Atea Pharmaceuticals, Inc. (NASDAQ:AVIR) Q2 2022 Earnings Conference Call August 8, 2022 4:30 PM ET

Company Participants

Jonae Barnes - Senior Vice President of Investor Relations & Corporate Communications
Jean-Pierre Sommadossi - Chief Executive Officer & Founder
Janet Hammond - Chief Development Officer
Andrea Corcoran - Chief Financial Officer & Executive President of Legal
John Vavricka - Chief Commercial Officer

Conference Call Participants

Tim Lugo - William Blair
Nik Gasic - SVB Securities

Operator

Good afternoon, ladies and gentlemen. Welcome to the Atea Pharmaceuticals Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. [Operator Instructions] Please note that today's conference is being recorded.

I would now like to turn the call over to Jonae Barnes, Senior Vice President of Investor Relations and Corporate Communications at Atea Pharmaceuticals. Please proceed.

Jonae Barnes

Good afternoon, everyone, and welcome to Atea Pharmaceuticals second quarter 2022 financial results conference call. Earlier today, we issued a press release outlining the topics we plan to discuss. You can access the press release as well as the slides that we'll be reviewing today by going to the Investors section of our website at ir@ataepharma.com and go to the Events and Presentations section.

With me today from Atea are Chief Executive Officer and Founder; Dr. Jean-Pierre Sommadossi; Chief Development Officer; Dr. Janet Hammond; Chief Financial Officer and Executive President of Legal, Andrea Corcoran; and our Chief Commercial Officer John Vavricka. They will all be available for the Q&A portion of today's call.

Before we begin 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.

Jean-Pierre Sommadossi

Thank you, Jonae. Good afternoon, everyone, and thank you for joining us today. I was going to start with our Bemnifosbuvir program where there is much to report, as you can see summarized on slide three. It is now evident that, as detailed on slide four, COVID-19 will likely remain a global concern for a very long time.

Indeed, we see new variants and sub-variants emerging in shorter time in travels and the rate of infection is increasing. The changing characteristics have caused the existing antibody treatment to fail and have reduced the efficacy of vaccine-induced immunity, creating the need for frequent and an early engineered booster to combat the emerging variants.

Pandemic surges can be life threatening for those at high risk over 65 years old, particularly those with risk factors, causing increased hospitalization and death. Right now BA.5 accounts for the vast majority of infections. It is highly infectious and new variants are expected to fuel a surge this fall. New oral antivirals with improved profiles are urgently needed due to the limitations of the current antiviral treatment options. These limitations include the issue of relapse, which was experienced by both President Biden and Tony Fauci among others after taking Paxlavi.

Relapse can lead to a rebound of symptoms, as well as transmission of infection to others. Other limitations include drug-drug interactions with many commonly prescribed life-saving drugs. These drugs are frequently used among those that are the most vulnerable to COVID-19 to limiting the ability for Paxlavi to be prescribed and raising treatment duration patients and prescribers. With Bemnifosbuvir we have the potential to address many of these limitations and we are working diligently to deliver improvements over the current standard of care.

Moving to slide five. We recently had an end of Phase 2 meeting with the FDA and met with the European Medicines Agency emerging task force to review the Bemnifosbuvir data package to date including the MORNINGSKY results. Let me remind you that in the MORNINGSKY study which we reported in May, the risk of hospitlization was 71% lower in the bemnifosbuvir 550-milligram BID arm versus placebo with a p-value equal to 0.047 unadjusted and exploratory. Obviously, we are very encouraged with this outcome. And the results were consistent in both standard and high-risk patients as well.

We are now in the process of finalizing the design of global late-stage clinical trial for the treatment of mild-to-moderate COVID-19. Bemnifosbuvir 150-milligram dose twice daily for five days in high-risk patients, including those who are immunocompromised regardless of vaccination status. The primary endpoint will be hospitalization and deaths. Operational planning is currently underway for this global trial and we expect to initiate this study in the fourth quarter of this year.

