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

Great. Hello, everyone. I'm Max Skor with Morgan Stanley. And before we get started, I'm just going to read a quick disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So with that, I'd like to introduce the Atea team. Very happy to have everyone here. And maybe just to level set, could you introduce the Atea story to people in the audience who maybe aren't as familiar.

Yes, so Atea is a biotech company based in Boston, and we have a nucleoside platform, which we have been using against serious viral diseases. We had a trial in COVID, and we are currently in Phase III with our nucleoside analog bemnifosbuvir for hepatitis C.

Great. So yes, 2 ongoing Phase III trials. But maybe can we discuss a bit deeper, what's the core scientific rationale behind your regimen? And how does it aim to improve on the current standard of care for hep C?

So I think it's a bit underappreciated, but the direct factoring antivirals that are commonly used for hepatitis C were approved about 10 years ago. And today, there are over 50 million people still with hepatitis C around the world. And within the U.S., about 2.4 million to 4 million people are estimated to have hepatitis C. And what's even more disturbing perhaps is that, that number continues to increase. And there are some reasons for this. I think the patients who were first treated when the direct-acting antivirals were approved were largely baby boomers, but the population has changed and has now skewed younger. Most of the patients are now in their 30s and 40s. And it's interesting, but they're much more medically complex than those patients were previously and approximately 80% of them are on concomitant medications. And this becomes important because for the prescriber having to treat these patients, they're looking for ways to treat them effectively with problems with adherence and also problems often with the history on potential drug interactions. And so looking for a profile which is simple, effective and easy to take for this patient population. And the World Health Organization and health organizations around the world have initiatives to eradicate hepatitis C ideally by 2030. And in order to do this, they are looking for a test-and-treat model. And we believe that our regimen of bemnifosbuvir, our nucleoside analog and ruzasvir, which is a highly potent NS5A is ideally suited to the test-and-treat model. Our regimen is highly potent once a day, short treatment course, 8 weeks and minimizes drug interactions. We have a really superior drug interaction profile and no food effect. So we see ourselves as ideally positioned to be able to help eradicate hepatitis C moving forward.

And I'll sure go into some of the details. So I think what we have right now is the best regimen for most patients. That's what we're going to potentially offer, which is a short course, 8 weeks with good profile with no drug-drug interactions, so very low potential for drug-drug interactions and no food effect. So we're going to be coming with a regimen that brings the best of both worlds of what's out there.

Okay. And before maybe diving into the posters that were recently presented at EASL, could we just talk about some recent market research the team has done. What does the opportunity look like? And has there been any impact from COVID potentially?

So following the Phase II data, we conducted another quantitative U.S. market research study, roughly 153 high writers of direct-acting antivirals in the U.S. It was done by IQVIA and they selected and did perform the study. What it showed was that 73 -- 76% actually said they were extremely likely to prescribe the asset. And when they ask them, where would you prescribe it, they saw the BEM/RZR product being used in roughly half the patients regardless of their cirrhotic state. And as far as for the reasons why, I mean -- and Arantxa just repeated it in terms of the potency, short duration and basically no DDIs. For me, personally, the results were very good, but what was even more impressive was these results are consistent with our other market research, showing a profile that is really highly preferred.

So it looks like based on your KOL feedback that doctors are looking for an alternative to the standard of care at this point?

Yes, it's really interesting. When you first talk to doctors and you say, "Hey, you're happy with what you currently have the 2 products out there." Yes, there's 2 cures and they're actually very happy. When you show them the profile that matches what Janet and Arantxa have just said, all of a sudden, it becomes, well, maybe their most preferred profile because they don't have to worry about any drug-drug interaction and it is giving them 8-week cures.

Okay. I think that's a good segue into the EASL 2025 posters that were presented. So these included the Phase II efficacy and safety updates. Can you synthesize the top takeaways and how these data reinforce the 8-week regimen?

