Atea Pharmaceuticals, Inc. (AVIR) Earnings Call Transcript & Summary

Great. Good afternoon, everybody. Thanks for joining us for our next session. I'm Matthew Harrison, one of the Biotech Analysts here at Morgan Stanley. Very pleased to have Atea with us. Before we get started, I just need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures here on the Morgan Stanley public website at morganstanley.com/researchdisclosures. So thanks, everybody from Atea for being here. I'm going to turn it over to JP to make some opening comments, and then we can jump right into the Q&A.

Thank you, Matthew, for this opportunity. And before we go into Q&A, I would like to just take a step back and provide some background about Atea. Since the founding of the Company, our vision has remained the same with the discovery and development of antiviral drugs for the treatment, cure and prophylactic of severe viral diseases, where there is a significant unmet medical need and where we can make a huge difference. Atea management team has deep antiviral discovery and development expertise and a proven track record of building leading companies in the biotech field and big pharma. Janet Hammond, our Chief Development Officer; John Vavricka, our Chief Commercial Officer; Andrea Corcoran, our CFO and EVP Legal; and Jonae Barnes, our IR and Corporate Communications are here with me today. We believe that all antivirals can play a differentiated and important role in the treatment of COVID-19 with the ability to rapidly inhibit viral application in the early phase of infection and potentially reduce disease progression, viral transmission and most importantly, hopefully, long-term COVID complication, where we've seen both symptomatic and asymptomatic patients as much as 30% to 40%, which really will be a meaningful impact on global health. With AT-527 for the treatment of COVID-19, we have gone from an IND to a global Phase 3 in less than a year. Our strategic partnership with Roche, expand our capabilities by facilitating pandemic scale manufacture of commercial product together with global distribution of AT-527. Allow me to really remind you the substantial progress that we did with AT-527 in this past year. We reported in Phase 2 hospitalized trial in term analysis that AT-527 has a rapid and sustained antiviral activity. As a proof of concept, we demonstrated that with Bronchoalveolar Lavage, effective drug concentration can reach the primary site of infection for COVID-19. We have -- and I think it's important, demonstrated that we have a dual mechanism of the RNA polymerase, which is a highly conservative enzyme, which is essential to viral application, and we believe that this allows AT-527 to have a high barrier to resistance and likely to be effective all against all variants. We have reported at our own internal, that AT-527 is not a mutagen, and we don't anticipate to have any dosing regimen change, even in the presence of CYP3A substrate. We continue to make significant progress with our drug candidate in our antiviral pipeline for the treatment also of dengue, hepatitis C and RSV expect to provide an update on this program in the near future. We are extremely well capitalized in excess of $860 million in cash and cash equivalents. And that at the end of June, and that does not include the $50 million milestones we see from Roche in July. I would like to finish here that to emphasize that our goal is to become the world leader in antiviral therapeutics, targeting multiple RNA viruses such as COVID, dengue, hepatitis C and RSV, since these are the major viruses emerging worldwide with a really major impact on human health. Matthew?

Great. Perfect. Thank you for the introduction, JP. Why don't we start with COVID, and then we can obviously progress through some of the other topics that he outlined. So I guess maybe the first question here is that comes even before we get to the program, right, I think people are now aware that there are a couple oral treatments for COVID in development, you all are sort of tracking towards data in the second half of this year. So maybe you could just broadly talk about what you see as the differences or the potential differences in profile between yours and Merck's and Pfizer?

Sure. Sure. As I indicated, the MOA of AT-527 is unique as it has a dual mechanism targeting the 2 functional domain of the RNA polymerase, which on the NiRAN and the RdRp. And we believe that this will provide a high barrier to resistance. And this basically, we believe, will compare very favorably against the protein inhibitors, especially with the new variants like Delta and Rwanda and Mu, where you see actually a much faster rate of replication of the virus, and this is basically confirmed by baseline viral load as high as 1 billion copies as compared to the original Wuhan, where we could see maybe 10 to the 5 or 10 to the 6. And obviously, as a long, when we see those high rate of replication and faster rate, we are concerned about mergers of resistance with classes of drugs that have been shown in other RNA viruses like protease inhibitors are to -- lead to a resistant variance, and this, obviously would be quite a significant negative point for that class. When we compare with [indiscernible], which also is a nucleoside, but it is not a specific inhibitor of the RNA polymerase by its MOA. It is causing an overwhelming number of mutations leading to AO catastrophe and degradation of the RNA chain, but not just on the RNA polymerase, but in the full viral genome. And obviously, that's where we can worry about the emergence of new variants under pressure by this drug, especially in immunocompromised patients.