Turning to Slide 6. We are confident the bemnifosbuvir will remain fully active against future variance. This is based on the consistent potent antiviral activity that we continue to generate as newer variants of concerns emerged as a test. Our most recent data set confirms antibacterial against or Omicron surveillance similar to the potency demonstrated with alpha, beta, gamma, epsilon and delta. This data reinforce our understanding of bemnifosbuvir potent inhibition of the two functional domains of the highly conserved viral RNA polymerase. Let me remind you that details related to the molecular mechanism were published in Nature Communications earlier this year.

Moving to Slide 7. Based on the evolving nature of COVID-19 variance and unmet medical needs, we are pursuing a multi-pronged approach which place us at the forefront of developing a combination regimen to fill the treatment gap of COVID-19. In the future, we see a role for bemnifosbuvir as monotherapy as well as in combination regimens.

Right now as previously noted, there are treatment gaps with first generation protease inhibitors, including drug-drug interactions from the drugs concerns. Also we can anticipate resistance to emerge with broad use prolonged treatment and weak treatment when protease inhibitors are administered as monotherapy. With bemnifosbuvir's attractive profile, we believe that it has the potential to become the cornerstone therapeutic for both monotherapy and in combination therapy. This is our rationale for pursuing in parallel to our late-stage monotherapy trial, a second generation protease inhibitor with an improved profile to be used in combination with bemnifosbuvir in specific patient population.

On Slide 8, as part of this efforts, our target profile for second-generation protease inhibitor is a highly potent drug, but there's a good safety profile with limited drug-drug interaction and does not require ritonavir or any other booster. And I'm pleased to recall today that we have made significant progress with our internal program. Indeed in a short-time period, we have achieved two essential properties with potency at nanomol and sub-nanomolar levels and good metabolic stability leading to a highly promising compounds. We are now working to combine this potency and metabolic stability in a clinical candidate which we hope to select later this year.

Moving to Slide 9. The antiviral effect of bemnifosbuvir in combination with the protease inhibitor Paxlovid examining vitro in an HCoV-229E surrogate model and the results indicate an additive antiviral effect. So not only we are encouraged by this data also this data support the potential benefit of the combination of bemnifosbuvir with a protease inhibitor for the treatment of COVID-19.

I will turn the call over to Janet for a review of our dengue fever and hepatitis C program. Janet?

Janet Hammond

Thank you Jean-Pierre. Turning to Slide 11. I'll begin with a review of our program to treat dengue fever. In recent weeks, hundreds of thousands of cases of dengue have been reported across Southeast Asia owing to the flooding and other climate related issues experienced there.

In the United States in Miami Dade County, a mosquito-borne illness advisory was issued for dengue in late July after the first case was confirmed this year in the Florida resident. There are no treatments for dengue. Dengue is the most prevalent mosquito-borne viral disease and affects almost 400 million individuals on an annual basis. Dengue is endemic in over 100 countries and more than half of the world's population is at risk for. There is a significant unmet medical need and the global economic burden is estimated to be between $8 billion to $9 billion annually.

As noted on Slide 12 we continue to enroll patients in the DEFEND-2 trial which is a randomized Phase II proof-of-concept study in patients with dengue fever. The study is designed to assess antiviral efficacy, safety and the pharmacokinetics of multiple doses of AT-752 with a primary endpoint of change in dengue virus viral load from baseline. AT-752 or placebo will be administered orally for five days in up to 60 patients with dengue infection. We expect to report initial results from the study later in the year.

We also initiated a second dengue study which is a human challenge model in the United States. In this study healthy volunteers are dosed with AT-752 or placebo and then administered a live dose of dengue virus. The subjects are closely monitored within a very controlled setting, allowing for the assessment of our load and the viral kinetics between the treatment groups. We also expect to report the preliminary results from this study later in the year.

Turning now to our Hepatitis C program. As shown on Slide 14, our HCV combination development plan looks very promising and we believe that there is still room to improve upon the standard of care for Hepatitis C. Our HCV combination profile includes convenient and short treatment duration with the potential for the first ribavirin-free therapy for decompensated disease.

We believe ruzasvir in combination with Bemnifosbuvir provides the opportunity to create a best-in-class pan-genotypic HCV therapy. We're continuing to make progress with our program and have completed a required combination preclinical toxicology study. We are currently manufacturing users via clinical trial to play and are finalizing the Phase II clinical trial design. We expect the Phase II combination program to evaluate convenient and short treatment durations in both noncirrhotic and compensated patients with cirrhosis. We anticipate initiating the study later this year.

