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Why Atea Pharmaceuticals Stock Got Crushed This Week

By George Budwell – Oct 22, 2021 at 7:42PM

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A mid-stage trial miss caused investors to hit the exits this week.

What happened

Shares of the clinical-stage biotech Atea Pharmaceuticals (AVIR -4.85%) closed the week down by a whopping 68.6%, according to data from S&P Global Market Intelligence. The biotech's stock plummeted last Tuesday after announcing that its oral antiviral pill, known as AT-527, badly missed the mark in a phase 2 trial called MOONSONG for patients with mild or moderate cases of COVID-19. 

AT-527 is being co-developed with pharma heavyweight Roche (RHHBY 1.20%). Atea and Roche, per their press release, said the drug failed to reduce the amount of circulating SARS-CoV-2 virus in patients with mild or moderate cases compared to patients who received a placebo. The drug, however, reportedly did exhibit a clinical benefit in high-risk patients with underlying health conditions. 

A person with a shocked expression on their face while looking at a cellphone.

Image source: Getty Images.

So what

Atea and Roche had mega-blockbuster (greater than $5 billion in annual sales) aspirations for AT-527, as it's an easy-to-swallow treatment for mild to moderate COVID-19 cases. Although the drug was putatively set to compete against alternative therapies from pharma heavyweights such as Pfizer and Merck, the market may still have been large enough in early-to-mid 2022 to easily support all three oral COVID-19 therapies.

That investing thesis for Atea's stock, however, took a big blow following these unexpectedly poor phase 2 trial results. On the bright side, Atea and Roche did note that they are looking into redesigning the drug's ongoing phase 3 MORNINGSKY trial to include more high-risk patients. 

Now what

Is Atea's stock worth buying on this hefty downturn? This is a tricky question, to be sure. This phase 2 trial had some major problems from a design standpoint, such as the inclusion of vaccinated patients. Merck's pivotal trial for its oral COVID-19 treatment called molnupiravir, by contrast, did not include vaccinated patients. So, in short, investors probably shouldn't take this phase 2 miss too harshly. There is still a chance for late-stage success for AT-527 after all. However, this small-cap biotech stock is probably only suited for the most aggressive of investors at this point.   

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Atea Pharmaceuticals, Inc. The Motley Fool has a disclosure policy.

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