Yes. So we presented at EASL our final data from the Phase II trial. The Phase II trial was a single-arm trial where we looked at the regimen treated for 8 weeks. We did the patients for 8 weeks in non-cirrhotics and in cirrhotics. And it was a large trial for Phase II. It didn't have a comparator because historically, hepatitis C trials didn't do comparators, but we enrolled 276 patients, and then we did analysis in different populations within that group. The first analysis was done and the primary endpoint was done in the patients who actually took the drug, they went as prescribed per the protocol. And there, we basically have cure rates of 98%. And if you look in the non-cirrhotic specifically, which is the majority of the population, we cure 99%, 100% of the patients who take the drug. So it's really extraordinary results for efficacy. And then after that, we also did some sub-analysis, the group of patients, for example, that were not compliant with the medication. They were taking less than 90% or even less of the drug as prescribed. And even in those patients, we had cure rates of 95% because we're actually a regimen that's very potent, 10x more potent than Epclusa regimen. And so we have a lot of drug forgiveness even if you forget your drug, we're still going to cure 95% of the patients with only 8 weeks. And so those are the very exciting results that we presented there, also across genotypes, and that's what made us to believe that we really needed to move to Phase III. And in the Phase III, we're moving forward now with a comparator. And so we're going 8 weeks versus 12 weeks. So we're expecting a superior profile because it's a shorter regimen with the good attributes that we were speaking before, the no drug-drug interactions or very low potential for drug-drug interactions and no full effect.

Great. Also kind of -- I'd like to kind of talk about the pharmacokinetic posters where you evaluated the drug in hepatic and renal impairment, including dialysis, suggesting no dose adjustments were needed. So how do you see these findings translate to your Phase III inclusion criteria and to a potential label?

So we're very pleased with the results, obviously, because I think we showed that we can anticipate that you can dose patients with both hepatic and renal impairment with similar efficacy and safety and no dose adjustment. So it broadens that patient population. Not only did we show the 2 Phase I studies for the hepatic and renal impairment, but we also had a study where we did a Phase I trial with BEM/ruzasvir and Biktarvy. And there we showed also that with a standard HIV regimen, you can safely and efficaciously treat HIV co-infected patients. So that also helps broaden the population for our Phase III trial and hopefully a broad label ultimately, too.

Yes. And can you talk a bit more about the patient makeup in a sense based on the market research that the team has done. How many of these patients have comorbidities, understanding that, of course, it's a challenging group to adhere to therapy at times?

So we estimate that probably 80% of patients are on concomitant medications for a variety of diseases. HIV co-infection perhaps in 10% to 20% of patients. And then a variety of other diseases, they're not a simple population. So having a broad label and an easy-to-tolerate profile is really crucial for being successful in this space, I believe.

That's great. So just to summarize in many ways what I'm understanding, a potential label could be differentiated based on drug-drug interactions, the treatment regimen. Is there anything you'd like to call out?

Well, Max, yes, there's one thing I wanted to say. We haven't actually reported this previously, but we just had the readout from our Phase I study of BEM/ruzasvir with a proton pump inhibitor. And we show no effect of proton pump inhibitor. And this really does differentiate us from both of the other regimens where there are significant cautions around using proton pump inhibitors if you should use them at all. And for instance, for Epclusa, you have to separate dosing by 4 hours in order to achieve adequate levels. And there, we show no effect at all. And interestingly, about 10% to 20% of the U.S. population is estimated to be taking a PPI. So this is actually not trivial information. So we're really excited about that.

Yes. That's great. That's very encouraging. So now pivoting to the Phase III trials. Could you just walk us through the C-BEYOND and C-FORWARD designs?

Yes. So C-BEYOND is a trial that we're conducting in North America, basically United States, the majority of the sites, 120 sites roughly and also some sites in Canada. C-BEYOND is the trial that we started enrolling back in April. Everything is going on track. There is a lot of interest from investigators, a lot of excitement also from the patients. And the other trial, C-FORWARD is basically the same, but it's run outside of North America. It's a global trial. And part of the reason is that we need to be in many different countries to lead to a completely pan-genotypic label with multiple genotypes that are found only in regions of the world like genotype 6 in Southeast Asia, genotype 4 in North Africa. So for example, we have to go to Egypt, et cetera. So that trial is going a little behind because a lot of these regions have much longer regulatory approval time lines. So it's still on track for our regulatory approvals, but it's moving forward a little bit slower for that reason. And so these are the 2 Phase III trials with the identical design. We're basically looking at an 8-week regimen for non-cirrhotic patients, which are the majority of patients, about 90% of patients in the world are right now non-cirrhotic. And we will include as well roughly around 10%, 15% of cirrhotic. So we have a broad label, but the cirrhotic population is less and less frequent. This is patients that have been infected with hepatitis C for many, many years, for decades, which it takes time to inflame the liver and eventually lead into fibrosis and scarring, et cetera. It's a population in decline. That group of patients we will treat for 12 weeks because it just takes longer to penetrate the liver and just to be sure that they don't rebound. But again, they are a very small percentage. The majority of the patients in the trial will be treated for 8 weeks versus 12 weeks with the comparator. So they are dosed for 8 weeks. The comparator is dosed for 12 weeks, then you stop and then you measure cure 3 months after. You have to see the virus rebound. So you measure cure after they have been off treatment for about 3 months. And so we're enrolling we're on track, and we're expecting results for the first trial sometime mid-2026, mid next year, really. And the other one is coming a little bit later for the reasons I mentioned. So roughly, we're expecting towards the end of next year.