With that overview, I will now hand the call over to Andrea to review our financial information.

Andrea Corcoran

Thank you Janet. As Jonae mentioned in her introductory remarks earlier today we issued a press release containing our financial results for the second quarter of 2022. The statement of operations and balance sheet are on Slide 16 and 17. For the second quarter of 2022, the decrease in R&D expenses in comparison to the second quarter of 2021 was driven principally by the discontinuation of our cost share arrangement with Roche. This cost share arrangement ceased when the collaboration with Roche ended earlier this year. The decrease was partially offset by an increase in R&D employee payroll and personnel-related expenses.

The nominal increase in G&A expenses in the second quarter of 2022 over the second quarter 2021 was primarily due to an expansion of our organization and reflects an increase in payroll and personnel-related expenses. We ended the quarter with a strong balance sheet including cash resources in the amount of $684.5 million to support our clinical development programs. The cash expenditures during the quarter were $21.1 million. We are reiterating our cash guidance with a runway through 2025.

I'll now turn the call back over to Jean-Pierre for closing remarks.

Jean-Pierre Sommadossi

Thank you, Andrea. Throughout the first half of 2022 we made considerable progress advancing our oral antiviral platform with the aim of transforming the treatment of severe viral diseases. As the global demand for COVID-19 treatments continue and abated, we remain confident in the opportunity for Atea to deliver a multipronged approach with best-in-class oral antivirals to treat COVID variants as the virus continues to evolve.

On Slide 19, as we look to the balance of the year, we expect to build on this momentum by achieving a number of value-creating milestones including the initiation of our late-stage clinical trial of Bemnifosbuvir for COVID-19 reporting preliminary clinical data from our dengue fever program and the initiation of our Phase 2 combination program in HCV. In addition, our goal is to select the second-generation protease inhibitor clinical candidate for COVID-19 combination therapy with Bemnifosbuvir. These programs have the potential to provide global solutions for patients suffering from severe viral diseases. And I look forward to reporting our progress in the months ahead.

With that operator, we will now turn the call up to your questions.

Question-and-Answer Session

Operator

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

Tim Lugo

Thank you for taking the question, and congrats on the progress in the quarter. I guess from a 10,000-foot level, it seems like there might have been a bit of a regulatory shift at the agency where maybe they're now more open to the monotherapy trial, whereas maybe at the beginning of the year. That wasn't the case. Can you talk about -- is it just the updated MORNINGSKY data, which impressed them, or is it just I guess the issues with the PI or is it all the above?

Jean-Pierre Sommadossi

Janet, would you like to address the question?

Janet Hammond

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

Tim Lugo

Okay. Fair enough. And is there any -- and can you just talk of thinking about using your own PI versus partnering with one of the other PIs? Obviously, as paxlovid, but there are other kind of development stage candidates out there? Is there something that just makes those not quite right for combination?

Jean-Pierre Sommadossi

Look, we'll see in the next six to 12 months. As you know the issues with Paxlovid are going to remain whether monotherapy or combination and mostly, it's drug-drug interaction. And very likely, we foresee that the combinations are very likely when we are talking about specific population, we are talking about immunocompromised patient transplant where you can have long-term bio-replication. So already, you start with a major limitation, which is the drug degeneration issues of Paxlovid.

So as you have seen we are moving very fast with our second generation. Our goal is to have like we said, a highly potent drug which will lead to a low dose. We foresee potential co-formulation with Bemnifosbuvir. Let's not forget we have a low pill burden with bemnifosbuvir, it's two pills twice a day. If you combine with Paxlovid, you're talking about five pills twice a day. That's quite a bit. So, we keep in mind of this.

But we believe that we will have a best-in-class you see that to my knowledge this is the first time reporting sub-nanomolar potency. We start to see even binding at the picomole level which this is what we would like to see as we have in HIV and HCV. So, not to talk about nanomole or the picomoles. So, let's see where we stand in the next six to 12 months. But we believe that our combination proprietary combination will lead and help and create major benefits to patients, especially in those very high-risk agents with COVID.

Tim Lugo

Thank you, Jean-Pierre.

