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

Great. Good afternoon, everybody. Thanks for joining us for the next session. Really pleased to have Atea with us for the next session. Just quickly before we get started, I need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/researchdisclosures. So JP, I'm going to turn it over to you to make some opening comments, and then we can jump right into it.

Well, first, thank you, Matt, to us and to give us the opportunity to give the latest update on our pipeline. Since the founding of the company in 2014, our vision has been centered on the discovery and development of antivirus. So the treatment [indiscernible] prophylaxis of the most severe viral diseases where there is a major unmet medical need or where we can really make a major impact. We have an exceptional management team and a scientific team today, actually, part of the executive team, he's with me, is Janet Hammond, our Chief Development Officer, with John Vavricka, our Chief Commercial Officer; and Andrea Corcoran, our CFO, and legal. And all of us, we have had an exceptional, I believe, track record of success in the field of antivirals over the years, both in terms of discovery and NDA with many NDA being achieved. Really I'm very pleased over the last 12 months, where we really have a successful advanced our pipeline, not just in [indiscernible] but also in the treatment of prophylaxis of the major mosquito borne valve disease for dengue. And we anticipate that we are going to initiate also before the end of the year. What I think is going to be the most potent combination therapy for the treatment of [indiscernible] addressing some unmet medical needs in terms of eliminating [indiscernible] in decompensated patients. And mostly today, as we know, is mostly an opioid crisis treatment with hepatitis C and treatment duration is going to be essential. And we believe that we are going to tremendously decrease and make it more convenient treatment as compared to what we have today. But really, what I would like to and what I believe we are mostly going to spend our time today is on [indiscernible] with [indiscernible] We have announced this morning a very exciting, very unique design for the Phase III global study, which will evaluate for the primary endpoint of hospitalization in that so the primary analysis in the supportive care population. But also, we will have a cohort and Janet can go over the details, which will assess a combination antiviral, which we believe ultimately will have a major role in immunosuppress of immunocompetent patients. And this is the reason why we are developing a second-generation PI because, unfortunately, the first generation because of drug-drug interaction tolerability, do not fulfill the need of this specific patient population, our second generation like in the need of ritonavir. And obviously, with less drug-drug interaction more potent, going to worry the level than the model below the animal, and we are very excited that we feel very confident that we will select a clinical candidate by the end of the year, and we'll share the unique characteristic of -- with totally different scaffolders compared to the [indiscernible] NPI in development.

Great. Great. No. So a perfect place to start. Why don't we talk about the pivotal program, and I guess, put it in the context of what we've seen, which is patient-reported outcome endpoints are difficult. However, the amount of hospitalizations and other factors have gone down, broadly speaking, in the overall population. So just put that in the context of how you came to the Phase III design, and what sort of benefits do you think you have from that?

I'm going to let Janet address that. Just put in perspective is we're talking to several KOLs across the [indiscernible] both in the U.S. and Europe, and the patient population that we have selected is really the one that we see in the hospital today, which is the elderly above 80 years old, there are the 65 years old with major comorbidities, risk factors. You may have seen in the Wall Street Journal, 85% of the deaths are in those patient population. And we'll see how many immunosuppresses we will enroll as well. And that's really where we want to evaluate as the first approach this combination of. But Janet, why don't you go over the detail on the design and what we believe we will achieve?

Thank you very much. So I think just taking one step back first. We reported out the results from the MORNINGSKY study, which was the Phase 3 trial that we had to terminate earlier this year, where we were able to show a 71% reduction in hospitalization in a population, which is very different from studies which have occurred to date and in that we had low-risk and high-risk patients in that population. So a number of 71% is a pretty remarkable achievement. Furthermore, in patients over the age of 40, we showed an 82% reduction in hospitalization. So we are going into the program with strong confidence that we have a drug which is able to reduce hospitalizations. And as Jean-Pierre mentioned, we're enriching for that patient population in particular. So as you said, patients over the age of patients over the age of 65 with risk factors for severe COVID and anybody who's immunocompromised over the age of 18. We're anticipating enrolling the study globally. We anticipate having 300 sites up and initiating the first patients in the fourth quarter of this year, over 30 countries in the study. So a very robust footprint. And we think an important and innovative trial design in that we're enrolling this population and they are allowed to receive a standard of care antivirals depending on where they live. Recognizing that, that is limited by a number of things. Firstly, the geographical footprint because although [indiscernible] is widely available here, that isn't necessarily the case elsewhere. Some patients are getting more [indiscernible] but many patients are not getting anything because of the profiles of these drugs. In particular, the drug-drug interaction profile, as Jean-Pierre mentioned, for paxlovid is problematic for many patients, particularly the most vulnerable patients. And so we see that there is a significant unmet medical need there, which we are going after. And we're confident that we'll be able to demonstrate a reduction in hospitalization across the board. But we're interested in seeing the monotherapy results, obviously, and that will be the primary endpoint of our study, but we also look forward to seeing how the drugs work together in combination, potentially looking at whether we're able to reduce the instance of relapse and rebound, which have been reported with viral infections and also seeing what proportion of patients are actually ineligible for paxlovid and also looking potentially to see resistance because we think that in immunocompromised patients and with increasing use and prolonged use of monotherapy with [indiscernible] inhibitors is something which is inevitable, unfortunately.

