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 severe viral infections. Leveraging our deep understanding of antiviral drug development, nucleos(t)ide biology, and medicinal chemistry, we have built a proprietary purine nucleos(t)ide 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 nucleos(t)ide 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").
COVID-19 - Bemnifosbuvir
Our most advanced product candidate for the treatment of COVID-19 is an investigational, novel, orally administered guanosine nucleotide analog polymerase inhibitor. Bemnifosbuvir has a unique dual mechanism of action at both the RNA-dependent RNA polymerase (RdRp) and NiRAN active sites on the highly conserved SARS-CoV-2 RNA polymerase.
Topline Efficacy Results from the MORNINGSKY Trial: In a topline analysis of data from the MORNINGSKY trial, the primary endpoint, time to symptom alleviation, was not achieved. However, a 71% reduction in hospitalization (2.9% versus 10%) was observed (p=0.047, unadjusted, exploratory) in the bemnifosbuvir arm (n=137) versus placebo (n=70). There were no deaths in the trial.
The study enrolled a broad patient population of whom approximately 50% were high risk; 50% were standard risk; 28% of patients were vaccinated; and 56% were seropositive at baseline. Consistent with previous studies, bemnifosbuvir was generally well tolerated. Adverse events leading to treatment discontinuation were 3% for bemnifosbuvir versus 7% for placebo and there were no gastrointestinal-related events leading to treatment discontinuation.
MORNINGSKY was a randomized, double-blind, multi-center, placebo-controlled
Phase 3 trial designed to evaluate the antiviral activity, safety and
pharmacokinetics of bemnifosbuvir in up to 1,400 patients randomized 2:1 to
receive bemnifosbuvir 550 mg twice-daily (BID) or placebo in an outpatient
setting. The study was closed out early in
Final Analysis from Phase 2 Hospitalized Study in High-Risk Patients with COVID-19: Final clinical efficacy results from the Phase 2 hospitalized study in high-risk patients with COVID-19 (n=83) suggest potential clinical benefits. The overall rate of disease progression was low, which had an impact on the ability to assess the primary endpoint of progression of respiratory insufficiency (PRI) rate, showing a 7.5% PRI rate for bemnifosbuvir versus a 10% PRI rate for placebo (primary endpoint). There were three deaths in the study, no deaths reported with patients treated with bemnifosbuvir versus three deaths with placebo (secondary endpoint).
Final virology results in 83 patients (secondary endpoint) were consistent with previously reported interim data of 62 evaluable patients from this study. Bemnifosbuvir was generally well tolerated with no drug related serious adverse events and no adverse events leading to treatment discontinuation were observed. The sample size evaluated was insufficient for statistical comparisons.
The global Phase 2 trial was a randomized, double-blind, placebo-controlled, multi-center study to evaluate bemnifosbuvir in patients with moderate COVID-19 in the hospital setting. The key inclusion criteria for this study were adult patients over 18 years and older with risk factors such as obesity, diabetes and hypertension. Study objectives were to assess safety, tolerability, and clinical and antiviral efficacy. Patients in Cohort A were
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randomized within five days of symptom onset to receive either bemnifosbuvir 550 mg BID or placebo and were dosed for five days. An additional cohort evaluating bemnifosbuvir 1100 mg BID versus placebo enrolled a very small number of patients prior to closing out early due to the evolving nature of the standard of care in the hospital setting.
Next Steps for
As part of a multipronged approach against COVID-19, we are advancing an internal program focused on the discovery of second-generation protease inhibitors that have clinical profiles well suited for combination therapy with bemnifosbuvir. As part of this effort, our target profile is a protease inhibitor that is highly potent, has a good safety profile with limited drug-drug interactions and does not require a booster (e.g., ritonavir). The optimization of lead compounds is ongoing with a target of late 2022 for selection of a clinical candidate.
HCV - Bemnifosbuvir in combination with ruzasvir
For the treatment of chronic HCV infection, we are advancing a novel combination
of bemnifosbuvir and ruzasvir, an investigational nonstructural protein 5A
("NS5A") inhibitor that we exclusively in-licensed from Merck in
Dengue - AT-752
Dengue is a mosquito-borne viral infection that infects up to 400 million people
worldwide a year, causing substantial public health and economic burden.
Currently there are no antiviral therapies approved by either the
We have initiated the global Phase 2 DEFEND-2 (DEngue Fever END) study of AT-752 for the treatment of dengue. The randomized, double-blind, placebo-controlled study will evaluate multiple doses of AT-752 and enroll up to 60 adult patients infected with dengue. The primary objective of the study is to evaluate antiviral activity, with change from baseline in dengue virus (DENV) viral load as the primary endpoint [DENV RNA by reverse transcription-polymerase chain reaction (RT-PCR)].