Operator

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

Unidentified Analyst

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

Jean-Pierre Sommadossi

Sure. John do you want to address that question?

John Vavricka

Yes sure JP. Yes, I understand your question. We believe that the COVID endemics will really continue throughout the world. And right now recently you've seen the multibillion dollar opportunity and that's just for treatment. There's no medicine stockpiling there.

But even if you look at the current landscape that you have which is the dominant player at least in the United States with Laxlovid. As JP said, due to the drug-drug interactions with many commonly prescribed medicines that is not going to go away. And these drugs are frequently used among those who are the most vulnerable to COVID-19. And unfortunately it's limiting the ability of Paxlovid to be prescribed and purely treatment dilemmas for both patients and prescribers.

And just to reiterate I think we always have seen that the commercial opportunity for COVID will really come from two areas. One will be from the active disease which is what you see now. And then once NDA approval comes that the government will stockpile that and the stockpiling will likely be similar to other type pandemics that we've seen before which was usually a percentage of the population that will be ongoing. So, we don't see anything really changing at least on the current landscape that you see right now. The liabilities of those assets we see are continuing.

Unidentified Analyst

Okay, great. That makes sense. I guess one more. And apologies if this is -- if you already discussed this, but can you talk a little bit about viral rebound and whether the risk of that will be different in combo and--?

Jean-Pierre Sommadossi

Viral rebound and what say that again please.

Unidentified Analyst

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

Jean-Pierre Sommadossi

Well, look we will have to conduct the study to see if this benefit can be realized, right? We just see recently potential for a rebound of although we are really not really been I would say documented just in this review paper recently Paxlovid is clear. And I think that it's really related to the mechanism of action.

When we talk about protease inhibitor, we are talking about the likely incomplete suppression, incomplete viral application.

Let's not forget that Paxlovid does an off-rate of one hour. That means that Paxlovid – when the clearance occurred within one hour you are back on full viral application. That's the major difference with nucleoside analog where you have chain termination, you have an irreversible process. So, again, we need first to have a good hand on real absolute. There are several reports to talk about 2%, 5%, 10%. It would be very important to know exactly where we are targeting some we even mentioned 20% or 30%.

I say very likely, if there is among different patient population very likely immunosuppressed patients for example immunocompromised where you are potentially long-term viral application may occur at the highest rate. And combination you will expect should led to those benefits. But obviously the studies will have to be conducted.

Unidentified Analyst

Thank you.

Operator

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

Nik Gasic

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

Jean-Pierre Sommadossi

Janet?

Janet Hammond

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

Nik Gasic

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

Janet Hammond

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

Nik Gasic

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

Jean-Pierre Sommadossi

Yeah. Basically we are moving forward with the new formulation and improved API. And the API is just an improved production process to be able to synthesize multi level. And the formulation actually is also a much more straightforward formulation process. So we actually just in the process to complete Phase I with this formulation. So we will basically include the new CMC in the package for the global trial as well.

Nik Gasic

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

Jean-Pierre Sommadossi

Correct. Exactly the same.

Nik Gasic

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

Jean-Pierre Sommadossi

Look as you have seen in the slide the – regardless of the variant and we search major differences in the sequence especially when we compare the Omicron with the alpha, the beta, the delta there is no difference at all. Not surprising, as the M&A polymerase is highly concerned.

I'd like to remind you that any surveillance of exactly 100% homology and the RNA polymerase sequence. And only you have a difference in the spike protein. So it's going to take a couple of months, again to develop especially BA5. We have activity against BA1 and against BA2. I think that I can tell you already the data that we are going to get with BA5.

And when we see the future, again, it's important to note that we have not seen any significant mutation in the RNA. The only one as compared to the original Wuhan strain is the 323 mutation, which is the interface between the new variant and the polymerase. And actually we have reported that in one of our clinical trials, we have 98% of these patients had that mutation. So this is why the nucleoside analog especially, and I'd like to make a difference with specifically targeting the RNA polymerase with a chain termination mechanism. We don't anticipate that we may see any difference regardless of the future variant.

Nik Gasic

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

Jean-Pierre Sommadossi

Janet, would you like to address the question?

Janet Hammond

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

Nik Gasic

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

Operator

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

Jean-Pierre Sommadossi

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

Operator

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