Okay. Great. Yes. So a couple of follow-up questions to that. So the first is around just mechanistically how the study is going to work. So obviously, someone tests positive, they're enrolled, if standard of care is available there than offered that...

They are offer standard of care across the board and then they are randomized to struggle placebo on top of that.

Okay. Got you. And then, so the study is then, I guess, powered off assuming that you need a certain number of people who have only taken monotherapy or just how is it going to work to make sure the monotherapy cohort.

The primary end point is in the monotherapy cohort, and we're anticipating that we'll enroll a study of approximately 1,500 patients, and we're anticipating probably about 1,300 of those also will get monotherapy.

Okay. So that's very helpful. And then I guess the follow-up to that is what kind of or what kind of difference has been the study powered for on hospitalizations?

So we're anticipating that the hospitalization rate in this patient population is going to be at least 4% and anything north of that is good for us.

So maybe we could just go back and talk about some of the other factors that you talked about. So Paxlovid rebound, I think every widely reported people understand about it, do you guys have a view on mechanistically what's happening there, and why maybe a combination may have an impact?

Well, it may be due to the MOA, but it's clear that what we have reported on the earnings call is we have additive, in fact, in vitro with both paxlovid and also Molnupiravir. And [indiscernible] we anticipate to have added benefits in terms of impact on suppression and replication, obviously. So I don't think that anyone knows the exact mechanism. We are not going to speculate on another drug sponsor. But we feel that combination therapy will be required in those immunosuppress immunocompetent because you have long-term viral replication. And having long-term viral replication, you have to increase duration. And if you increase duration with monotherapy with the PI, we have exponential increase in the risk of resistance. And so that's in that patient population, definitely it makes a lot of sense to have a combination there, and this anti-viral combination code will give us the indication that we will need to initiate more obviously, powered studies in terms of the combination.

And then in terms of the -- I know this is sort of a couple of steps ahead of things. But in terms of the potential label that you might receive, I assume this -- the plan is you'd only get a monotherapy label, but you might have some data for physicians if they wanted to dose off label in terms of combination is that essentially what you can achieve with that...

I think that's likely. I mean I think you get what you studied, and we're powering it for that monotherapy population.

Okay. Okay. Great. And I guess the follow-up then is you addressed this a little bit at the beginning. But in terms of level of activity, and maybe let me step back a bit. We've got a couple of agents now. I think correlation between viral load declines and some of the outcomes, maybe is a bit clearer now because we've got a lot more data than maybe we had a year ago even. So can you just talk about some of the properties of the agent and how you see the agent position to be able to achieve that reduction in hospitalization that you need?

First, what is clear with [indiscernible] and Remdesivir is that with this class of drug, [indiscernible] leading to chain termination. So it's an irreversible mechanism. You don't see viral decline. But it's clear that you don't see viral decline in the upper respiratory track, which, by the way, it's not the site of the disease. So that's a little bit the issue that you face is that -- and there is more and more evidence that monocyte microphage may be actually critical as infective agents in all the organs because ultimately, when you see and you have autopsies after deaths, you have variants being present in every single organ, not just in the lung. And so the upper respiratory track is not, we believe, reflective of the potency of the drug. And that's why clinical benefit can be only evaluated with hospitalization and that’s as the only valued endpoint. So it's not that with the PI, okay, you do see a decrease of viral load, but no one has shown a clear cut relationship with clinical benefit. And that's why ultimately, the regulatory utility is what they want is clinical benefit.

Okay. So then maybe let me ask the question another way. I was basically trying to get at -- given we've seen success from some other agents, including other PIs, how do you think about your drug properties and your ability to hit on that primary endpoint, given the evidence that we have from the...

I think that as [indiscernible] has indicated remind us is we believe that it's derisk because we have 71% and even 82% achieved that endpoint in the primary study with a much a smaller number and with a p-value that is significant. So ultimately, that’s what we want to demonstrate again. And the key because as you know [indiscernible] if we go with the general population, you are going to have a hospitalization rate of 1% to 2%. The success is going to be based as [indiscernible] has indicated, we need at least 4%. We believe that actually, you have seen there is a report in [indiscernible] on those immunosuppressive patients. So you have a 25% of hospitalization rate. So highest that you will go and more effect you are going to see with the drug, and that's what we want to achieve.

