Atea Pharmaceuticals, Inc. (NASDAQ:AVIR) Q3 2021 Earnings Conference Call November 11, 2021 4:30 PM ET

Company Participants

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

Conference Call Participants

Jonathan Miller - Evercore ISI
Tim Lugo - William Blair
Roanna Ruiz - SVB Leerink

Operator

Good afternoon, ladies and gentlemen. Welcome to the Atea Pharmaceuticals Third Quarter 2021 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.

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

Thank you, operator. Good afternoon, everyone and welcome to Atea Pharmaceuticals third quarter 2021 financial results conference call. This afternoon, 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 Chief Executive Officer and Founder, Dr. Jean-Pierre Sommadossi; Chief Development Officer, Dr. Janet Hammond; Chief 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, 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.

Jean-Pierre Sommadossi

Thank you, Jonae. Good afternoon, everyone and thank you for joining us today. In addition to the financial results, we have a number of updates for AT-527 to review, including an amendment to the Phase III MORNINGSKY trial protocol and the plan to accelerate it's enrollment, quantitative infectious virus assay data from the MOONSONG trial confirming potent and rapid antiviral activity for AT-527 and new in vitro data for AT-527 demonstrating potent antiviral activity against the major variance of concern or interest, including Delta.

I will begin on Slide 3. AT-527 our only administered product candidate for COVID-19 is a direct-acting antiviral agent derived from our purine nucleotide prodrug platform. AT-527 is designed to protect against disease progression and the development of long COVID complications. Given the evolving dynamics of COVID-19 which is becoming endemic, medical intervention and all therapeutics in particular will be essential in stemming the tide of this pandemic and future surges. AT-527 targets viral RNA polymerase, a highly conserved enzyme critical to viral application and transcription. Uniquely, AT-527 is a mechanism with dual targets. It is a chain terminal without introducing new mutations in the base. And it also enables -- thus providing the potential to create the high variety resistance and antiviral activity across variants as we will share with you in a few minutes.

In all studies, AT-527 was shown to be generally safe and well tolerated. Of particular note, AT-527 is not mitogenic, with no reproductive toxicity and it's -- we expect minimal drug-drug interaction since AT-527 is a weak inhibitor of cytokine -- and no dose adjustment is expected for core administration of drug that -- substrate which account for the metabolism of more than 50% of clinically relevant drugs. So this should make our drug candidate prescriber friendly.

On Slide 4, COVID variants of concern continue to create new challenges for treatment and prevention. These variants can also make the execution and evaluation of clinical trial results more challenging because of the impact and differences in viral kinetics as well as clinical symptoms. Ongoing -- genomics surveillance worldwide has improved our ability to rapidly identify such variant. As you can see on this chart, almost 6,000 variants have been sequenced with an outstanding number. The evolution of the -- will make COVID-19 endemic with the ability to continue circulating for years to come -- variants of interest have been associated with increased transmissibility, neutralization resistance and disease severity. The continuing spread of Delta has led to a new subtype called ay.4.2 or Delta plus which carries additional mutation.

Although the original Delta variant remains the most dominant on a global basis, this new mutant now accounts for 14% of infections in the U.K., up from less than 4% just early September and is more likely contributing to the research -- the recent surge of the fifth wave of COVID in Western and Eastern Europe and other global areas. Preliminary evidence suggests that Delta plus spread between 12% and 15% more frequently among household members compared with other Delta viruses and will likely become an important strain, including in the U.S.

Moving to Slide 6. As you know, we have previously shown that AT-511, the free base of AT-527, is a potent inhibitor of SARS-CoV-2 in vitro. The average -- in primary human -- cells against the original virus isolated in early 2020 was around 0.5 micromole with a fivefold assay approximately -- assay to assay variability as you can see in this slide. We recently evaluated our drug candidate against the major variants of concern or interest, including Alpha, Gamma -- and more recently, Delta. Consistent with it's dual mechanism of action, AT-511 maintained it's potency against all the variants tested, including Delta. We believe that this data confirm the key mechanistic advantage of this drug candidate which targets the highly conserved viral RNA polymerase. In fact, we have analyzed over three million SARS-CoV-2 sequences deposited in the database to date and found that less than 0.01% was mutation near the active site of the SARS-CoV-2 polymerase.

