Atea Pharmaceuticals, Inc. (AVIR) Q4 2021 Earnings Call Transcript

Atea Pharmaceuticals, Inc. (AVIR)
Q4 2021 Earnings Call
Feb 28, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Welcome to the Atea Pharmaceuticals fourth quarter and full year 2021 financial results conference call. [Operator instructions] I would now like to turn the call over to Ms. 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, and good afternoon, everyone, and welcome to Atea Pharmaceuticals' fourth quarter and full year 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 -- Chief Executive Officer and Founder

Thank you, Jonae. Good afternoon, everyone, and thank you for joining us today. I will begin on Slide 3. From the beginning, Atea goal has been to discover breakthrough drugs against severe RNA virus diseases.

Today, with the evolving nature of COVID-19, it is clear that a combination of direct-acting antiviral will be needed to address this very challenging viral disease. So what have we learned in the past year? We are dealing with the viral disease, which is rapidly evolving from variant to variant within three to six months with major pandemic surges such as what we have seen with Delta last summer and now with Omicron. We are also starting to see the significant public health and economic impact of long COVID, which will continue to have long-term effects on individuals and society as well. This virus, which is constantly and rapidly mutating, is now evading vaccine and most of the monoclonal antibodies.

And it's clear that we urgently need several old therapeutics with different mechanism of actions to deal with challenging virus. While the protease inhibitor class has recently showed good efficacy against COVID-19. Historically, we have learned that these kinds of drugs has a low barrier to resistance, with rapid development of resistance strength, especially in the immunosuppressed individuals where we can see viral replication will continue for weeks and even months. Nucleotide drugs have been the backbone of successful oral combination regimens against many severe RNA viral diseases to mitigate this resistant issue and also to enhance efficacy.

We believe that our nucleotide bemnifosbuvir or AT-527 has the potential to be a preferred nuc of choice for a combination regimen with a protease inhibitor for the treatment of COVID-19. Our team has experience in leading development efforts in several combination therapies for RNA viruses over the years. And we believe that we can deliver, again, a long-term solution with a combination of bemnifosbuvir and the protease inhibitor for the treatment of COVID-19 now. Turning to HCV.

The recent in-licensing of ruzasvir, combined with bemnifosbuvir, will accelerate the time line of our HCV program and may result in the best-in-class pan-genotypic hepatitis C combination regimen. There is still a need for improved HCV treatment with shorter treatment duration, better convenience and to eliminate [Inaudible] in patients with advanced liver disease. As John will discuss later in the call, the hepatitis C market is large and the global HCV market in 2021 approached $4 billion with the U.S. representing about 50% of the market.

We are also advancing our third clinical program, AT-752, a nucleotide analog generated from our purine platform. Dengue fever is the most prevalent mosquito-borne viral disease with a large global disease burden and lack of antiviral treatments. We have successfully completed the phase 1 study late last year, and AT-752 will now progress to a phase 2 clinical trial conducting in dengue endemic countries as well as a challenge study conducted in the U.S. Let's now review our strategy for COVID-19.

Moving to Slide 5. Our vision for bemnifosbuvir is to be a nuc of choice, as I've said, for the combination treatment with a protease inhibitor for COVID-19. Bemnifosbuvir targets viral RNA polymerase, which, as you may know, is a highly conserved enzyme critical to the viral replication and the transcription of this virus. Uniquely, bemnifosbuvir has a mechanism of action or MOA with dual targets.

It is both a chain termination without introducing any mutation or new mutation in the viral genome, especially in the spike protein as has been shown with molnupiravir. It is also inhibiting the NiRAN function, which is also a functional function of the RNA polymerase and which is also critical to the viral replication. Thus, we believe that this MOA provide the potential to create a high barrier to resistance, as well as provide antiviral activity across any variants of concern. And details relating to this MOA were recently published in the peer-reviewed journal, Nature Communications.

So based on this unique MOA, we can anticipate that bemnifosbuvir will maintain its activity as this virus continue to evolve. In all clinical studies to date, bemnifosbuvir was shown to be generally safe and well tolerated. Of note, it is nonmutagenic, with no reproductive toxicity and is nonteratogenic. And it is the safety profile which we believe that makes bemnifosbuvir uniquely well suited not only for a combination treatment regimen in COVID-19, but also for HCV, which we'll review during this presentation.

