ATEA PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and related notes included elsewhere in this Quarterly
Report on Form 10-Q, as well as our audited consolidated financial statements
and related notes as disclosed in our Annual Report on Form 10-K, dated
Overview
We are a clinical stage biopharmaceutical company focused on discovering, developing and commercializing antiviral therapeutics to improve the lives of patients suffering from life threatening viral infections. Leveraging our deep understanding of antiviral drug development, nucleoside biology, and medicinal chemistry, we have built a proprietary purine nucleotide prodrug platform to develop novel product candidates to treat single stranded ribonucleic acid viruses, which are a prevalent cause of severe viral diseases. Currently, we are focused on the development of orally available, potent, and selective nucleotide and nucleoside prodrugs for difficult to treat, life-threatening viral infections, including SARS-CoV-2, the virus that causes COVID-19, dengue virus, chronic hepatitis C infection ("HCV"), and respiratory syncytial virus ("RSV").
AT-527 for the Treatment of COVID-19
Our product candidate for the treatment of patients with COVID-19 is AT-527, an
orally administered, novel antiviral agent. In
We, together with our collaborator Roche, initiated in
In addition to the MORNINGSKY Phase 3 clinical trial, we are currently
evaluating AT-527 for the treatment of hospitalized patients with
moderate COVID-19 in a Phase 2 clinical trial. This Phase 2 clinical trial is a
randomized, double-blind, placebo-controlled trial in approximately 190 adult
patients with moderate COVID-19 and one or more risk factors for poor outcomes
in the hospital setting. We dosed our first patient in this clinical trial in
A second Phase 2 clinical trial, conducted in collaboration with Roche, has recently been completed. The global Phase 2 MOONSONG trial was a randomized, double-blind, multi-center, placebo-controlled trial, evaluating the antiviral activity, safety and pharmacokinetics of AT-527 550 mg (Cohort A, n=30) and 1,100 mg (Cohort B, n=30) administered twice daily (BID) in adult patients with mild or moderate COVID-19 versus placebo (n=40). The primary endpoint of this virology trial, which enrolled patients who were SARS-CoV-2 positive, was change from baseline in amount of SARS-CoV-2 virus RNA as measured by RT-PCR at specified timepoints.
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AT-527 was generally safe and well tolerated in the MOONSONG study. The proportion of patients experiencing any adverse event was 20% in the placebo group, 20% in the AT-527 550 mg twice daily group ("Cohort A") and 27% in the AT-527 1,100 mg twice daily group ("Cohort B"). There were 3 serious adverse events in total (1 in Cohort A, 1 in Cohort B and 1 in placebo), all deemed to be non-drug related, and all other adverse events were grade 1 or 2. Gastrointestinal-related adverse events were the most commonly reported adverse events: 8% in the placebo group; 7% in Cohort A; 17% in Cohort B, with mild to moderate nausea/vomiting resulting in premature study drug discontinuation of 3% in the placebo group, 0% in Cohort A and 17% in Cohort B. No clinically significant differences in laboratory abnormalities were observed in the treatment arms as compared to placebo.
Based on the data from these two Phase 2 clinical trials and additional recent results for AT-527 as well as the evolving COVID-19 environment, we are seeking to amend the global Phase 3 MORNINGSKY trial protocol to (i) change the trial's primary endpoint to proportion of patients with COVID-19 related hospitalization or all-cause death from time to alleviation or improvement of COVID -19 symptoms which will become a secondary endpoint; (ii) refine the patient population eligible for enrollment in the trial to include only unvaccinated high risk patients; and (iii) increase the dose of AT-527 to 1,100 mg BID from 550 mg BID. We expect to submit these amendments to regulatory authorities where the MORNINGSKY trial is currently being conducted and to additional regulatory authorities as we and Roche seek to expand the geographic footprint of the MORNINGSKY trial. We will not be able to implement such amendments to the MORNINGSKY clinical trial protocol until we have received regulatory authority to do so. We now anticipate reporting Phase 3 MORNINGSKY top-line data in the second half of 2022.
In addition to the ongoing Phase 3 and Phase 2 clinical trials we are also conducting a comprehensive Phase 1 program that includes several clinical trials in healthy volunteers which are either currently underway or planned.