Okay. So do you think it's just as much about drug properties as is it about study design and making sure you have the right population that is rich for high enough hospitalization?

I think that's exactly what it is. I mean I think as you go into that very vulnerable population who, for the most part, don't qualify for treatment with the agents that we have available, at least are the available ones. But that rate goes off the chart. I mean, 20% to 25%.

Just this is the patient that needs the most.

Yes. So can we talk about then commercial strategy and just how to think about the market more broadly? Obviously, the U.S. government as we said they're going to get out of the procurement business, and it's going to turn to a commercial market, briefly, I don't know if you're willing to comment on timeline, so maybe we could talk about time lines to market and then what you think the market opportunity may look like when you get there?

Yes, for time lines, as we have discussed this morning during our call, we anticipate about a 12-month enrollment, so probably end of 2023 -- if there will see availability for EUA, obviously, we will find for the EUA and followed by an NDA. So John, why don't you address more specifically related to the commercial and what we foresee and how we are going to address that?

Sure. So you did mention correctly that Congress is desiring to go back to more of a commercial landscape. We've been in discussions with several members of Congress and the administration. And it's inevitable that it will go to a regular commercial landscape. Our view is if it's a level playing field, then that will be okay, particularly in the population which we're studying, those individuals either cannot take medicine right now or doctors are in a particular dilemma where they can't prescribe this in these individuals. So from that perspective, we believe that the pandemic is -- it's going to be endemic. It's going to continue to be endemic now and we also believe that it's going to be a multibillion dollar opportunity. All the government funding that you've seen to date really has been for active treatment, so people who present with disease. And historically, the government has also stockpiled significant amounts of drug. But that only occurs upon an NDA. That's when they're legally allowed to do that. But it's this exact patient population that we're studying and that critically need this the most. And as I speak to members of Congress a lot, and it's obvious. It's obvious to us today. It's obvious in the media, there's COVID fatigue out there. But when we look at the numbers, in the U.S., you're talking hundreds, it's like 400 deaths a day in the United States right now attributed to COVID. And most of those are at that risk population. And when we start focusing our efforts on that, that is something that even when you go to a private market, the payers are going to pay for, particularly that at-risk population.

And how do you think about potential competition from antibody treatments in that market?

I don't really look at those as being a direct competitor. I think they coexist together. Obviously, ours will be an oral, you taken as an outpatient, so you'll have the convenience factor and the like. And for hospitalized patients, obviously, more parental administration of drugs will likely take precedence.

Just to add, and Janet can expand. This patient population is the one that has the most weak immune system. So that's where you really need direct acting anti-viral, vaccine antibodies are not going to have the same type of response than DAAs.

I guess I was asking more on the immunocompromised population where some people are still developing antibodies as a prophylactic treatment for those...

We didn't [indiscernible] those patients in our study because we think that they're probably nice and synergistic together. And once patients have the very best access. But I don't know that either alone is going to be sufficient for many of them.

And I think they would prefer to take oral medications as well.

Yes. Good. Maybe just to make sure we hit on some of the other work you're doing, can we talk about [indiscernible] so remind people what you...

We are very pleased where we are with Dengue. We will share some preliminary results at the end of the year, both with the treatment, the global Phase 2 study that evaluate the treatment with AT-752. And also we are very excited about the challenge study that is ongoing. And the reason we are very excited is because we have a drug that is very safe. Technically, we have 3 months of [indiscernible] that mean that we could basically give 3 months prophylactically. And there is some actually potential demand with the [indiscernible] for example. But in the same time, when you think about that, there is 500,000 prescriptions from [indiscernible] the United States for travel, for the travel market, we foresee this potential prophylactic agent as the first prophylactic and the first treatment for dengue as really a major market opportunity.

And just because people are probably less familiar with Dengue, what does success look like in an early study like this, what level viral knockdown is important here or is that even the right way to think about it?

So we have the 2 studies. In the treatment study, which is occurring in patients in dengue-endemic areas, we're looking at viral load decline as the primary endpoint and then reduction in symptoms is a secondary endpoint. And we're expecting to see a difference between them, but it's challenging to do because the bar load does decline pretty rapidly anyway. So older question is getting the patients in quickly, but we believe based on our preclinical data that we ought to be able to do that and we have well-designed criteria for suitability for enrollment into that study to show that difference. And then in the challenge study, patients are given the drug and then actually injected with dengue an attenuated strain, and there is obviously to protect them from developing any symptoms or viremia at all as measure [indiscernible].

And so that will be a clear outcome and just proportion of patients that don't get into...

Yes, that don't get symptoms. And I think it's actually a good proof of concept really from the [indiscernible] in general.

Okay. And just theoretically, so let's assume success out of these studies, what is the development plan look like for something like this?