I will now hand the call over to Janet.

Janet Hammond -- Chief Development Officer

Thank you, Jean-Pierre. Good afternoon, everyone. Let's turn to Slide 6. Advancing bemnifosbuvir for COVID-19 remains a top priority for us.

Combination therapy using multiple drugs with different mechanisms of action has proven important to limiting the development of resistance for many RNA viral diseases such as HCV and HIV. We're working diligently on our COVID-19 clinical development program, taking into account the continuously evolving COVID-19 landscape. And we look forward to sharing with you further information on this plan in the future. Let's move to hepatitis C, and I'm going to hand the call over to John.

John Vavricka -- Chief Financial Officer and Executive Vice President of Legal

Thank you, Janet. Good afternoon. Let's turn to Slide 8. The market for hepatitis C is large, with 2021 global HCV market approaching $4 billion, with the U.S.

representing approximately 50% of the market. This market size was achieved even during the height of the COVID pandemic. Despite the availability of direct-acting antiviral oral combination regimens for the treatment of HCV, there remains a large underserved HCV patient population, which continues to grow in the United States. A large portion of this increase in incidents is attributed to the opioid crisis, IV drug use and HCV reinfection, especially among younger adults.

We believe that a new best-in-class pan-genotypic HCV regimen that has a shorter treatment duration and is more convenient has the potential to achieve blockbuster status. Additionally, a more potent nucleotide-based regimen should eliminate the need for ribavirin in patients with decompensated cirrhosis. I'll now hand the call back to Janet.

Janet Hammond -- Chief Development Officer

Thanks, John. Moving to Slide 9. We're very pleased to have obtained an exclusive worldwide license from Merck to develop, manufacture and commercialize ruzasvir, an oral NS5A inhibitor. We're excited about ruzasvir's profile.

It is one of the most potent NS5A inhibitors with in vitro activity in the picomolar range against all 7 HCV genotypes. Extensive clinical studies of ruzasvir conducted by Merck through potent antiviral activity in HCV-infected patients. In over 1,200 patients at daily doses of up to 180 milligrams for up to 24 weeks, a favorable safety profile with no consistent treatment-related changes in laboratory parameters was observed. To further support the combination of bemnifosbuvir and ruzasvir in patients, we've conducted in vitro experiments either alone or in combination.

As shown in the figure on this slide, these experiments demonstrated that the combination resulted in substantially greater inhibition of HCV replication than either agent alone, suggesting a significantly synergistic antiviral effect between the two inhibitors. Once again, a key reason why we in-licensed ruzasvir was this advanced development stage, which decreases development risks and also provides the opportunity to create a best-in-class pan-genotypic combination therapy with bemnifosbuvir in a shorter time frame. Now let's move to bemnifosbuvir's profile in HCV, which is shown on Slide 10. Bemnifosbuvir was the primary focus of Atea's original program before COVID hit.

It's about tenfold more potent than bemnifosbuvir in vitro against the panel of laboratory strains and clinical isolates and remains fully active against sofosbuvir resistance strain. In monotherapy, bemnifosbuvir demonstrated a potent response, and uniquely, viral kinetics were consistent across all genotypes, including genotype 3, as well as in patients with compensated cirrhosis. As you can see in the chart, there is a rapid and steep viral load decline of around 4 logs within 72 hours. This rapid and steep decline is important to prevent the potential for development of NS5A resistance, especially in the hard-to-treat genotype 3 population.

Bemnifosbuvir at 550 milligrams supports once-daily dosing. And based on its safety, tolerability and efficacy profile to date, it's an ideal candidate to develop in combination with ruzasvir. Moving to Slide 11. We're very excited about our HCV combination development plan and believe that there is still room to improve on the standard of care.

A significant data has been generated for both drug candidates. And as soon as synthesis have been completed for the ruzasvir clinical trial material, we will move quickly into a phase 2 combination study. We anticipate initiating the study in the second half of the year. Our phase 2 development program will evaluate treatment of shorter duration and will include patients with both compensated and decompensated liver disease.