AT-752 for the Treatment of Dengue
We are developing AT-752, an oral, purine nucleoside prodrug product candidate
for the treatment of dengue. AT-752 has shown potent activity against all
serotypes tested in preclinical studies. In
AT-787 for the Treatment of Hepatitis C
HCV is a blood-borne, positive sense, ssRNA virus, primarily infecting cells of
the liver. HCV is a leading cause of chronic liver disease and liver transplants
and spreads via blood transfusion, hemodialysis and needle sticks. We are
developing AT-787 for the treatment of chronic HCV infection, including patients
with decompensated cirrhosis. AT-787 combines AT-527 with a second generation
investigational NS5A inhibitor, AT-777, into a single,
oral, pan-genotypic fixed-dose combination product candidate. Despite recent
advances in treatment, there remains a large underserved HCV patient population
which continues to grow. Based on our preclinical and clinical data to date, we
believe that AT-787, if approved, could offer potential benefits over currently
available treatments, including to shorten treatment duration in non-cirrhotic
and compensated cirrhosis HCV in all genotypes and to eliminate the need for
ribavirin in patients with decompensated cirrhosis. We temporarily paused our
development program for AT-787 in HCV infected patients at the outset of the
COVID-19 pandemic in
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Product Candidates for the Treatment of RSV
RSV is a seasonal respiratory virus that can be serious for infants, older adults, and the immuno-compromised population. We are evaluating second generation nucleoside pyrimidine prodrugs and other compounds for the treatment of RSV. We are optimizing compounds for RSV that we believe have the potential to inhibit both initiation of viral replication, as well as viral transcription. We anticipate nominating a lead product candidate and initiating the IND-enabling studies in the first half of 2022. We believe that the product candidate we develop, if successful, could be the first therapy in over 30 years to be approved specifically for the treatment of RSV.
Financial Operations Overview
As of
We do not have any product candidates approved for sale and have not generated any product revenue since inception. Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.
We plan to continue to use third-party service providers, including contract research organizations ("CROs") and contract manufacturing organizations ("CMOs"), to carry out our preclinical and clinical development and to manufacture and supply the materials to be used during the development and commercialization of our product candidates.
We expect to continue to incur significantly higher expenses over the next several years. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:
• continue clinical development of AT-527 for the treatment of COVID-19;
• continue clinical development of AT-752 for the treatment of dengue;
• re-initiate clinical development of AT-787 for the treatment of HCV;
• continue IND-enabling activities and commence clinical development activities
for product candidates for the treatment of RSV;
• maintain, expand, protect and enforce our intellectual property portfolio;
• hire additional research, development and general and administrative personnel;
• establish commercialization capabilities; and
• incur additional costs associated with operating as a public company.
Components of Results of Operations
Revenue
To date, we have not generated any revenue from product sales. Our revenue has
been collaboration revenue solely derived from the Roche License Agreement,
which became effective in
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Operating Expenses
Research and Development Expenses
Substantially all of our research and development expenses consist of expenses incurred in connection with the development of our product candidates. These expenses include fees paid to third parties, including CROs and CMOs, to conduct certain research and development activities on our behalf, consulting costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities attributable to research and development personnel. We expense both internal and external research and development expenses as they are incurred. In circumstances where amounts have been paid in advance or in excess of costs incurred, we record a prepaid expense, which is expensed as services are performed or goods are delivered.
A significant portion of our research and development costs have been external costs, which we track by therapeutic area. Our internal research and development costs are primarily personnel-related costs, including stock-based compensation, facility costs, including depreciation and lab consumables. We have not historically tracked our internal research and development expenses by therapeutic area as they are deployed across multiple programs.
As discussed in Note 3 to our unaudited condensed consolidated financial statements, we and Roche share certain manufacturing and clinical development costs on a 50/50 basis. Billings to us by Roche for our percentage share of such expenses are recorded in research and development expenses. These costs represent a material portion of our total expenses and may continue to increase based on the activities being performed by Roche.