Okay. Perfect. Perfect. And I guess, could you spend a minute or 2 more just on the work that you've done around the -- the high barrier to resistance, obviously, which is innate with the mechanism, but also the work you've done from a in vitro standpoint around different variants and all of the other sort of characteristics.

It's a really good question. And so we are right now actually evaluating AT-527 against a few of the variants that are present on the global scale. So the alpha and by the way, we had both alpha and gamma in our hospitalized patient trial. And based on the response, we believe that we see activity against those variants. The most difficult to assess is the delta. And the reason it is the most difficult to assess is, so far, to the best of our knowledge, there was not a single CRO, including the NIV contract lab that has been able to grow in the cell-based assay, this delta variant. Apparently, this delta has a lower efficiency for the infectivity of those cells. So we hope that we are going to be able to get this in vitro assays with those CROs as quick as we can. But in the same time, I think with the Phase 2, especially in MOONSONG, we're now probably 90% to 95% of the variance. So presented, it was the delta, we should definitely have the ultimate validation within an in vivo situation.

Okay. Perfect. Perfect. So I think that leads to data that we do have, and then we can take a look at what's coming up. So obviously, you reported data from a Phase 2 hospitalized patient study. I think that -- I think there are probably 3 questions. The first is, people want to know how should they think about that population, right, because hospitalized patients tend to look very different from non-hospitalized patients. So how should that data inform our outlook on some of the other studies? And then 2, how should we think about the viral load decline achieved in those patients? And what's the right context, whether it's hospitalized patients that were treated with antibodies or what other drugs should we be looking at as analogs when we're comparing sort of the efficacy you could demonstrate in that population?

Sure. Excellent question. Janet, maybe if you can address that question, please?

