Day 10, 42% of patients in the AT-527 arm achieved viral clearance compared to 0% in the placebo arm. In the graph to the right, when evaluating a stricter threshold with no detectable RNA virus or target not detected (TMD), still 33% of patients in the AT-527 arm had undetectable RNA at that time. Earlier PCR negativity, as demonstrated in these Phase 2 results, may lead to a faster recovery time while also minimizing the transmission of infection. In this Phase 2 study, consistent with previous studies, AT-527 was generally safe and well-tolerated, and there were no drug-related serious adverse events. Now moving to Slide 12, you'll find new results here that evaluate the drug levels measured in the lung lining fluid in a Bronchoalveolar lavage study, which measures drug levels from the surface of the lungs and from cells in the lungs obtained through washings. For the first time with a direct acting antiviral, target drug levels were achieved in the lungs in healthy volunteers with AT-527, 550 milligrams administered twice daily. These levels even exceeded the target 0.5 micromolar or 159 nanograms per milliliter, which corresponds to the in vitro EC90 of the drug in infected primary human airway epithelial cells. This is important in confirming that AT-527 reaches target drug levels at the primary site of infection and has significant implications for efficacy in both treatment and prophylaxis for COVID-19. As seen on Slide 13, analysis of SARS-CoV-2 infected cells treated with AT-511, which is the freebase to AT-527, confirmed by next-generation sequencing that AT-527 is not a mutagen and does not introduce mutations into the viral genome. Such mutations, we believe, could be the catalyst for new variants, especially in immuno-compromised patients. Additionally, a new drug-drug interaction study in healthy volunteers indicates that AT-527 is a weak inhibitor of CYP3A, and no dose adjustments should be needed for the concurrent administration of drugs that are CYP3A substrates. CYP3A enzymes are the most abundant cytochromes in the human liver and are responsible for the metabolism of more than 50% of clinical drugs. Therefore, this should simplify prescribing. Moving to Slide 14, MOONSONG, our variable Phase 2 trial of AT-527 in the outpatient setting continues to advance. It's a randomized, double-blind, multicenter, placebo-controlled trial evaluating AT-527 in mild or moderate COVID-19 outpatients. It's being conducted in collaboration with Roche and will enroll up to 220 patients to evaluate the antiviral activity, safety, and pharmacokinetics of AT-527 in adult patients. The primary endpoint of this trial is the change from baseline in the amount of SARS-CoV-2 virus RNA, as measured by reverse transcription polymerase chain reaction at specified time points. There are multiple cohorts with varying doses, and we expect results in the second half of this year, over late Q3 or early Q4. Enrollment in COVID-19 studies is challenging across the industry, and we are continuing to open additional clinical sites which is aiding recruitment. This has proven to be a surprisingly challenging disease for clinical trials as it spreads globally without seasonality, and when patients do become infectious, there is a very limited window for eligibility for entry into our studies. Note that this is the Phase 2 proof-of-concept study to show antiviral activity, supportive data for dosage, and importantly, to confirm the safety profile of the drug. The study has not been powered for statistical significance. As highlighted on Slide 15, we continue to advance our Phase 3 MORNINGSKY trial, a global multicenter trial evaluating AT-527 in mild or moderate COVID-19 patients in an outpatient setting. This trial is conducted with our partner Roche and is currently enrolling patients outside of the United States. We anticipate that it will enroll approximately 1,400 adults and adolescents with mild to moderate COVID-19. Patients with or without stressors will be randomized within 5 days of symptom onset. At the time of enrollment, patients must be stable and do not require hospitalization. The primary endpoint evaluating the efficacy of AT-527 compared with placebo will measure the time to a deviation or improvement of COVID-19 symptoms. Other key efficacy endpoints will include the number of patients requiring medically attended visits or hospitalization for COVID-19, and mortality. Additionally, among other secondary and exploratory endpoints, the study will also identify and/or evaluate biomarkers that are predictive of an antiviral response to AT-527. We currently expect results from the study in the second half of 2021. Patients from the study have the option to roll over into major spring, a Phase III, six-month long-term follow-on study conducted in collaboration with Roche. This trial was recently initiated and will evaluate the impact of AT-527 on long COVID. It's expected to enroll approximately 1,000 patients and is already currently accruing patients.