The following table summarizes our external research and development expenses by indication and internal research and development expenses:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(in thousands) (in thousands)
COVID-19 external costs $ 28,515 $ 8,192 $ 75,469 $ 13,679
Dengue external costs 3,214 608 6,806 1,657
HCV external costs 1,338 263 1,378 923
RSV external costs 609 92 1,552 1,775
Internal research and development costs 9,343 4,446 24,189 6,143
Total research and development costs
We are focusing substantially all of our resources on the development of our
product candidates, particularly AT-527. We expect our research and development
expenses to increase substantially for at least the next few years, as we seek
to initiate additional clinical trials for our product candidates, complete our
clinical programs, pursue regulatory approval of our product candidates and
prepare for the possible commercialization of these product candidates.
Predicting the timing or cost to complete our clinical programs or validation of
our commercial manufacturing and supply processes is difficult and delays may
occur because of many factors, including factors outside of our control. For
example, if the
General and Administrative Expenses
General and administrative expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, allocated overhead, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.
We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying
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Interest Income and Other, Net
Interest income and other, net, consists primarily of interest income earned on our cash and cash equivalents.
Income Taxes
Income taxes consists primarily of federal and state current income taxes.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods
indicated:
Three Months Ended
September 30,
2021 2020 Change
(in thousands)
Collaboration revenue $ 32,811 $ - $ 32,811
Operating expenses:
Research and development 43,019 13,601 29,418
General and administrative 11,939 4,028 7,911
Total operating expenses 54,958 17,629 37,329
Income (loss) from operations (22,147 ) (17,629 ) (4,518 )
Interest income and other, net 53 7 46
Income (loss) before income taxes (22,094 ) (9,993 ) (4,472 )
Income tax expense (6,100 ) - (6,100 )
Net income (loss) and comprehensive income (loss)
Revenue
Collaboration revenue for the three months ended
Research and Development Expenses
Research and development expenses increased by
General and Administrative Expenses
General and administrative expenses increased by
Interest Income and Other, Net
Interest income and other, net, remained consistent during the three months
ended
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Income Tax Expense
Income tax expense was
Comparison of the Nine Months Ended
The following table summarizes our results of operations for the periods
indicated:
Nine Months Ended
September 30,
2021 2020 Change
(in thousands)
Collaboration revenue $ 159,187 $ - $ 159,187
Operating expenses:
Research and development 109,394 24,177 85,217
General and administrative 32,597 7,500 25,097
Total operating expenses 141,991 31,677 110,314
Income (loss) from operations 17,196 (31,677 ) 48,873
Interest income and other, net 162 74 88
Income (loss) before income taxes 17,358 (31,603 ) 48,961
Income tax expense (13,300 ) - (13,300 )
Net income (loss) and comprehensive income (loss)
Revenue
Collaboration revenue for the nine months ended
Research and Development Expenses
Research and development expenses increased by
General and Administrative Expenses
General and administrative expenses increased by
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Interest Income and Other, Net
Interest income and other, net, remained consistent during the nine months ended
Income Tax Expense
Income tax expense was
Liquidity and Capital Resources
Sources of Liquidity
As of
Future Funding Requirements
To date, we have not generated any product revenue. We do not expect to generate any product revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates and we do not know when, or if, this will occur. We expect to continue to incur increased expenditures for the foreseeable future, and we expect our expenses to increase as we continue the development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, we expect to incur additional general and administrative costs as we continue to operate as a public company.
We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We may seek to raise capital through public or private equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. We anticipate that we may need to raise substantial additional capital, the requirements for which will depend on many factors, including:
• the scope, timing, rate of progress and costs of our drug discovery efforts,
preclinical development activities, laboratory testing and clinical trials for
our product candidates;
• the number and scope of clinical programs we decide to pursue;
• the cost, timing and outcome of preparing for and undergoing regulatory review
of our product candidates;
• the scope and costs of development and commercial manufacturing activities;
• the cost and timing associated with commercializing our product candidates, if
they receive marketing approval;
• the extent to which we acquire or in-license other product candidates and
technologies;
• the costs of preparing, filing and prosecuting patent applications, maintaining
and enforcing our intellectual property rights and defending intellectual
property-related claims;
• our ability to maintain the collaboration with Roche and to establish and
maintain other collaborations on favorable terms, if at all;
• our efforts to enhance operational systems and our ability to attract, hire and
retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following regulatory approval;
• our implementation of operational, financial and management systems; and
• the costs associated with being a public company.
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A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.
Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to others rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.
See Part II, Item 1A,"Risk Factors" for additional risks associated with our substantial capital requirements.
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