Atea Pharmaceuticals, Inc. (AVIR) Q3 2024 Earnings Report, Transcript and Summary

Good afternoon, everyone, and welcome to the Atea Pharmaceuticals Third Quarter 2024 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. I would now like to turn the call over to Jonae Barnes, Senior Vice President of Investor Relations and Corporate Communications at Atea Pharmaceuticals. Ms. Barnes, please proceed.

Thank you, operator. Good afternoon, everyone, and welcome to Atea Pharmaceuticals third quarter 2024 financial results and business update conference call. Earlier today, we issued a press release, which outlines the topics we plan to discuss. You can access the press release as well as the slides that we'll be reviewing today by going to the Investors section of our website at ir.ateapharma.com. With me today from Atea are Chief Executive Officer and Founder; Dr. Jean-Pierre Sommadossi; Chief Development Officer, Dr. Janet Hammond; John Vavricka, our Chief Commercial Officer; Dr. Arantxa Horga, our Chief Medical Officer; and Chief Financial Officer and Executive Vice President of Legal, Andrea Corcoran. They will all be available for the Q&A portion of today's call. Before we begin the call, and as outlined on Slide 2, I would like to remind you that today's discussion will contain forward-looking statements that involve risks and uncertainties. These risks and uncertainties are outlined in today's press release and in the Company's recent filings with the Securities and Exchange Commission, which we encourage you to read. Our actual results may differ materially from what is discussed on today's call. With that, I'll now turn the call over to Jean-Pierre.

Thank you, Jonae. Good afternoon, everyone, and thank you for joining us. I will begin on Slide 3. It has been a busy year so far, and our team has executed on two large global clinical programs on time and on budget. Unfortunately, as we reported in September, we did not have the desired outcome for SUNRISE-3 as we had hoped for. COVID-19 variants are constantly evolving, as you know, and the natural history trended towards milder disease, which has resulted in fewer hospitalization and death. Of particular importance in contrast to our prior studies, hospitalization due to severe respiratory disease, including pneumonia, was not observed in SUNRISE-3. Therefore, it is quite difficult for a direct-acting antivirals to demonstrate the significant impact on the course of the disease. I am proud of our team's rigorous execution of this trial and we thank the study participants and the investigators. Our efforts are now concentrated on our global HCV program, and we remain on track to report top line results from our Phase II study in early December. We then anticipate holding an end of Phase II meeting with the FDA early next year and initiating the Phase III program shortly thereafter. For someone who has worked in HCV for most of my career, the unrelenting high rate of HCV infections in the U.S. underscore the need for new innovative therapies for today's patients particularly for those with substance abuse disorder and comorbidities. Injection drug use accounts for about 30% of new HCV cases globally and approximately actually 60% in the U.S., where between 2 million and 4 million people are estimated to be infected with HCV. Annually, HCV diagnosis in the U.S. outpaced treatment rates as less than the 1/3 of those diagnosed with HCV received timely treatment. We believe that our combination with its potential best-in-class profile has the ability to address current treatment challenges and unmet needs and to play a major role in the eradication of HCV in the U.S. We also continue to make progress with our early-stage discovery program, evaluating a highly differentiated second-generation protease inhibitor, which is targeting RNA respiratory viruses. Importantly, with $492.8 million of cash, cash equivalents and marketable securities as of September 30, we are in a strong financial position to execute and complete our HCV program phase III -- our HCV Phase III program, and we anticipate our runway to extend well into 2027. With that, I will now turn the call over to Janet to review our Phase III readiness for the HCV program and the profile to today's HCV patients. Janet?