John Vavricka, Chief Commercial Officer

Thank you, Janet. Turning to Slide 17. We tend to view the target populations as four broad patient segments. There are symptomatic active disease patients, where symptoms are present and would be treated. There's asymptomatic active disease, where although patients are asymptomatic, we believe they will be accessed through proactive testing from employers, schools, and travel. The third area is prophylaxis, both pre and post exposure, and finally government purchases, which would include purchases for active disease as well as for stockpile. We see all of these segments as large market opportunities. We also consider it important to look at vaccinated and unvaccinated individuals in each of these segments when considering different patient motivations and communications. Compared to the last pandemic with H1N1 in 2009, one of the biggest differences was that there were FDA-approved antivirals readily available, so that the government chose to stockpile during the pandemic. Current government efforts appear to target availability of new oral therapeutic treatments for COVID-19 that are meant for immediate utilization within the U.S. distribution system following an EUA or NDA approval. There is currently a $3.2 billion government offering for oral therapeutic treatments or high-risk outpatients, mild to moderate patients, and pre and post exposure prophylaxis treatment. We remain in active discussions with the U.S. government agencies regarding this offering. We also believe that given the devastating global impact of COVID-19, it is highly likely that the U.S. government will also stockpile treatment for future preparedness similar to what they stockpiled during H1N1.

Janet Hammond, Chief Development Officer

Thanks, John. On Slide 19, I'm pleased to report that we are also making progress with AT-752, our program for Dengue. The Phase 1a single ascending dose study portion of the trial, evaluating multiple doses, has been successfully completed, and the multiple ascending dose portion of the trial was initiated during this quarter. The objectives of the study are to establish the safety and tolerability of AT-752 and also to support dose selection for future studies of AT-752 as a treatment and also for prophylaxis of Dengue fever, expected to enroll up to 60 patients. With that, I'll now turn the call over to Andrea for a review of the financials.

Andrea Corcoran, Chief Financial Officer, Executive Vice President of Legal

Thank you, Janet. As Jonae mentioned in her introductory remarks, this afternoon, we issued a press release containing our financial results for the second quarter of 2021. The statement of operations and balance sheet are on Slides 21 and 22. For the second quarter 2021, the increase in research and development expenses in comparison to the second quarter of 2020 was principally driven by an increase in external clinical development and manufacturing expenses, incurred primarily in conjunction with the advancement of AT-527 for the treatment of COVID-19 and to a lesser extent AT-752, which is being developed for Dengue fever. These expenses included our share of costs incurred by Roche and increases in internal spend, mostly due to an increase in personnel-related expenses. The increase in general and administrative expenses was primarily due to the expansion of our organization and consisted principally of an increase in payroll and personnel-related expenses. I am pleased to report that we ended the second quarter with a strong balance sheet to support our clinical development programs. As of June 30, 2021, cash and cash equivalents were $816.5 million. Please note that this does not include the $50 million development milestone the company achieved in June under our license agreement with Roche. That payment was received in July. I'll now turn the call back over to Jean-Pierre for closing remarks.