Thank you very much. So yes, so just to remind people, the hospitalized study was the first study that we did with AT-527 for SARS-CoV-2 infection. And the study was designed way back at the beginning of the pandemic, attempting to look at showing a reduction in progression to respiratory failure in patients infected with SARS-CoV-2. The patient population was patients with risk factors for progression of disease, patients who required hospitalization, but actually, patients, and I think this is important in regard to your question around the hospitalized patient population. It's a different hospitalized patient population probably for what we see with remdesivir. Now these are patients who had low -- no or little requirement for oxygen supplementation on admission to hospital. They were also required to have had infection or symptoms of infection for 5 days or less in order to be eligible for this study. And the study was -- well, is a double-blind, randomized placebo-controlled trial. Patients are dosed with AT-527 550 milligrams twice a day for 5 days. And the primary endpoint, as I mentioned, was progression to respiratory failure or lack thereof. But we also collected biokinetics and clinical symptoms and also importantly, I think, safety and tolerability. And the data to which you're referring is really just the interim analysis, where we were able to show -- and we're very pleased to be able to see in really a relatively small patient population, a robust antiviral effect with on average, a 0.7 log delta between the active and the placebo group of patients, and we're talking about approximately 30 patients in each of those 2 arms. So with regard to -- and regards to safe and well tolerated. But with regard to the hospitalized population and the generalizability of that population. A lot changed during the course of the study and remdesivir first of all received an EUA and then was approved. And the monoclonal bodies came along behind that and also had an EUA. And that actually changed, to some extent, the patients that we were able to enroll in the study, because many patients were clearly sick and in need of therapy, were no longer eligible for placebo, particularly in the United States where this therapy has been much more available. And I think really has caused us to have a rather heterogeneous patient population in the study. In the United States, for the most part, the patients probably had slightly more severe disease than patients who would not consent to being admitted to a hospital setting of any description. But to some extent, we're perhaps more akin to a confinement type of setting, where it was perhaps essentially convenient for them to be in hospital, but perhaps they weren't as quick as many of the patients are, particularly during a surge, when hospital beds are at a premium. Outside of the United States, the study has a significant global footprint. I think things have been different in different parts of the world. And in some cases, patients have been actually really sick. But I think it's a long way of saying that the patient population is probably not completely representative of the very severely ill hospitalized patient population that one sees. And so we have, I think, a spectrum of patients, probably on the more severe end of mild disease. But I think when one looks at the CTC definition of what mild disease is, it's only patients who don't require oxygen. And I think you can be feeling pretty miserable even under those settings. So it's probably -- that is the patient population. And then with regard to your question around the viral load decline and how that compares to what we've seen in other studies. We would say that it's hard to compare for a number of reasons. I think there's variabilities in the assets that are being used in the [indiscernible] and sensitivities of those assets. I think there's also variability, and I think this is going to be an ongoing phenomenon with this disease, is there's an ongoing variability in the viral variance that you're studying. And they also have their own purpose, I think, in regard to viral kinetics. So as Jean-Pierre mentioned earlier, and I'm sure others have, the viral kinetics of the delta virus are very different from those that we've seen previously. The viral loads are much higher. They tend to peak much earlier. And so I think those differences are going to cause differences in the viral kinetics that one observes, both within a drug and when you look at cross comparisons of both in time and mechanism of action. But having said all of that, we believe that what we saw a 0.7 log delta from active versus placebo is in many ways comparable to what has been seen by Merck's molnupiravir. I think the difference is vertical lower perhaps, but that patient population was also different. And I think what one has seen with the monoclonal antibodies is also very much in the same ballpark. So we think that we're seeing comparable and really pleasing antiviral efficacy in terms of the viral kinetics. I mean the question to some extent is what does the viral kinetics mean in terms of the underlying disease. And again, I think that's a variable dependent on way of that drug is taken and how representative a nasopharyngeal sample is of what's actually happening in the lungs. And I think that's some of the reservations that regulators have potentially around using nasopharyngeals and viral kinetics as an endpoint. And indeed, they are larger present here for Phase 2 studies, but not as a regulatory endpoint.

Okay. Okay. Good. So I guess that leads us to sort of what we have to look forward to here and hopefully in the near term. So you've got 2 studies to read out in the second half. There's MOONSONG, which is obviously a Phase 2 data set. And then you have MORNINGSKY, which is obviously the pivotal data set. I guess the first question would just be, how relevant is MOONSONG at this point, just given the time line here? And should investors be focused on MOONSONG at all?

So MOONSONG is our global Phase 2 study, where we're looking at the viral kinetics in patients with or without risk factors for disease progression. And it's a global multi-sense study, placebo-controlled trial. Again, looking at patients with symptoms for 5 days or less. But what we're doing here is, we're conducting the viral kinetics and actually also looking at a couple of different doses. We started off with the dose which we used in the hospitalized study. And as I mentioned, that has already shown, I think, really good antiviral efficacy. But the question is, could you, with other doses actually even see greater effect? And so we're exploring some of the doses. And we hope to see a readout from several of those cohorts probably early in the next quarter. And so that's really the purpose of the study, is to get experience in the outpatient setting, not this hospitalized patient population that I described to you previously. Really the viral kinetics, how that translates into clinical symptom relief and really just some general experience with safety tolerability and dose confirmation. But it's running in parallel with the MORNINGSKY study, which is our Phase 3 global study. And that again is a placebo-controlled randomized study, where we're again looking at both patients with and without risk factors for progression of their disease. And the primary endpoint for that study is time to elevation of symptoms. And really, the idea has been to have one large Phase 3 study in which we could assess the efficacy of AT-527 in causing symptom relief as an all-encompassing endpoint. Those patients who have greater risk for progression and those who do not, because it is a unifying endpoint for both of those categories. And then we have a key secondary endpoints, hospitalization, negative attended visits, mortality as well as viral kinetic safety and tolerability. And so we hope to have all of those patients in that study and we're looking at patients who again had symptoms for less than 5 days. And they need to have at least 3 symptoms of moderate severity, so that there is an ability to show symptom improvement or residency in those patients.