Thanks, Jean-Pierre. Turning to Slide 4. We believe that our global Phase III-Ready HCV program is derisked with a compelling value proposition. This is based on the substantial preclinical and clinical data already generated on bemnifosbuvir and ruzasvir, both alone and in combination, coupled with a well-characterized regulatory pathway. Furthermore, our program has a potential best-in-class profile and all that with a long IP runway. Let's review the activities underway to initiate our global Phase III program. For manufacturing, our fixed dose tablet is ready for the Phase III global program. Our API and manufacturing processes have been optimized, and we are already prepared for commercial scale production. There is a clear regulatory pathway with HCV. We are planning an end of Phase II meeting with the FDA early next year to finalize our Phase III program and expect to conduct two global Phase III studies with an active comparator starting early next year. Leveraging the work and relationships already existing from our Phase II study, we have global clinical trial sites that are prepared and excited to participate in our Phase II program. Additionally, our contract research organization and Central Labs are already engaged in start-up activities ahead of the Phase III initiation. Finally, our intellectual property provides broad global coverage and a long patent protection until at least 2042. The branded treatments, Epclusa, including its authorized copy and Mavyret also have long patent runway with IP protection to 2036, which should allow a stable pricing in the foreseeable future for the HCV market. On Slide 6, the profile of today's HCV-infected patients has shifted since the introduction of direct-acting antivirals. Now the majority of U.S. infected patients are younger and HCV infections predominate in patients in the age group between 20 to 49 years with less than 10% of HCV patients being cirrhotic. This is because the progression to cirrhosis from HCV infection normally takes about 20 years. And since patients have been trending younger, they have not been infected for an extended length of time yet. The patients who are at the highest risk for HCV in 2024 are frequently poorly adherent to their medications due to substance abuse disorders including opioid use or other drugs and many have mental health disorders. In addition, a high proportion of the current patients take multiple concomitant medications including HIV medications, hormonal contraceptives, statins and proton pump inhibitors. For this patient profile, a direct-acting antiviral combination with a low risk of drug interactions, no food effect, combined with a short treatment duration is clearly beneficial. We believe that the target profile of our combination has the potential to address these unmet needs. It may also treat more patients successfully and could expand the number of patients cured. I'll now hand the call over to John to review the antiviral market opportunity for HCV. John?

Thank you, Janet. Turning to Slide 7. Today's patient profile presents new challenges and requires an improved drug profile. Rigorous market research suggests that a very large number, approximately 94% and of Epclusa and Mavyret prescribers are not satisfied with current treatment options. First, treatment adherence is a challenge. Patients who use drugs are often unable to get into medical care and maintain treatment adherence due to chaotic life circumstances. In fact, healthcare professionals have reported that 17% of patients failed to complete a full course of therapy. An ideal HCV therapy should provide high efficacy with a short length of therapy. Secondly, a longitudinal analysis of HCV patients showed 80% of patients who initiated direct-acting antiviral therapy are often on medications for other medical conditions and an ideally HCV therapy should allow patients to take concomitant medications without drug interaction risk. Finally, taking these medications with food may be an issue. In particular, patients who use drugs consider food requirements with therapy challenging. An ideal HCV therapy should not be dependent on taking with or without food. Neither Epclusa nor Mavyret can address all these challenges. Mavyret has a short duration of therapy but is hampered by its drug-drug interactions profile, and it needs to be administered with food. And Epclusa has a long treatment -- long duration of therapy, which limits its convenience. Slide 8 outlines the current HCV market in the United States. HCV continues to be recognized health care crisis in the U.S. with between 2 million and 4 million living with HCV and new challenges continue to hinder the progress towards eliminating it globally. The U.S. HCV commercial market is expected to remain large, with net sales of approximately $1.5 billion. The market demand grew roughly 5% in 2023 versus 2022 based on the number of patients treated, with the market shares of the two key HCV treatment options, Epclusa and Mavyret remain stable. And for the first half of 2024, we have seen a slight increase in pricing with stable market share. Also interesting to note is the U.S. patient pool continues to be replenished with approximately 100,000 new chronic cases each year. We believe future U.S. government initiatives and the removal of certain constraints by payers and other access barriers, combined with the best-in-class profile, has the potential to expand the number of patients cured from this severe viral disease. With that, I will now turn the call over to Arantxa for a review of our global Phase II HCV study.