Jean-Pierre Sommadossi, Founder, Chairman and CEO

Thank you, Andrea. In closing, we cannot underestimate the importance of the AT-527 clinical development program and the progress we are making. The COVID-19 endemic remains very much with us, and all data points to another surge this fall due to the Delta variants and low vaccination rates around the world. It is our goal to advance this important program and to provide quickly a solution that can play an important role in helping to reduce the global burden of this disease. The Atea team, along with our partners at Roche, are doing everything in our power to make this happen. Our success will be everyone's success. As reviewed today, we continue to make substantial progress with AT-527. And now we have demonstrated that AT-527 has rapid and sustained antiviral activity against SARS-CoV-2, which is target drug label in the lungs, which as you know, is the primary site of infection. Unique dual mechanism targeting the RNA polymerase, which we believe will be important for a high barrier to resistance, and hopefully also for addressing the problem that we are seeing with variants, demonstrated that it is not a mutagen, very likely not leading to new variants in the future and no dose adjustment necessary for co-administration of drugs that are CYP3A substrates, as you know, the largest majority of drugs being metabolized by these enzymes. As we continue to advance multiple global clinical studies in parallel with our partner Roche, we look forward to the upcoming results from the Phase 2 MOONSONG and the Phase 3 MORNINGSKY studies. In addition to the substantial progress with AT-527, we continue to make progress with other drug candidates and our antiviral pipeline for the treatment of Dengue, hepatitis C and expect to provide an update on these programs later this year. With that, operator, we will now open the call to your questions.

Operator, Operator

And your first question comes from the line of Eric Joseph with J.P. Morgan.

Eric Joseph, Analyst

Hi, good evening. Thanks for taking the question. A couple from, I guess, first with as it relates to the inpatient data. I'm curious to know whether at this stage where the field kind of has a sense of how the normal decay of viral load mirrors onto symptom improvement or symptom resolution. I guess if we're trying to relate the comparative viral load data in the Phase 2 study. Is there a sort of an absolute threshold of viral load that might predict for symptom resolution, or is kind of a goal trying to get to viral clearance as many as a greater proportion of patients as possible. And then secondly, JP you highlighted the unmet need in the pediatric population. I would be curious to know whether there are any plans to kind of begin safety testing in the pediatric population to expand access to that opportunity. Thank you.

Jean-Pierre Sommadossi, Founder, Chairman and CEO

Two great questions. So thank you. Janet, can you maybe address both questions?

Janet Hammond, Chief Development Officer

Thank you, Jean-Pierre. Yes, happy to. So firstly, in regard to your question around the symptoms, in comparison to what happens to the viral load decay, in our overall cohort of patients, and it's a very small cohort, we didn't see much of a correlation between symptom decline and viral load decline. However, when we looked at the patient group who had viral loads in excess of the median, meaning greater than 5.26 logs of viral load, we actually saw surprisingly good correlation between declining viral load and declining symptoms. What that would translate to then was really that the viral load decline in patients who were treated was associated with a much more rapid improvement in symptoms, with approximately a two-day earlier overall resolution of symptoms. So I think that answers that question. And then in regards to the pediatric population, yes, we are already in talks with both the EMA and the FDA regarding our pediatric plan, and both agencies have seen the plan and have provided comments on it. As I mentioned, in our MORNINGSKY study, we do have plans to start enrolling adolescents into that study, because obviously, it's going to be a really important patient population for that new treatment, particularly as it's taking longer for the vaccines to roll out. So thank you.

James Molloy, Analyst

Great. Thanks for taking the questions.

Operator, Operator

The next question comes from the line of Jonathan Miller with Evercore.

Jonathan Miller, Analyst

Thanks for taking my question. First one on the big Phase 3 studies, what percentage of the patients do you expect to be seronegative at baseline? Since as we've seen in other direct acting antiviral trials, those have been responsible for driving the majority of the benefit. And secondly, as we've seen some recent positive results in post exposure prophylaxis trials done with monoclonal antibodies. And we've been wondering how you think that reads through to oral small molecule approaches? Can you do even better or worse? And remind me what your timeline is for initiating some sort of prophylaxis trial, whether pre or post exposure?

Jean-Pierre Sommadossi, Founder, Chairman and CEO

Janet?