So can you give any feedback on what you heard from regulators? How did the end of Phase II feedback shape the Phase III clinical trial designs?

We had a great Phase II meeting. It was really -- it went very smoothly. The major comments were centering about how do you analyze these populations, especially in the context of a controlled trial because there has never been a controlled trial for hepatitis C before, a registrational controlled trial. And so how do you do analysis and that kind of discussion, it was very insightful. And then we also -- we are getting also approvals ex U.S. through the EMEA, et cetera, and that is also going very well. And that -- there was one thing that was very interesting talking about differentiation. We talked about food effect. We talked about drug-drug interaction, but there is a genotype, genotype 3 in particular, that can be very resistant. And the FDA asked us not to take those patients and not to treat them with the control, not to treat them with Epclusa, but to just give them our regimen because our regimen is 10x more potent. And so resistance in that subgroup may also be a differentiation factor. So overall, it was a great meeting, and we advanced very quickly. We started enrolling in April right after. It didn't require a lot of modifications.

And what percentage of these genotype 3 patients will be enrolled in the U.S. study?

So you can find genotype 3 patients in the U.S., particularly in immigrant populations, but the majority of them come from places like Pakistan. Pakistan has a very high population of genotype 3. And we are -- in Pakistan, we had excellent results in Phase II, where we enrolled a significant amount of genotype 3s that did very well. In particular, in non-cirrhotics, we had 100% cure if they took the drug. Obviously, when they start not taking the drug, it goes down a little bit from maybe 99% to 95%, but still very, very remarkable.

Okay. And diving a bit deeper into the comparator arm and the overall margin for success. Could you speak to what non-inferiority margin and superiority hurdles you're targeting?

So we agreed with the FDA on study design endpoints and the non-inferiority margin and the non-inferiority margin is compatible with going against an active comparator with a high efficacy rate. And I think that's what we'll say there. But I think really, when you look at what we're doing, the profile of our combination is so vastly superior to Epclusa that the statistical study may be designed for non-inferiority, but the profile that we're describing of a highly potent once-a-day regimen with minimal drug interactions is superior. So that's really where we want to focus going forward.

And just can you remind me in regards to the competition out there, there are 2 players that are currently on the market. What is their IP position and your own IP position in that regard?

So Max, you're correct. There are 2 dominant players. One is Epclusa and the other is Mavyret. They have IP patent protection until 2034. You also likely know that Gilead has an authorized generic. This is not a true generic product. It is a captive product from Gilead. So we're not competing immediately against generics. The first generics wouldn't be available until 2034 or beyond.

Okay. That's helpful. And then remind me of the -- for the combination from Atea, what the IP position there is?

Ours will go to 2042.

Yes. Okay. That's what I thought. And then can we just talk about the patient journey overall, specifically in the United States, where these patients are being identified? How the treatment regimen is currently being rolled out and where potentially you can make the greatest impact?

Janet?

Janet?

So I think the patients are everywhere, but I think the problem is diagnosing and identifying them. And the ACIP guidelines suggest that everybody over the age of 30, I think it is, should be screened for hepatitis C at least once. But it's a -- I think it's the tip of the iceberg, unfortunately, that's getting treated. And it's about a static number of patients who are being treated everywhere, about 100,000 patients. But actually, the incidence is increasing. So there are more patients infected every year that are actually being treated. So the pool of patients is actually quite a lot more than that and continues to grow. And John, you might want to talk a little bit about the demographics as to who -- how you see that in terms of 1/3 being -- I've heard you say this, 1/3 Medicare, 1/3 Medicaid and 1/3 in private.