Let's now move to our third phase 2 program for dengue fever, and I'll hand the call over to John.

John Vavricka -- Chief Financial Officer and Executive Vice President of Legal

Thanks, Janet. Dengue is the most prevalent mosquito-borne viral disease, and it affects almost 400 million individuals on a yearly basis. Dengue pandemic in over 100 countries and greater than half the world's population is at risk. There is a significant unmet medical need and the global economic burden is estimated to be between $8 million and $9 million.

There are no treatments for dengue. And the approved vaccine is less than -- has less than an optimal profile with safety concerns and a restricted label. Our breakthrough drug candidate, AT-752, is a purine nucleotide prodrug derived from our platform. It has shown potent in vitro activity against all serotypes tested and demonstrated strong efficacy in the animal model.

I'll now hand the call back to Janet to review our program. Janet?

Janet Hammond -- Chief Development Officer

Thank you, John. As shown on Slide 14, last year, we initiated and successfully completed a randomized, double-blind, placebo-controlled single and multiple ascending dose phase 1 study to evaluate the safety, tolerability and pharmacokinetics of AT-752 in healthy subjects. In the phase 1 trial, AT-752 was well tolerated in 65 healthy subjects who administered either single or multiple doses. There were no serious adverse events reported, and most adverse events were considered mild and there were no changes in laboratory parameters.

In addition to the clinical work, we also published support of in vitro and in vivo data of AT-752 in peer-reviewed journal. The data published in antimicrobial agents in chemotherapy showed that AT-752 has potent in vitro activity against all dengue virus stereotype and also other dengue viruses tested. AT-752 was also shown to reduce viremia and improve animal health and survival in a mass model of dengue virus. In addition, data demonstrating the in vivo efficacy of AT-752 against yellow fever virus was recently published in the peer-reviewed journal, PLOS Neglected Tropical Diseases.

The published data showed that AT-752 reduced viremia and improved disease outcomes in a hamster model of yellow fever virus. There are two key studies that we are planning to conduct in 2022 for the dengue program. On Slide 15 is the first study, which is a human challenge study we're planning 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.

Subjects are closely monitored within a highly controlled setting, allowing the assessment of viral load and the viral kinetics to be compared between the treatment groups. Results are expected in the second half of the year. Pictured on Slide 16 is the second key study we plan to initiate during the first half of this year. It is a phase 2 proof-of-concept treatment study in patients with dengue fever, and this study will be conducted in dengue endemic countries around the world.

The study is designed to assess antiviral activity, safety and pharmacokinetics of multiple doses of AT-752, with the primary endpoint of change from baseline in viral load. AT-752 or placebo will be administered orally for five days in patients with dengue infection who present within 48 hours of developing fever. The study will be initiated soon, with initial results anticipated later in 2022. I'm going to hand the call over now to Andrea to review our financial information.

Andrea Corcoran -- Chief Commercial Officer

Thank you, Janet. As Jonae mentioned in her introductory remarks this afternoon, we issued a press release containing our financial results for the fourth quarter and full year of 2021. Statement of operations and balance sheet can be found on Slides number 18 and 19. For the fourth quarter of 2021, the increase in R&D expenses, in comparison to the fourth quarter of 2020, was principally driven by an increase in external clinical development and manufacturing expenses, incurred primarily in conjunction with the development of AT-527 for the treatment of COVID-19 and to a lesser extent, AT-752, which is being developed for dengue fever.

We also had an increase in internal spend, primarily attributable to an increase in Atea personnel-related expenses. Of note, our external expenses include our share of costs incurred by Roche relating to bemnifosbuvir, phase 2 MOONSONG,  phase 3 MORNINGSKY and phase 2 MEADOWSPRING clinical trials. These shared costs include external costs incurred by Roche in connection with the conduct of the studies and FTE costs for Roche personnel who are working on this program. The increase in G&A expenses quarter over quarter was primarily due to an expansion of our organization and consist principally in an increase in payroll and personnel-related expenses.