Thank you, John. On Slide 10, we would like to remind you of the outline of our Phase II single-arm open-label study of 550 milligrams of bemnifosbuvir in combination with 180 milligrams of ruzasvir once daily for eight weeks. This Phase II trial, which is nearing completion enrolled 275 treatment-naive patients including the lead-in cohort of 60 non-cirrhotic patients. We are looking forward to reporting the top line results in early December. Slide 11 reviews how we will be reporting the efficacy analysis of the study population for the Phase II trial. The primary efficacy analysis of the study is sustained virological response at 12 weeks post treatment or SVR12, in the per protocol treatment adherent population as measured by pill count and confirmed by adequate drug exposures. A secondary efficacy analysis will assess SVR12 in the per protocol population regardless of treatment adherence. This is also referred to as the efficacy-evaluable population and includes patients in the analysis whether or not they were treatment adherent. We will report data in both populations. Turning to Slide 12. Atea [indiscernible], we presented data from the leading cohort of 60 patients. We are very pleased with these results. which show a high SVR12 rate of 97% with a short eight-week duration of treatment. Importantly, the only two patients with post-treatment relapse or failure illustrate the challenge of drug adherence in this patient population. The viral relapse or failure was due to treatment adherence as demonstrated by inadequate drug levels and not due to viral resistance as confirmed by the lack of new viral mutations. Moving to Slide 13. This slide shows the on-treatment bio kinetics of individual patient data from the leading cohort. As you can see, there was a rapid reduction of viral load in all patients within the first week regardless of baseline viremia and genotype. By week four on treatment, all 60 patients in the leading cohort had a viral load near or below the lower limit of quantification. Therefore, this rapid kinetics across all genotypes support eight-week regimen. Slide 14. In summary, all 60 patients in the leading cohort completed the eight-week treatment period, the combination treatment of bemnifosbuvir and ruzasvir was generally safe and well tolerated with no drug-related severe adverse events or premature treatment discontinuation. Similarly, there were no trends observed in adverse events or safety laboratory parameters. I would also like to mention that next week, there are three poster presentations at AASLD, The Liver Meeting 2024, which include additional safety and resistance data for bemnifosbuvir and modeling data on the lead-in cohort from the Phase II study. In addition, an integrated population pharmacokinetic model was developed to simultaneously characterize the pharmacokinetic profile of bemnifosbuvir and its metabolites. This data will be presented at the American College of Pharmacometrics Conference on November 11. I will now turn the call over to Andrea to discuss Atea's financials.

Thank you, Arantxa. As Jonae mentioned, earlier today, we issued a press release containing our financial results for the third quarter of 2024. The statement of operations and balance sheet are on Slides 16 and 17. In the third quarter of 2024, R&D expenses decreased compared to the prior year period. This net decrease in 2024 was primarily driven by lower 2024 COVID-19 spending, offset by higher 2024 spending related to our HCV Phase II clinical trial. For G&A expenses, there was a decrease in the current quarter compared to the corresponding period in 2023. This decrease was primarily the result of incurring lower professional fees in the third quarter of 2024. Interest income for the 2024 quarter decreased compared to the prior year period due to lower investment balances. For the remainder of 2024, we expect R&D spend will be principally related to the completion of the HCV Phase II study and start-up activities associated with our anticipated global HCV Phase III program. At the end of the third quarter of 2024, our cash, cash equivalent and marketable securities balance was $482.8 million. Continuing our strong financial discipline, we project our cash guidance runway well into 2027. I'll now hand the call back to Jean-Pierre for closing remarks.

Thank you, Andrea. We are eagerly awaiting the top line results from our Phase II HCV study, which, as we have mentioned, is expected in early December. So just about a month from now. The combination of bemnifosbuvir and ruzasvir represents a potential best-in-class profile that combines the most compelling attributes of current HCV drug treatments such as convenience, short duration and low risk for drug-drug interaction. We believe that our combination is highly differentiated and has the opportunity to address significant unmet medical needs of today's HCV patients. We are looking forward to initiating our Phase III development program early next year. Before opening the call to your questions, I would like to thank our talented and dedicated Atea employees. Our team with relentless pursuit of excellence drives our dedication to advancing oral antiviral therapeutics for patients worldwide affected by viral diseases. With that, I will turn the call back over to the operator.

[Operator Instructions] And your first question comes from the line of Eric Joseph.

This is Isabella on for Eric. First, how are you thinking about the Phase III HCV trial design, particularly in the context of any remaining adherence obstacles and the use of an active comparator. And additionally, what parameters are you seeking clarity on going into your meeting with the FDA?