Yes. No. So -- and that's how the market kind of breaks out right now, if you like to think about it that way, 1/3 of Medicare, 1/3 Medicaid and 1/3 commercial lives. So it really does touch all aspects of society. I will mention that it's now becoming a top priority for the U.S. government right now. There's initiatives in Congress, the White House and at the CDC to start addressing hepatitis C and to try to figure out the best ways to do test and treat to get to a lot of these patient populations is becoming a priority for them.

Yes. Can you -- I've seen the headlines around that, too, can you speak to a bit more what those efforts look like, time lines around that and how that could shape the prescribing dynamics?

Sure. So right now, in the Senate, there's -- I think it's roughly a $10 billion bill that will be divided up between treatment as well as trying to figure out ways to better address the patient population. That one, it's just right now, the bill is written. So it's targeting prison populations, other types of Medicaid populations. It's just still a bill right now. The White House is doing something different. That's actually right now, it's $100 million, and that's an initiative right now to figure out what is the best way to go after difficult-to-treat populations, such as people who have used drugs and other types of conditions. And finally, you have the CDC trying to pull together a 2-day meeting, which is going to take place rather soon to figure out what is the best way that we can increase the adherence to these and treatment for hepatitis C in the United States, up to 4 million. As you know, we have right now. And as Janet said, that it's only increasing every year. And we didn't state it, but the obvious is that if you let a patient go with hepatitis C, it's the leading cause of hepatocellular carcinoma in the United States. So if you treat them now or you're going to spend a lot more money treating them later.

Okay. That's helpful. So going back to a bit feedback around the end of Phase II meeting, what are the key end of Phase II agreements with the FDA, such as endpoint analysis sets, safety databases? Do you foresee pooling the 2 data sets to go to regulators and potentially get approval and how will that inform the ultimate label?

So yes. So we -- as I said, we did agree with them around endpoints and study design and non-inferiority margins, and we're powered at 90% with this study. We're aiming to pull the 2 studies, and we think that will give us a broad label, I mean, obviously, depending on the data that comes out, but we anticipate a broad label encompassing all genotypes patients with and without cirrhosis, co-infected patients and then potentially with our broad array of Phase I studies, also a broad label in terms of the medications that can be co-administered safely with the regimen. And so we think it's going to be a broad label, which will be suitable for the majority of patients with hepatitis C outcome.

Okay. And do you think there'll be the necessity for running another study for special populations, such as we discussed the renal impairment, HIV, HCV?

So we're including co-infected patients in the trial. So they should be part of the label that we achieve. And I don't believe that we'll need to -- because I think the Phase I data are sufficiently good that we should have indications for patients with both renal and hepatic impairment. I think for the vast majority of patients, this will be a really good treatment.

Okay. And then one follow-up question regarding the FDA and ex U.S. regulators. Where do you think they land on label languaging around drug-drug interactions or contraindications, cautions versus the 8 and the 12-week regimen? Do you think there'll be anything you would elaborate on or predict would come out in the labeling around that?

So we're anticipating that for patients with cirrhosis, our regimen is going to be efficacious with 12 weeks. So we would ultimately expect that for the vast majority of patients, as Arantxa said, are non-cirrhotic that our treatment regimen will be 8 weeks for everybody apart from patients with compensated cirrhosis, where the treatment duration would be 12 weeks. But that's what the studies are being designed to show. So it will be -- replicate what we're studying in our Phase III trials.

Okay. And then moving on to the financials. You have, I would say, a significant cash position with around $279 million after the second quarter, guiding to a runway through 2027. Any commentary around capital allocation, BD activities? Anything?

Sure. Thanks, Max. So the cash balance at the end of June was $379 million.

Oh, what did I say? Yes.

$279 million.

Oh, sorry. I did comment that it was significant.