With that, I will now turn the call over to Janet for a more detailed review of our clinical programs.

Janet Hammond

Thank you, Jean-Pierre. Beginning with Slide 8. As you can see on this slide, our robust clinical program includes six studies of AT-527 85 which are running in parallel. We are leveraging lessons learned from each of these to better of our patients and updating our program in real time.

There are two key updates on this slide which include advancing the AT-527 1100-milligram BID dose in the hospitalized study and we expect results from the next cohort in the first half of next year. In addition, we are amending the Phase III MORNINGSKY trial protocol with a new primary end point, a refined patient population and an increased dosage. And we have a plan to accelerate enrollment completion. I will review the MORNINGSKY update towards the end of my presentation.

Turning to Slide 9. As COVID-19 has continued to evolve, so has the ways to quantify the virus. After considerable effort, an optimized infectious virus assay is now available to quantify infectious virus in addition to the RT-PCR assay which measures all forms of RNA obtained from the sample, regardless of whether it is from intact replicating virus or from non-variable virus or simply viral fragment. This difference is important because it should be a more accurate assessment of the impact of a direct acting antiviral on the ongoing infection. I will next review the new -- results for AT-527 from the MOONSONG trial that we have obtained by using this infectious virus assay.

As outlined on Slide 10, our methodology is quantitative and utilize the highly sensitive SARS-CoV-2 live virus assay. Measuring live virus in the -- swap samples from patients has been very challenging for this evolving field but it is an important advance. Previously, qualitative data from a related type of assay was reported during the development of -- in order to assess more specifically the antiviral effect of our drug candidate by using live virus, our CRO, in collaboration with our partner, Roche, has developed an optimized, highly sensitive and quantitative infectious virus -- assay.

As illustrated in this slide, a modified cell line with enhanced susceptibility to SARS-CoV-2 was inoculated with -- samples so that we can determine -- after six days of incubation, positively infected cells were detected by SARS-CoV-2 specific immunostaining. This newly optimized assay has three key advantages: Firstly, it quantifies the infectious virus, thus eliminating the possibility of noninfectious virus or viral fragments by RT-QPCR as previously reported. Earlier assets developed as -- reported in infectious virus assay which was qualitative, only positive or negative, with no actual viral -- secondly, this is very accurate. And thirdly, it is highly sensitive. The level of -- of the asset is equivalent to approximately 10 infectious virus particles per milliliter. Please note that the analysis includes the approximately 71% of all patients in MOONSONG cohorts A and B who had positive baseline culture.

On Slide 11, today, we are reporting -- from the MOONSONG study -- Cohort B in the overall population, including both high- and low-risk patients with the majority being seropositive AT-527 at 1,100 milligrams BID treated patients demonstrated a rapid and potent reduction of viral load of half -- versus placebo at three [ph].

Turning to Slide 12. We are able to see a treatment effect in the subgroup of patients -- high risk with underlying health conditions. And these results reinforced the exploratory analysis in the same population with RT-PCR in MOONSONG and the Phase II study in hospitalized patients. In Cohort B, the actively treated patients administered 1,100 milligrams BID had a robust viral load reduction of 0.9 -- at day 3. This data also show a suggested dose response between Cohort A and Cohort B.

Moving to Slide 13. As I have just outlined, these additional data from the Phase II MOONSONG trial support the rapid and potent antiviral effect of AT-527 as measured by a quantitative, highly sensitive infectious virus assay which detects live virus capable of replication.