Can you talk about how enrollment is going in MORNINGSKY? And just sort of outlook on study execution right now?

So the enrollment is continuing to accelerate, and we have countries coming on board all the time. And I think where are you starting to see that the momentum is building there in a very pleasing way, so from that's where we are.

Okay. Okay. And I guess, maybe just remind people powering on the primary endpoint. Because I think -- I guess, and what I'm really trying to get at here is just, time to symptom relief is hard for people to correlate with viral load reduction and sort of think about how the data that we have around viral load reduction could give you confidence and a difference there. So maybe just talk about how you powered the study and how you thought about being able to have that kind of benefit?

The study is designed to enroll approximately 1,400 adults and adolescents. And we haven't discussed much about how we're powering it. But I think we believe that, that will be sufficient for the endpoint. And we actually have some experience in our own hospitalized study. And I think we've seen similar data emerging certainly from Regeneron, where I think there is quite a nice correlation between viral load reduction and symptom alleviation. And we were certainly able to show in our own study and actually, just in the small cohort of patients who had higher viral loads, that there was a very nice reduction in viral load. And that actually correlated quite well with a significant difference in the time to alleviation of symptoms and I shouldn't say significant facts in the way that it's statistically meaningful, because the numbers are too small. But we were able to show over 2 days of symptom shortening in comparison to those in placebo with the high viral load. So we believe that there is a good correlation between those 2, and we have to be able to show that.

Okay. Okay. And do you think there's a minimum that is clinically relevant here, in terms of being able to demonstrate that or is just a statistically significant study purely enough?

No. I think it's obviously important. I mean, I know when you hear disparaging remarks about the neuraminidase inhibitor class and what they're able to do in influenza and the day not being very meaningful. I think one day less when you don't feel that you'd rather be dead, is probably meaningful from the patient perspective, but it may not be that meaningful from the perspective of the payer. So we certainly hope to see something a bit more than that. But I think there's room for a drug to have a lot more impact than that. And one of the aspects of the MORNINGSKY study, which I failed to mention that I think is important, is that we have a follow-on study called the MEADOWSPRING study and patients who are enrolled in the MORNINGSKY study are eligible to enter the MEADOWSPRING study on completion of the MORNINGSKY study. And this study really is aimed at collecting the information regarding lung COVID in patients in our trial. And we believe that one of the benefits of a direct-acting antiviral, particularly administered early on in the disease, is that it's able to shut down viral replication. And then potentially, that also by reducing the viral load may impact the immune response of the host to the virus, and we believe that those are potentially factors which are likely to mitigate the development of lung COVID. And so we're really interested to see whether we can ensure a benefit in prolonged symptoms after COVID-19 infection in patients in our trials, and that's something that we'll follow-up there too.

Good. So maybe we can transition to, let's assume we have a positive study and talk about path to market and how you're thinking about commercialization.

John?

Sure. So for commercialization, let me just take a step back and so Atea has the commercial rights in the United States and externally US, our partner Roche has full commercialization responsibility for outside the US. And we are currently assessing our co-promotion efforts and discussions with our partners for the US. As far as how we see it, we foresee COVID-19 really to be endemic. And we're likely to live this for many, many years. And from a commercial perspective, as we see with other therapeutic areas, we also see that it will be necessary to have several therapies when it comes to -- for COVID-19. And we look -- we basically look at the target population in 4 broad patient segments. The first one is the treatment of symptomatic disease. This is obvious, patients that were symptomatic receive treatment as they are now. But also typically, one that's not usually available to us would be from a treatment of asymptomatic disease. And in this case, we look at -- have the opportunity, because of basically massive testing within the education and employment sector, identifying patients who are asymptomatic, but are positive for COVID, and that is a rather large segment. As well as for prophylaxis, both pre and post prophylaxis and finally would be a government purchase, and that would be both for an immediate use like a EUA supply that we're all hearing about, but also the long-term stockpiling contracts after an NDA, that we foresee that will be rather multi-tiered for many years to come. I mean, in some cases, many governments are still stockpiling after the last pandemic today. But we review all of those as very large segments.