I am pleased to report that we ended the year with a strong balance sheet to support our clinical development programs. As of December 31, 2021, cash and cash equivalents amounted to $764.4 million. For financial guidance going forward, please note, during the first quarter of 2022, we expect to incur residual costs from Roche associated with the wind-down and closeout of the MOONSONG, MORNINGSKY and MEADOWSPRING trials. The timing of R&D expenses in 2022 is currently expected to be back-end-loaded.

This assumption is driven by clinical plans which currently contemplates the initiation of the phase 2 dengue trial, as Janet just discussed, in the challenge study during the first half of the year, as well as initiation during the second half of the year -- of the phase 2 bemnifosbuvir combination trial for COVID-19 and initiation of the phase 2 combination trial of bemnifosbuvir and ruzasvir for HCV, which we'll likely do later in the year. For spending going forward, we will be taking a disciplined biotech-focused approach. As previously mentioned, expenses in 2021 included cost sharing with Roche relating to external spend associated with MOONSONG, MORNINGSKY and MEADOWSPRING COVID-19 clinical trials and Roche FTEs involved in the COVID-19 program, which was a big pharma model. We anticipate to have cash runway through 2025, and we plan to be very dilution-sensitive as we move forward.

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

Jean-Pierre Sommadossi -- Chief Executive Officer and Founder

Thank you, Andrea. In closing, we are building a pipeline with the vision to be a leading antiviral company. We plan to continue to build out our pipeline of antiviral product candidates by broadening our nucleotide pipeline with other classes of antivirals that may be used in combination with our nucleotide product candidate. In 2022, we expect to make meaningful progress across our three phase 2 program for COVID-19, HCV and dengue.

These programs have the potential to provide global solutions for patients suffering from severe bowel diseases. The data set for these clinical trials will be important readouts and should be key inflection points for our company. Importantly, as Andrea has indicated and presented, we have the financial strength with a cash runway through 2025 and a seasoned management team to advance these programs. 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 severe bowel diseases.

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

Questions & Answers:

Operator

Thank you [Operator instructions] We have the first question comes from the line of Matthew Harrison of Morgan Stanley. Your line is now open. You may ask your question.

Matthew Harrison -- Morgan Stanley -- Analyst

Great. Thanks for taking my questions. Good afternoon. I guess two for me.

So first, when you're thinking about potential combination partners in COVID, what do you think you need in terms of an agreement here? I mean are there -- do they -- I don't know, just give me some sense in terms of how you get access to drug and how you might think about those studies. Do you need a formal agreement? Or could you get access otherwise? And then second, on dengue, just give us a sense of what sort of, I guess, clinical outcome here would be meaningful in these patients. Is it about duration of disease, symptoms, etc.? Thanks very much.

Jean-Pierre Sommadossi -- Chief Executive Officer and Founder

Thank you, Matt, for your questions. Related to the first question, we are open to partnership. But in the same time, as you have seen with ruzasvir, we are going to be very opportunistic to evaluate externally as we are doing right now internally in terms of P-I [Inaudible]. So as we speak, we are evaluating several opportunities.

And I will foresee preferably in-licensing rather than partnership, but we are definitely open to potential interaction with some of the players with maybe more advanced P-I. If we believe that there lead to a potential best-in-class and compare with the evaluation that we are doing right now in vitro -- with in vitro studies. Related to the second question, I'll let Janet to address the second question. Janet?

Janet Hammond -- Chief Development Officer

Thanks, Jean-Pierre. So I think we have two studies, as I mentioned, a challenge study and a treatment study. So in the challenge study, really, it's a prophylactic model. So what we're going to be looking for is the absence of the development of viremia in patients who have been preadministered with AT-752.

In the treatment study, in patients who already have symptoms and we'll be looking for reduction in viremia and also the prevention of progression to more severe dengue on these patients and reduction in symptoms.

Matthew Harrison -- Morgan Stanley -- Analyst

Thank you.

Operator

Thank you. We have the next question comes from the line of Mr. Tim Lugo of William Blair. Your line is now open.

You may ask your question.