Leveraging the lessons from MOONSONG and as outlined in Slide 14 as well as other recent results, we are submitting amendments to the global Phase III MORNINGSKY trial. MORNINGSKY is a randomized, double-blind, multicenter, placebo-controlled Phase III trial evaluating the antivirus activity, safety and pharmacokinetics of AT-527 in approximately 1,600 patients randomized 1:1 to receive AT-527 1,100 milligrams twice a day or placebo. We, together with Roche, plan to leverage the existing operational global infrastructure from the MORNINGSKY clinical trial site and expand it's footprint with approximately 300 sites in new geographies. We expect to report the data from this trial in the second half of 2022.

Amendments to our MORNINGSKY study include the following: Changing the trial's primary endpoint to COVID-19-related hospitalization or all-cause mortality. The previous primary end point of time to alleviation or improvement of COVID-19 symptoms will become a secondary end point. Refining the patient population to include only unvaccinated high-risk individuals. And lastly, increasing the dose of AT-527 to 1,100 milligrams twice daily from 550 milligrams BID. Patients enrolled in MORNINGSKY have the option to be enrolled in later spring, a 6-month, long-term follow-on study conducted in collaboration with Roche to evaluate long COVID in patients who received AT-527 in comparison to placebo in MORNINGSKY.

Let's now turn to AT-752, our program of the treatment and prophylaxis of dengue fever on Slide 16. Earlier this year, we initiated a randomized, double-blind placebo controlled single and multiple ascending dose Phase I study to evaluate the safety, tolerability and pharmacokinetics of AT-752 in healthy subjects. We have completed Part 1 of the study, the single ascending dose cohort. And in Part 2, the first two cohorts are complete and the last cohort is ongoing. We expect conclusion of this study by year-end.

During the first half of 2022, we expect to initiate our Phase II study of AT-752 for the treatment of dengue fever in Asia and South America. In this trial, we will enroll adults with fever greater than 38 degrees within 48 hours of probable dengue infection and positive results on the MS-1 antigen test and RT-PCR assay. The primary end point will be change in viral load from baseline. We look forward to keeping you apprised of our progress in this important study next year.

With that, I will now turn the call over to Andrea for a review of the financials.

Andrea Corcoran

Thank you, Janet. As Jonae mentioned in her introductory remarks this afternoon, we issued a press release containing our financial results for the third quarter of 2021. The statement of operations and the balance sheet are on Slides 18 and 19.

For the third quarter 2021, the increase in R&D expenses in comparison to the third 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 include 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 in 2021 and consists principally an increase in payroll and personnel-related expenses.

I'm pleased to report that we ended the third quarter with a strong balance sheet to support our clinical development programs. As of September 30, 2021, cash and cash equivalents were $839.7 million. This includes the $50 million development milestone the company received in July under our license agreement with Roche.

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

Jean-Pierre Sommadossi

Thank you, Andrea. As Janet outlined, the protocol changes we are making to the Phase III MORNINGSKY study maximize our ability to demonstrate a positive clinical outcome. The updated inclusion criteria, dosing regimen and primary end point should allow execution of a more focused and derisked trial. Importantly, the encouraging infectious virus data we have disclosed today give us further confidence in AT-527 rapid and potent antiviral activity against COVID-19 which is critical to stopping disease progression and transmission.

We continue to be very excited by the opportunity for Atea to change the course of COVID-19, dengue fever, hepatitis C and all of our infections. This is an exciting time to be bringing force what we believe to be groundbreaking technologies and we look forward to updating you on our progress. As always, we thank you for your continued support as we build Atea into a global leader in the discovery, development and commercialization of all therapies that address the unmet medical needs of patients with -- bowel diseases.

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

Question-and-Answer Session

Operator

[Operator Instructions] First question comes from the line of Eric Joseph from JPMorgan. Your line is now open.