Janet Hammond, Chief Development Officer

Thanks, Jean-Pierre. So with regard to the proportion of patients who are going to be seronegative, I think to some extent, my interpretation of the literature to date has been that, actually patients who are more immunocompromised and who have far higher viral loads tend to be seronegative. Patients who have zero risk factors and are generally in better shape tend to have low viral loads and also tend to be seropositive. So I think that for our Phase 3 studies, we're planning to enroll both high and low-risk patients and are ready to roll both populations into similar studies. I think it's likely that we will see more patients who tend to be seropositive and seronegative, because of the fact that we will have the patients who are already very much at risk and likely to be seropositive, and then the patients who are high risk. I think, as you saw in our hospitalized study, approximately 50% of patients were seropositive or seronegative. So, I'm guessing that will translate into a higher proportion of patients being seropositive. But you're right, it's a good question, because I think one tends to see a better response, or it's more easy to see that correlation in patients who started as seronegative, just because they have a higher viral load initially. With regard to your question around post-exposure prophylaxis, I think that there are differences and similarities between what we anticipate seeing. We believe that pre-exposure prophylaxis ought to deliver similar levels of benefits to what you see with the antibodies. I think there are both pros and cons to both approaches. The beauty of the approach of a small molecule in that type of setting is that access is considerably easier as you don't need to go and get an injection, and you can initiate therapy much more conveniently. I think the disadvantage might be that the monitoring of antibodies has a longer duration of effect after a single dose, whereas the prophylaxis with a direct acting antiviral will be dependent on taking the drug. But of course, that situation allows for more room to tailor it and potentially, I suppose, also ultimately less likelihood for the genesis of resistance. So, I think we'll have to see how it all evolves and what we learn. Overall, we believe that the antiviral efficacy for both approaches ought to be very similar.

Jonathan Miller, Analyst

And your plans to initiate the trial?

Janet Hammond, Chief Development Officer

I'm sorry. Yes, we plan to initiate the trial in this second half of the year.

Jonathan Miller, Analyst

Thanks very much.

Operator, Operator

Your next question comes from the line of Tim Lugo with William Blair.

Unidentified Analyst, Analyst

Hey, everyone. This is someone filling in for Tim. Thank you for the opportunity to ask questions. First, I wanted to clarify when you mentioned that MORNINGSKY is rolling out globally, does that include the U.S.? I know the FDA has been somewhat slow in the past, so I just wanted to confirm that it is operational. Secondly, you mentioned that you're considering higher doses. Can you provide any details on what that dosage would be? When can we expect to see the initial data from that? Will that be related to MORNINGSKY? Perhaps in Q3? And how much additional efficacy can we anticipate from that, particularly in light of the Bronchoalveolar lavage data you shared from healthy patients?

Jean-Pierre Sommadossi, Founder, Chairman and CEO

I'm going to address the second one, and Janet will go over the first one. First, we anticipate that we should see a proportional increase in those concentrations. Until we have the data, obviously, we cannot make any extrapolations, but from the observations we've made in the Phase 1 trials at higher doses, we believe that there will be substantial increases in drug exposure, and hopefully, this should translate into antiviral efficacy and ultimately clinical benefit. We are encouraged by the fact that we continue to see the same tolerance and safety. Obviously, we have to expand in larger cohorts. As for when we will be able to share the results, as Janet indicated, we have six studies in parallel. As soon as the cohort is completed, we will share with the street. Janet, you want to address the first question?

Janet Hammond, Chief Development Officer

So the first question, I think, was regarding whether MORNINGSKY is currently running in the U.S? The answer is no, it is not. We're in discussions with the FDA, but it is currently not running in the U.S.

Unidentified Analyst, Analyst

Okay. Thanks. And just to follow-up on that, do you have any guidance as to how much data or how many patients worth of data they need to see to allow that to enroll? Do you have a sense of when that might be able to get up and running?

Jean-Pierre Sommadossi, Founder, Chairman and CEO

Janet?

Janet Hammond, Chief Development Officer

I can't provide specifics on that, unfortunately. So I'm unable to answer your question.

Unidentified Analyst, Analyst

Got it. Thanks.

Operator, Operator

And I'm showing no more questions at this time.

Jean-Pierre Sommadossi, Founder, Chairman and CEO

So thank you everybody for your interest and support, and I appreciate it. Thank you again for joining us and for the continued support to Atea.

Operator, Operator

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