Lachlan Hanbury-Brown -- William Blair -- Analyst

Hey, this is Lachlan on for Tim. Thanks for taking my questions. A couple on the dengue program. How do you see the challenge that you're setting through a regulatory process? Do you see that as a phase 2 or more kind of informing your plans for a phase 2? And second of all, after the phase 1 data, have you sort of narrowed down a dose or multiple doses and dose regimens that you plan to evaluate in the phase 2 [Inaudible]?

Jean-Pierre Sommadossi -- Chief Executive Officer and Founder

Janet?

Janet Hammond -- Chief Development Officer

So thank you, Tim. So I think we would consider the study probably to be somewhat of a hybrid, the challenge study, as these are healthy volunteers who are being administered a challenge dose. So I don't know how you would classify it from a regulatory perspective. But I think it's going to be very informative because I think there is scope certainly for -- an effective drug for dengue fever to be able to be as both for treatment and for prophylaxis.

So I think it will be important in showing that we are effectively able to inhibit the development of viremia in patients who are administered the dengue virus. And also -- and therefore, I can provide some element of proof-of-concept actually in treatment. But I think it also provides an element of proof-of-concept for prophylaxis. So I think for both those reasons, it's quite an important and intriguing study to do.

And then with regard to the dose, the phase 2 treatment study, as I outlined, actually, we'll be looking at a couple of doses. So we'll take the dose up and determine what the best dose is.

Lachlan Hanbury-Brown -- William Blair -- Analyst

Great. Thank you.

Operator

Thank you. [Operator instructions] We have the next question comes from the line of Roanna Ruiz of SVB Leerink. Your line is now open. You may ask your question.

Roanna Ruiz -- SVB Leerink -- Analyst

Great. Thanks. Good afternoon. So one, for your COVID program, could you just update us a little bit on what you've learned so far with your preclinical testing of combination use of bemnifosbuvir with a protease inhibitor? And I'm also curious, have you done any testing or plan to do testing of the Omicron sub variants that are emerging right now?

Jean-Pierre Sommadossi -- Chief Executive Officer and Founder

Roanna, thank you for your question. Number one, we have data ongoing. So I think it's too early to share related to combination with some P-Is. We are evaluating actually several of them.

And we will share a very likely by, let's say, in -- hopefully, in the near future and when we believe that we have a critical mass of data. And -- I'm sorry. On the second question -- Janet, if you can address the second question, please?

Janet Hammond -- Chief Development Officer

OK. The second question was really along the same line [Inaudible] from testing for Omicron. And I think that is still in the works, and we haven't yet seen the results, but I think they're anticipated shortly.

Roanna Ruiz -- SVB Leerink -- Analyst

OK. That's fair. No worries. And then I also wanted to ask a question about your HCV program.

So thinking ahead with this phase 2 combination trial that you're going to initiate, what types of features are you considering? Or can you just ballpark, give us a sense of how big this trial might be, what you're hoping to look for in the data in terms of the results?

Jean-Pierre Sommadossi -- Chief Executive Officer and Founder

Janet, do you want to address it?

Janet Hammond -- Chief Development Officer

Yes. But I'm afraid it's not going to be an answer which is going to be very satisfactory because we're in the process of working that out. And so I think we'll be able to give you information a little later in the year, but that's probably not today.

Roanna Ruiz -- SVB Leerink -- Analyst

OK. Fair enough. Thanks again.

Jean-Pierre Sommadossi -- Chief Executive Officer and Founder

Thank you.

Operator

Thank you. I am showing no further question at this time. I would now like to turn the conference back to CEO Jean-Pierre Sommadossi. Sir?

Jean-Pierre Sommadossi -- Chief Executive Officer and Founder

Thank you again for joining us and for your continued support of Atea. Thank you.

Operator

[Operator signoff]

Duration: 32 minutes

Call participants:

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

Jean-Pierre Sommadossi -- Chief Executive Officer and Founder

Janet Hammond -- Chief Development Officer

John Vavricka -- Chief Financial Officer and Executive Vice President of Legal

Andrea Corcoran -- Chief Commercial Officer

Matthew Harrison -- Morgan Stanley -- Analyst

Lachlan Hanbury-Brown -- William Blair -- Analyst

Roanna Ruiz -- SVB Leerink -- Analyst

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