Unidentified Analyst

Hi, good afternoon. This is Hannah [ph] on for Eric. Thanks for taking the questions. Just a few from us. So first, I just wanted to get your thoughts on the feasibility of conducting the Phase III trial, where we have the Pfizer pill -- accessible? How confident are you in the stated time lines that you've given? And then, also with the recently reported remdesivir outpatient trial which showed a meaningful effect in hospitalization or death despite a minimal or really no effect on viral load. Just wanted to get your take on this data set. And then from a theoretical perspective, what other than viral load reduction do you think might translate to an effect on clinical outcomes?

Jean-Pierre Sommadossi

Janet, could you address both questions, please?

Janet Hammond

Thank you. Yes. So with regard to the feasibility of conducting the study, we believe that it's still feasible. And in some ways, I think it's unfortunate that it is. But I think vaccine rollout across the world, while impressive in many places, is lagging in many others. And I think that unfortunately, this provides an opportunity for many high-risk patients still to be susceptible to the disease. We have an extensive footprint already and plan to have a still further extensive footprint as we move forward. As I mentioned, we will have more than 300 sites or thereabouts in the trial. And so we believe that study ought to be able to be enrolled and completed in the time frame that we suggested. And then, with regards to remdesivir; I wasn't completely sure that I understood your question. I think that what remdesivir showed very elegantly and in a large study was really that there was no correlation between viral load and clinical assay. And I think that probably that is true, in general, for the direct acting antiviral particularly when measured by RT-PCR.

And I think really, some of what we have attempted to show today is really that in addition to RT-PCR which seems to be a rather blunt tool and I think is recognized as such, the live virus assay that we have reported on seems to be somewhat more able to discriminate between viral fragment and non-variable virus an actual live virus. And I think we're actually showing quite nicely even a suggestion of a dose response in what we're seeing there. Certainly, clinical end points are really what it's all about, ultimately. I mean that's what we all care about is whether the patient gets better. And if we can prevent hospitalization and -- some target end point which is able to help support that and ultimately be a useful target end point, that would be great. But I think the remdesivir data supportive of the field in general and what others are experiencing as well as ourselves [ph].

Unidentified Analyst

Okay, great. That's helpful. Thanks for taking the questions.

Operator

Next one on the queue is Jonathan Miller from Evercore ISI. Your line is now open.

Jonathan Miller

Thanks so much for taking the questions, guys. I have a couple of maybe more detailed ones on some of the data you released today. You mentioned that your Phase II cohort is majority seropositive. I think you said 71% seropositive baseline. How different are the results there between seropositive and negative patients at baseline for one? Then secondly and sort of following on the last question. It seems like the majority of the patients on the 1.1 gram arm in the Phase II were high risk. And just trying to back out -- obviously -- in my head on long scale. But is it fair to say that the viral load impact in low-risk patients is really pretty modest?

And then following on the prior question, if you think that there's not a good read-through from viral -- clinical efficacy, do you expect that direct-acting antivirals maybe broadly will have a meaningful clinical impact in low-risk patients? And I guess I'll pause there.

Jean-Pierre Sommadossi

Janet?

Janet Hammond

So thanks, John. So firstly, in regards to your question around the seropositivity, yes, the seropositive was actually very high and perhaps not surprisingly increased, I think, as the study went -- we're still awaiting some of the final serology data from Cohort A. But certainly, in Cohort B, 87 of the treated patients were seropositive and I think 80% in the placebo group, so really high numbers. And I think that does blunt what you're able to see. Perhaps it blunted less, I think, in the high-risk patients than in the other ones. But I think essentially, what we're seeing -- and I think it perhaps answers some of your second question to around the viral load impact in the low-risk patients. I think clearly, if you're a low risk, you're able to cure the virus perhaps more effectively yourself without the need for direct acting antiviral. But I think if you're able to prevent hospitalization and I think as others have demonstrated preventing hospitalizations and death in high-risk patients, you have to believe that you're having a similar effect, although it's harder to measure in patients who are at lower or more modest risk for those types of outcomes. But nevertheless, I'm certain that you're probably shortening the duration of symptoms. And this is something that we have been hoping to demonstrate in our Phase III trial. But it seems that these harder end points are certainly easier to document.