Arantxa, you want to address those two questions.

Yes. Thank you for the question. So to answer the first one, we are planning to do randomized trials, and that will, in our opinion, address the issue of adherence because then you'll have a control and then you can address the population against the control. In terms of the meeting with the FDA, we are really proposing a development plan, a Phase III development plan that is very much aligned with the FDA guidelines. And we're going to be submitting the data and then submitting these designs, which are aligned with what they are requiring. So I'm not [indiscernible] FDA will say, but I think that we are very confident that our plan will be generally at least acceptable.

Your next question comes from the line of Umer Raffat.

This is [Jing Chen] on for Umer. I guess first one, you've mentioned the drug exposure of fixed dose combination is comparable to individually administered drug. But have you seen any change in the PK profile for each drug component, especially in its half-life?

No, absolutely not. We have -- I think we have shown the profile last time and we are very pleased with the PK profile on both drugs, and we don't see any difference, both on drug exposure and individual parameters such as half-life of both drugs.

Okay. I also want to touch upon the Phase III design. Is it going to be the same dose, like 550-milligram BEM and 180-milligram ruzasvir? And I see there's only one site in Phase II U.S. site will be the same like most of the site for Phase III also ex U.S.

Arantxa?

So we're going to have U.S. sites, a lot more than one. This -- we only have one in Phase II because that was what we got time to open in Phase II. But no, in Phase III, we're going to have a lot of U.S. sites and also a lot of sites ex U.S. In terms of the dose, yes, it's going to be the same dose, but the beauty of it is that now we're going to have a fixed dose combination. And we think that, that obviously decreases the pill burden, and that's going to help us also with adherence.

Well, we can mention, Arantxa, I think we have more than 100 sites just in the U.S., right? Arantxa, what do we anticipate...

Yes. We're still identifying some of them. But what I can tell you is that we have a lot of interest from the sites. We're getting very, very strong response from investigators and sites in the United States and also ex U.S., but especially in the United States.

Your next question comes from the line of Andy Hsieh.

Great. Maybe one on the Phase III kind of aspiration. Just given the active control, I'm just curious if you're shooting for perhaps superiority or noninferiority with a numerical benefit from the SVR12 perspective? Just trying to gauge your temperature on that front?

Do you want to address that Arantxa?

Yes. So the trial will be powered for noninferiority and we always allow a second test for superiority within the primary endpoint. So we are powering for inferiority and we may even make a superiority.

Yes, go ahead. I'm sorry.

Go ahead. I'm sorry, I have the second question...

Andy, as you know, for any drug that has higher than 90% efficacy. We anticipate that the rule is that we anticipate a 5% noninferiority. And so based on the number of patients that we need for basically a safety database, we think that we have powered more than 90% with a size of about 800 patients. So we'll see what the FDA feedback as the end of Phase II meetings. But we feel reasonably confident that we should be aligned.

Excellent. And maybe a commercial question, just on kind of volume-based contracts that we've seen previously, could potentially be a low-hanging fruit, right, just basically provide drugs and the other entity would have to identify patients, making this pathway very cost efficient. I'm just wondering how you think about that segment of the market and how much you'll utilize these types of framework.

John?

Yes. Thank you for the question. What I can comment on at least is what historically what has gone on and there are many pathways for utilization, particularly the traditional pathways as well as with government entities, whether it be Medicare or Medicaid. And right now, the government continues to be one of the single larger payers in that regard. So the individual states would likely follow under the Medicaid situation. And it's been pretty relatively stable and we don't see that changing in the foreseeable future.

And could you comment on having sales reps in that kind of framework? Would it be less compared to the traditional framework or it will be comparable?

What I can tell you is that if you look at the market overall in this particular market with the magnitude of these sales, like these are $1.5 billion in net sales in the United States. It's a very concentrated set of writers in the United States to prescribe these assets and it's very efficient to go after them.

That concludes our Q&A session. I will now turn the conference back over to Jean-Pierre for closing remarks.

So, thank you all for joining our third quarter 2024 earnings conference call. And thank you for your continued support.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.