It's something that we still want to discuss as to how to prioritize whether we develop prophylaxis firstly and treatment secondly or whether we can prosecute both in parallel. And I think that's obviously going to be a bandwidth issue depending on what else is going on with COVID [indiscernible].

And we will have to discuss with the regulatory authorities obviously as well.

And J.B., you touched on some of the populations that might be of interest. But as you think about prioritizing, so in the U.S., it's obviously unlikely to be a treatment population, it's more of a prophylaxis population and that's the market, though the government or the military might have a different view on that, they might want both. So is it -- I don't know, just how do you think about commercialization and what key initial markets may be in terms of your strategy?

John will address your question...

Sure. Just to take a step back for a minute. If we weren't talking about COVID today, Dengue fever from the perspective of being the most viral in mosquito disease is affecting 400 million individuals each year if economic impact is tremendous. But to your point, for the U.S., it would be a prophylaxis market for travel, and if you wanted to go back and look at an analog, you could look at malarone for anti-malaria prevention, prior to the pandemic, there were 600,000 prescriptions written in the United States each year. So that gets it. To your point, you're also correct, outside of that prophylactic market, it's missionaries, there's peace core, and there's over 170,000 U.S. troop stationed overseas and depending on how that would play out. But the other piece that I also don't want to forget about is that for most of the epidemiology is occurring in lower-income countries. So even a product that is priced moderately still has a very large potential to do quite well there on a mass basis, as vaccines do on a global worldwide basis.

And is that something outside the U.S., just given the breadth of that opportunity that if you had some proof-of-concept data, you consider partnering, how do you think about that?

We will evaluate the partnership absolutely. I think we'll be highly complementary to a vaccine, for example. And very some in close to approval. So it's clear that having 2 tools with vaccine vaccination and treatment will have a major impact on dengue absolutely. And look, it was global warming, and we see actually [indiscernible] the news that cause France, there is an extensive number of cases of dengue [indiscernible] is the same. So right now, there is not in the usual country you expect, but it's coming.

Yes. We wrote a report about 4 years ago on the migration of mosquitoes and tropical diseases sort of coming north. So maybe in the last couple of minutes, just we touched on HCV. And probably the primary question is, I think it's clear you have drugs that are active. I think for a lot of people, it's a question of what's the commercial opportunity, how you think about the commercial opportunity, especially versus...

I'm going to let John to address that. Just I think what's important, and I've been, as you know, at the forefront and Janet as well of developing agent for the treatment of [indiscernible]. And why do we want to do more. We want to do more because we need treatment that are convenient and there is some that are convenient, but they may be too long. They may be too long in terms of duration of treatment for the patient population that you are targeting, which basically it's not like the old days -- I see the old days about 10 years ago that it was mostly the 65, 70 years old. Now it's the 20, 25, 30 years old. And you see the prevalence in the United States have double since the approval of effective treatment at double, and you expect the opposite. So what we need is convenience, lack of food effect. We need a simple once a day and the shortest duration that we can. We believe that we definitely can achieve 8 weeks, maybe less, especially what we call FO. So the new infection, we could achieve even 6 weeks, but we will have to demonstrate that. And so that's our goal. Our goal is to achieve a treatment that is best-in-class, shorter duration, very convenient. John, I'll let you do in terms of more of the market the ability.

So obviously, what profile we deliver will be a best-in-class profile. But I tend to look at it more just simply, it's a $4 billion market, with 50% in the U.S. And those numbers that I quote are net sales -- and we always forget that, we tend to think that, that's gross sales. But those are what are reported by companies. And the other interesting thing JP hinted on to is that if you look at the incidence rate in the U.S. because of the younger population, IV drug use and et cetera, that the number of patients that we're actually curing in the United States is pretty much equal to the new number that are being diagnosed as the market is there. So I tend to look at this as a very simplistic approach. You have 2 assets out there right now. Our trials are, by the way, will be done as a head-to-head against [indiscernible]. And so having a very effective profile, having a large multibillion dollar market, there is room for 3 products to compete in that market. And there's other commercial advantages we don't have time today. But I just think from that perspective, you can all share in that market to have 3 products share in the cure of hepatitis C.

And then not in the U.S., but you take some major countries like in Japan, for example, you don't have prescription until late in liver disease. And that's why they still have patients with decompensated liver disease, so I mean that you have only 1 treatment and you have to use [indiscernible] on top that is really a toxic drug. We believe that it is the potency of our combination, we would be able to alleviate that, but to eliminate [indiscernible] very likely, we anticipate after a launch Phase 2 that we will do in non [indiscernible] after going in decompensated patients mostly in the Asian countries.

Okay. Well, great. Well, thanks for being here. Nice to see everybody. I appreciate it.

Thanks.