And I think that is -- we're going in the direction that we are with MORNINGSKY. But I think that if you're showing those types of benefits of high-risk patients, we need to refine the tools in which we demonstrate that in order to protect high-risk patients, you're clearly also showing benefit in -- patients albeit viral load, particularly by RT-PCR isn't the perfect measure. But I think you can see that there are reductions in viral load across the board. I think just the higher-risk patients, perhaps less surprisingly, also do tend to start off with higher loads. And clearly, you need to have a bigger Delta to be able to demonstrate something. So, I think it all tells the same story quite cohesively. I hope that answered the question.

Jonathan Miller

Yes, somewhat. And then I guess one final one. How are you defining higher risk in the new criteria?

Janet Hammond

So I think it's -- I think the definition is pretty standard in terms of patients being elderly, obese, diabetic, immunosuppressed and I think also potentially asthmatic patients with underlying renal disease, underlying tumors and so forth.

Jean-Pierre Sommadossi

And hypertension.

Janet Hammond

And hypertension, yes, cardiovascular disease.

Jonathan Miller

Well, thanks very much, guys.

Operator

So for the next question we do have Tim Lugo from William Blair. Your line is now open.

Tim Lugo

Thanks for the question and the additional data. I'd like maybe a broader question on -- given the recent impressive -- inhibitor data, I'd just love to hear your updated thoughts around targeting -- directly versus the -- we, I guess, previously were thinking the correlations between HCV and HIV and other more chronic diseases would suggest the RNA polymerase was the correct targets for minimizing resistance. But is that still the case? And can we kind of -- can we really extrapolate those diseases to SARS-CoV-2 and COVID-19?

Jean-Pierre Sommadossi

Sure. Well, look, first, we welcome really all progress in developing treatments as part of a multipronged approach and -- to come back on COVID-19 pandemic. And as there are several vaccines, we believe that multiple treatment options will be needed. So, regarding -- I don't think that one target is going to be better than the other one. You have seen the data I just mentioned about the remdesivir and the outpatient. Unfortunately, the drug can be given only IV. And obviously, we know the limitations. I think we have not seen from Pfizer all the detailed analysis of the data, talking about viral load, talking about potential of emergence of resistance. And what I believe -- what we believe is that it's going to be a very different, I would say, situation in the real world than in clinical trials with protease inhibitors potentially used in immunocompromised patients, used in -- so with maybe issues on -- taking all the doses at the right time. And so we have to see; let's not forget that any drug, any antiviral drug with one point mutation will very likely lead to resistance. When Tamiflu was launched in 2008, 2009, there was absolutely no resistance at all. Just one year later, it was the majority of the -- resistance to Tamiflu.

So, I don't want to picture a future negative picture on protease inhibitors. But I think we have to be -- we can celebrate today. We should celebrate. But at the same time, we need to see the reality for the future. As Janet indicated, we are going to have an endemic situation. There is going to be new strains. And I believe that -- I would not be surprised that we are going to talk about combination therapies, as you know, with potentially the combination of two different classes. And PI and -- have been shown in the past to be a very interesting combination. So, I think what we have learned over the last 12 to 18 months is what we know today may be different in 6 months and surely in 12 months to come; so I would be cautious there.

Tim Lugo

Okay, that's understood and I agree. I think we're all looking towards the first combination that is going to be incredibly interesting. But I guess generally, when we look across the oral trials and even remdesivir as well, the patient numbers that have been enrolled on the other trials have just been so much higher. I know MOONSONG took a while to get underway. Can you just maybe comment on how MORNINGSKY will be different in terms of patient enrollment, really pushing patient enrollment? Because it did take a long time to get those patients on MOONSONG.

Jean-Pierre Sommadossi

Yes. You're absolutely right, Tim. We are very aware of it. Janet, would you share basically what we are putting in place and how we foresee to accelerate the MORNINGSKY enrollment after we will have basically filed and finalized the amendments with the regulatory authorities?