Thanks for that, and we've been very careful stewards of those funds. And currently, for capital allocation, our main focus is, as you can appreciate, we'll be on the Phase III program and the completion of that. So we expect that, that program in its entirety will use approximately $200 million. So more than sufficient capital on the balance sheet right now allow us to complete the study as the program gets to the NDA approval and prepare for the commercial launch. So well, we're quite fortunate in that regard. With regard to BD activity, we are opportunistic, of course. We're always looking for something that might fit in our suite of products, but we have a really high bar. We'll first assess for BD activities for an in-licensing activity, something that has a large commercial opportunity and then would need to be best or first-in-class. Our expertise is in the antiviral space, and so we're focused in that area. We're not deviating to other things. We also have a strategic process ongoing that will allow us to potentially evaluate partnerships that would assist us with the commercialization of our assets. We expect those discussions to get a jump start once we've had the Phase III results, but they've been very positive up to this point. But in order to maximize the value of the asset and ensure that we get the proper partner because this is such a special asset. We want to make sure that we treat it with that care and not enter into a deal with haste. We're going to wait to get those Phase III results before we include any partnership activity.

Okay. And maybe if you can elaborate a bit on what the partnership potentially could look like ex U.S.? Any commentary there?

Well, ex U.S., for sure. We've always said that we would be looking for ex U.S. partner, and that would be a full partnership that partner would get full right because of non-U.S. assets. For the U.S., we're open to a number of different strategies and different structures, one that would make sure that we have maximizing the value of the asset would be our ideal.

Okay. And then just to conclude in this sense, over the next 12 to, let's say, 18 months, we have the Phase III readout coming U.S. first, ex U.S. -- U.S. -- Canada first and then ex U.S. What other meaningful inflection points would you call out over the next 12 to 18 months?

Well, we have a couple coming up in November. We'll be at AASLD, which is the largest U.S. meeting similar to EASL in the spring of 2026, we'll be there as well. And we'll have additional KOL events. The most near term will be in November as well. So we recently had a KOL event in May. It's still on the website, but it gave us an opportunity to engage with 6 key opinion leaders there, and we're going to continue that work as we await the results from the Phase III trial.

And I mean, from my perspective, the data has been significant. The opportunity is obviously there. We have 2 competitors in the space. What do you think investors are kind of missing on the story overall?

We wish we knew. But for those that are with us, this is a great opportunity, we believe. The Phase III is -- the readout is imminent. It's the realization of objectives we had since inception of the company, and we're very much looking forward to an exciting 2026.

Okay. So if you don't mind, I'd like to move on to 3 survey questions we're asking most of our companies. So with China's rise in biotech innovation, how are you thinking about your competitive position here? And will it influence your R&D or BD strategy?

Probably not for us. We -- our BD strategy doesn't -- is not being impacted by China and R&D, we hope to be complete with that soon.

Okay. And then how are you currently leveraging AI or thinking about AI's future disruptive potential?

Yes. We're all learning about AI, right? So it's a whole new opportunity for all of us. It's likely to come into an area where John is the expert as we see changes in the commercial structure and arrangements. But for us, AI is -- we're using it in our early discovery activities where we have some interesting opportunities that we're exploring.

Okay.

We'll continue to use the historic methods as well, right? So we're not completely dependent upon AI. It's an emerging technology, but we're still using the expertise of our internal team.

That's great. And then lastly, what has been most impactful from the regulatory side? Would you say FDA, MFN or tariffs? Granted some of them may not apply to you at the moment, but maybe in the future.

We don't know. The landscape is so -- such evolving. We are uniquely positioned, we think, among the HCV manufacturers that we have, U.S. manufacturing right now. That, we think, is an advantage for us as we approach this evolving landscape. On MFN, we'll see really how that landscape evolves. But to the extent that MFN includes prices in Europe, we shouldn't be negatively impacted by that. And to the extent we're doing U.S. domestic manufacturing, tariffs should be of less concern.

And FDA, we -- I think that we spoke to it previously, but just in regards to interactions with the FDA and as things...

I'll leave this to my colleagues here, but the basic take is that we have not been impacted by the staff reductions at FDA, at least up until this point. And our engagements have been very, very constructive.

Okay.

And responsive, I mean no delays, nothing.

Okay. And then the last question. Anything I missed, anything of investor interest you think that I overlooked?

No, I think it's pretty thorough.

Okay. So great. Well, thank you very much for attending. I really appreciate it.

Great. Thank you, Max.

Thanks, Max.

Thanks.