Atea Pharmaceuticals (AVIR 0.78%) didn't get the outcome it wanted with a phase 2 study of its oral antiviral therapy AT-527. In this Motley Fool Live video recorded on Oct. 20, Motley Fool contributors Keith Speights and Brian Orelli discuss how Atea's clinical flop shakes up the COVID-19 pill market dynamics.

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Keith Speights: That's not the only big COVID story that we have to talk about, Brian. Another really big one from this week is that Atea's antiviral pill for COVID-19 just flopped in a mid-stage trial, and, as a result, the company is looking at maybe delaying its phase 3 study somewhat.

What do you make of Atea's results and how does this shake up the COVID-19 pill market?

Brian Orelli: Yeah. This drug is the one that has partnered with Roche (RHHBY 7.53%), the drug it's called the AT-527, had previously shown that it could reduce viral loads in hospitalized patients. There was hope for the drug, especially after Merck's (MRK 0.36%) success.

Merck's and Atea's drug works slightly differently so I'm not sure that the confidence was necessarily completely justified. But at least Merck's trial showed that if you inhibit the virus early, you can also keep people have the hospital. I think that was some of the confidence that investors were showing by Atea's stock price going up after Merck's results.

This phase 2 study was really just a mess. Essentially it looked at everyone with moderate to severe disease. If you were vaccinated, that was OK. You come into the trial. If you didn't have an underlying condition, that was OK you come into the trial. Then it was further complicated by the fact that it ran quite a long time and therefore, there were different variants of the virus in the study. Patients had been infected by different variants.

We look at everybody in the clinical trial, the drug failed, if you only look at people with risk factor, there seems to be a difference in the reductions in viral loads. Patients who got AT-527 reduced their viral loads more than people who got placebo, if you're looking just at the people who have a risk factor.

I think Atea and Roche probably overestimated how well the drug might work, and that's the reason why they enrolled everybody instead of doing what Merck did, which was just enroll unvaccinated people with a risk factor. Merck and was able to show that its drug kept people out of the hospital while Atea and Roche weren't even able to show that in general over the entire population that they were able to reduce the amount of virus in the patients.

Now, maybe a lot of that's probably just because patients are able to clear the virus fairly easily and so the drug isn't actually helping them go above and beyond that. That's maybe not all that surprising, but they certainly weren't able to show that.

Then as you said, the phase 3 needs to be adjusted and that's going to push back the data into the second half of 2022. I think, the drug probably still works because I don't think that the data from the hospitalized patients was a fluke. I think that the drug is definitely helping lower viral loads in the most severe patients.

But they're going to have to prove that and it's going to take a while. That's going to allow Merck and potentially even Pfizer (PFE 1.80%) if Pfizer gets its drug if its phase 3 is positive, we should get that data by the end of the year. If both of those are on the market, that's going to make it much harder for Atea to get onto the market next year. If it gets on the market, how secure are Merck's and Pfizer's positions going to be. Can it beat those two and get some of the market share?

Speights: Brian, you made a really good point there that the drug could still work. The phase 3 study won't necessarily be a failure just because these phase 2 results weren't very good. But this really underscores how important trial design is -- in terms of which patients to include and exclude.

Orelli: Yeah. We see this a lot in cancer trials where they're looking at a very subset of the patients and then you look at last line of patients have gotten other treatments and they don't have anything else left. You can pin in on a subset of the patients and then you can expand from there and that's probably what they should have done originally with the phase 2.

But we'll have to wait and see. But I think it's definitely bad news in the short term. In the long term, we'll have to wait and see.