In addition to the DEFEND-2 study, we have initiated a dengue human challenge
trial. This trial, which is being conducted exclusively in
Roche collaboration
In
In
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the Roche License Agreement. The obligations of Roche to equally share the costs
associated with development activities terminated on
As a result of the termination of the Roche License Agreement, we have regained worldwide exclusive rights from Roche to research, develop, manufacture and commercialize bemnifosbuvir in all fields of use.
Financial Operations Overview
As of
We expect that our net cash used in operating activities will increase significantly as we advance our product candidates through preclinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. In addition, we may incur additional costs as we continue to operate as a public company. We believe that our available cash and cash equivalents will be sufficient to fund our planned operations through at least 2025.
We do not have any products approved for sale and have not generated any product revenue since inception. We do not anticipate generating any revenue from product sales for the foreseeable future. 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.
As we continue to advance our programs, we expect 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:
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continue clinical development of bemnifosbuvir for the treatment of COVID-19;
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continue clinical development of AT-752 for the treatment of dengue;
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initiate clinical development of bemnifosbuvir and ruzasvir for the treatment of HCV;
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continue discovery and IND-enabling activities in anticipation of a nominating a product candidate for the treatment of RSV;
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maintain, expand, protect and enforce our intellectual property portfolio;
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hire additional research, development and administrative personnel; and
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establish commercialization capabilities if we are successful in developing our product candidates.
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 was terminated 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, during the term of the Roche License Agreement which terminated in
The following table summarizes our external research and development expenses by indication and internal research and development expenses:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands) (in thousands)
COVID-19 external costs $ 3,636 $ 28,841 $ 16,967 $ 46,954
Dengue external costs 2,636 2,313 5,863 3,592
HCV external costs 2,313 25 3,737 40
RSV external costs 529 547 1,066 943
Internal research and development costs 10,744 8,077 21,858 14,846
Total research and development costs
We are focusing substantially all of our resources on the development of our product candidates, particularly bemnifosbuvir. 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 FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.
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 may increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with
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complying with Nasdaq and
Interest Income and Other, Net
Interest income and other, net, consists primarily of interest income earned on our cash and cash equivalents.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods
indicated:
Three Months Ended
June 30,
2022 2021 Change
(in thousands)
Collaboration revenue $ - $ 60,391 $ (60,391 )
Operating expenses:
Research and development 19,858 39,803 (19,945 )
General and administrative 12,437 11,901 536
Total operating expenses 32,295 51,704 (19,409 )
Income (loss) from operations (32,295 ) 8,687 (40,982 )
Interest income and other, net 1,080 52 1,028
Income (loss) before income taxes (31,215 ) 8,739 (39,954 )
Income tax expense (120 ) (7,200 ) 7,080
Net income (loss) and comprehensive income (loss)
Revenue
Collaboration revenue for the three months ended
Research and Development Expenses
Research and development expenses decreased by
General and Administrative Expenses
General and administrative expenses increased by
Interest Income and Other, Net
Interest income and other, net, increased by
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Income Tax Expense
Income tax expense was
Comparison of the Six Months Ended
The following table summarizes our results of operations for the periods
indicated:
Six Months Ended
June 30,
2022 2021 Change
(in thousands)
Collaboration revenue $ - $ 126,376 $ (126,376 )
Operating expenses:
Research and development 49,491 66,375 (16,884 )
General and administrative 24,979 20,658 4,321
Total operating expenses 74,470 87,033 (12,563 )
Income (loss) from operations (74,470 ) 39,343 (113,813 )
Interest income and other, net 1,178 109 1,069
Income (loss) before income taxes (73,292 ) 39,452 (112,744 )
Income tax expense (120 ) (7,200 ) 7,080
Net income (loss) and comprehensive income (loss)
Revenue
Collaboration revenue for the six months ended
Research and Development Expenses
Research and development expenses decreased by
General and Administrative Expenses
General and administrative expenses increased by
Interest Income and Other, Net
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Interest income and other, net, increased by
Income Tax Expense
Income tax expense was
Liquidity and Capital Resources
Sources of Liquidity
As of
We entered into an open market sales agreement, or the Sales Agreement, with
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 may 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:
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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;
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the number and scope of clinical programs we decide to pursue;
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the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;
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the scope and costs of development and commercial manufacturing activities;
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the cost and timing associated with commercializing our product candidates, if they receive marketing approval;
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the extent to which we acquire or in-license other product candidates and technologies;
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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
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our ability to establish and maintain collaborations on favorable terms, if at all;
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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;
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our implementation of operational, financial and management systems; and
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•
the costs associated with being a public company.
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.
Market volatility, inflation, interest rate fluctuations and concerns related to
the COVID-19 pandemic and geopolitical events, including civil or political
unrest (such as the ongoing conflict between
See Part II, Item 1A,"Risk Factors" for additional risks associated with our substantial capital requirements.
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