And can you talk about -- I guess, just the opportunity for a government purchase? And is that contingent on receiving an EUA? What sort of discussions you're having? And then, I guess, compare with -- or I guess what I should ask is, does the fact that Merck got a government purchase, does that sort of stop everybody else in the category from getting one?

So we actually can learn from more past experience, particularly within the H1N1 pandemic, where the government did like to stockpile at that time because the antiviral was available. So currently, because there's no antivirals available, what the government is currently doing is, they're trying to increase the availability of like New World therapeutics. I don't know, all the details haven't been released by Merck, but they did start, I believe, as of last year and went through a process in which to get what they call a conditional purchase. And that it would be in the event of an EUA or an NDA. So the government currently has several offerings right now to be looking at trying to expand the full idea of therapeutic agents, very similar to what they had done with vaccines when -- before they were approved. And we're obviously in active negotiations and participating in all those discussions with the government. And that would be -- mainly their focus right now is, if you had an EUA, it would be for immediate use within the supply chain. And obviously, anything with post NDA would also involve the likelihood of stockpiling, it's quite significant. The past pandemic has -- is similar in this nature.

Okay. So just to be clear, it's possible for you to have some conditional purchase agreement, prior to data and prior to an EUA, though those kinds of talks are ongoing. Is that the right way to characterize that?

I think it's fair. And I think the reason that they do conditional approvals is because they haven't seen the data yet. They haven't -- and also the governments putting this conditional approval, will also be subject to both the FDA, leaving an EUA acceptable as well as an NDA acceptable. So I think that is a very fair statement. And the government would look to secure those. And also, with past experience, both the vaccines and other therapeutic areas, they do like to make multiple awards and just like they did with the vaccines across multiple products for the health of the marketplace, but also just to place multiple bets.

Okay. Great. Good. Well, maybe in the last minute or 2 since we've spent almost all the time on COVID. JP, you could just comment broadly on some of your other efforts. You obviously have a dengue product that's coming in the trial. So maybe just highlight that for us.

So thank you, Matthew. And we have made really substantial progress with AT-752, our program for dengue. We completed the single ascending dose study portion. And right now, we are evaluating multiple doses that we anticipate will be completed in the Q4. And following this multiple ascending dose portion of the trial, we will file of course an IND in the US and CTH in several countries where we anticipate we will run in parallel a prophylactic study as well as a treatment study for dengue. And you may have seen just today, the announcement of major outbreak in India with several deaths actually. It's still a viral disease with 400 million impacted individuals on a worldwide basis and some even very closely from home. So we are excited to have, obviously, Phase 1 are great, but you want to see data both on prophylaxis and treatment. So hopefully, that will occur next year. The same with hepatitis C, we believe that as a combination we are a best-in-class. And we are looking to reactivate those programs very rapidly by end of the year, early next year. So we have given the guidance. RSV is a difficult nut to crack. But in the same time, we believe that we have the right approach to select the key clinical candidate. It has been -- and you may know, from a basic science standpoint, it's extremely difficult to obtain the RNA polymerase of RSV. We were successful in the last quarter. And since then, we have moved very nicely, because we now -- we have the direct assay and what we anticipate in terms of x-ray crystallography, to really pick the best clinical candidate and move into RSV. And we have a very important preclinical candidate there. So we are very excited on all the programs. We look forward also to the report the Phase 2 and the Phase 3. And to remind everyone that we are here to really build a world leader in antiviral therapeutics. We have the expertise, the experience, a first-class executive team, as you have seen today. And obviously, a very strong balance sheet that is important to build such companies. Great. Well, JP, Janet, John and the rest of the team, thank you for being here. Appreciate the time today.

Thank you.

Thank you so much. Thank you for the invitation again. Thank you. Bye-bye.