Janet Hammond

Sure. I think we have increased the sample size somewhat. But we certainly have, I think, really doubled down on the geographical footprint, particularly looking at areas where we're likely to be able to enroll patients who are unvaccinated. And I think with that footprint -- and also, I think with the potential for conducting an interim analysis and so forth, similar to what others have been able to do, we believe that we should be able to -- time lines that we are committing to and are confident that this is something which is still possible. We realize that the window is going to close as more people become vaccinated and also therapies become more accessible. But we're certainly committed to doing this and really believe that we can.

Tim Lugo

Okay, that's understood. And maybe another -- I guess how many patients have been enrolled in MORNINGSKY by -- when you filed the protocol amendments? And if I recall, I think the higher dose had a bit of a nausea signal. Are you going to be allowing antiemetics in MORNINGSKY? And I guess also, can you maybe give us some more details on this additional cohort from MOONSONG that we'll be expecting early next year?

Jean-Pierre Sommadossi

Janet?

Janet Hammond

So firstly, with regard to the number of patients, it's not something that we've disclosed. And secondly, with regard to the use of antiemetics, we are going to educate physicians on the fact that there has been some GI signal. We don't believe that it's a particularly significant one at the moment but it's certainly something that we are actively managing and also setting up studies to assess how best to address it in terms of potential food effects and protecting patients from feeling these symptoms and something that we're actively working on. But we don't actually believe yet that we fully understand the significance of it as there were some peculiarities with the patients where the adverse events were experienced. In particular, all of the adverse events that resulted in discontinuation all came from the same site which is somewhat unusual.

And so we're still trying to really understand that and work out how best to manage it. We will allow the use of antiemetics and make this available. But on the other hand, we don't want to encourage and allow people to believe that this is something that they're going to experience because it is something which I think is susceptible to some auto suggestions. So it's quite a tricky one to manage. And we're actively thinking our way through that at the moment. And then lastly, in regards to your question around MOONSONG, we're not planning to enroll any further cohorts in MOONSONG, at least at the moment.

Tim Lugo

Okay. Thank you for all the granularity and all the answers. Best of luck.

Jean-Pierre Sommadossi

Thank you, Tim. Thank you.

Operator

Next one on the queue is Roanna Ruiz from SVB Leerink. Your line is now open.

Roanna Ruiz

Hi, thanks for taking the question; a couple regarding MORNINGSKY. I was curious, in your protocol amendment plan, would you possibly explore going for an even shorter time period than five days of symptom onset as I believe, I think Pfizer's interim had less than three days of symptom onset or less?

Jean-Pierre Sommadossi

Janet?

Janet Hammond

So we're going to allow patients in who have had symptoms for five days or less. I think we will certainly try to ascertain whether their symptom duration was shorter than that. And we could certainly analyze by shorter duration and see whether that has an impact. There was a small impact, I think, in the size study. But it actually was surprisingly -- I thought. I mean, I think it was 87% versus 89%. So short is obviously better but I don't think it made as much of a difference as I was expecting.

Roanna Ruiz

Okay, makes sense. And I was also curious, in the remarks, it sounded like you will run the new MORNINGSKY protocol by the FDA. So does that mean that you're taking steps toward opening some trial sites in the U.S.? Or could you just give us an update on where that stands right now, that would be great.

Janet Hammond

So, I can give you a broad update which is that we continue to engage with the FDA and we will be sharing with them the protocol. And we have ongoing positive dialogue, and we do hope that we will be enrolling patients in the U.S. in the study; but I think that's about what I can say.

Roanna Ruiz

Okay, fair. Thanks.

Operator

And there are no further questions on the queue. I will now turn the call over back to the presenters.

Jean-Pierre Sommadossi

So again, thank you very much for your participation and I would like to thank everyone and -- thank you again. Good night.

Operator

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