Atea Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2022. The unaudited statements cover Atea Pharmaceuticals, Inc. and its wholly owned subsidiary. Atea is a clinical-stage biopharmaceutical company developing oral antiviral therapies for COVID-19, dengue, HCV and RSV. No product candidates were approved for commercial sale.
Financial performance and condition
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Collaboration revenue | $0.0 million, versus $32.8 million in 2021 | $0.0 million, versus $159.2 million in 2021 |
| Research and development expense | $4.9 million, versus $43.0 million | $54.4 million, versus $109.4 million |
| General and administrative expense | $11.4 million, versus $11.9 million | $36.4 million, versus $32.6 million |
| Total operating expenses | $16.3 million, versus $55.0 million | $90.8 million, versus $142.0 million |
| Operating income (loss) | $(16.3) million, versus $(22.1) million | $(90.8) million, versus $17.2 million |
| Interest income and other, net | $4.4 million, versus less than $0.1 million | $5.6 million, versus $0.2 million |
| Net income (loss) | $(8.1) million, or $(0.10) per diluted share | $(81.5) million, or $(0.98) per diluted share |
| Cash flow from operating activities | Not separately disclosed | $(99.4) million, versus $(11.6) million |
- At September 30, 2022, cash and cash equivalents were $176.4 million, marketable securities were $488.6 million, and total cash, cash equivalents and restricted cash were $176.7 million.
- Total assets were $686.6 million and stockholders’ equity was $663.2 million. Accumulated deficit was $25.4 million.
- Debt was not disclosed. Lease liabilities totaled $3.3 million, including $0.7 million current and $2.6 million noncurrent.
- Marketable securities consisted primarily of short-term U.S. government, commercial paper, corporate bond and asset-backed securities. Unrealized losses were $0.9 million.
- Operating margin and net margin are not meaningful because the company had no revenue during the 2022 periods.
- Stock-based compensation was $11.5 million in the third quarter and $35.1 million for the first nine months, compared with $11.0 million and $28.3 million, respectively, in 2021.
Material changes versus the prior comparable periods
- Revenue fell to zero following Roche’s termination of the license agreement, effective February 10, 2022. Atea recognized the remaining deferred Roche revenue in 2021.
- Nine-month operating results shifted from $17.2 million of operating income in 2021 to a $90.8 million operating loss in 2022, primarily because of the loss of Roche collaboration revenue.
- Research and development expense declined substantially because Roche cost-sharing activity ended and Atea recorded a $14.5 million third-quarter credit, including a $14.6 million credit related to Roche close-out cost estimates. The company is now responsible for the ongoing development costs of bemnifosbuvir.
- General and administrative expense increased $3.8 million for the nine-month period, primarily due to higher payroll and personnel-related costs.
- Interest income increased materially as Atea invested in higher-yielding marketable securities and benefited from higher interest rates.
- Cash, cash equivalents and restricted cash declined by $588.0 million during the first nine months, principally because of $488.9 million of investing outflows and $99.4 million of operating cash use.
- Atea’s common shares outstanding increased modestly to 83.3 million at September 30, 2022, from 83.1 million at December 31, 2021, primarily from option exercises and ESPP issuances.
Guidance, outlook, commentary and risks
- Atea expected to initiate the global SUNRISE-3 Phase 3 trial of bemnifosbuvir before the end of 2022. The planned trial was designed to enroll at least 1,500 high-risk, non-hospitalized COVID-19 patients and evaluate bemnifosbuvir with locally available standard of care.
- Management planned to submit clinical trial applications for a Phase 2 HCV study of bemnifosbuvir combined with ruzasvir before year-end 2022. AT-752 remained in the global Phase 2 DEFEND-2 dengue study and a dengue human challenge trial.
- MORNINGSKY Phase 3 did not meet its primary endpoint of time to symptom alleviation. Atea reported an exploratory 71% reduction in hospitalization, but the result was based on a limited evaluable population and was not the primary endpoint.
- Atea was advancing an internal protease-inhibitor program intended for potential combination use with bemnifosbuvir, but the program remained at an early discovery stage.
- Management stated that available cash, cash equivalents and marketable securities were expected to fund planned operations through at least 2025. The financial statements separately state that these resources were sufficient for at least twelve months from issuance of the report. Future spending was expected to increase substantially as clinical development advanced.
- Atea had no commercial products and did not expect product revenue for the foreseeable future. Additional financing may be required through equity, debt, collaborations or other arrangements; the company warned that financing may be unavailable or dilutive.
- Key risks include clinical-trial failure or delay, changing COVID-19 variants and treatment standards, competition from authorized therapies, regulatory uncertainty, dependence on third-party manufacturers and CROs, supply-chain exposure to China, intellectual-property challenges, cybersecurity incidents, and the need to recruit and retain key personnel.
- The company disclosed an Indian pre-grant opposition challenging pending patent claims relating to AT-511/bemnifosbuvir. It also disclosed a contingent consultant success fee capped at $5.0 million; payment was not probable or estimable at September 30, 2022.
- Management concluded that disclosure controls and procedures were effective at the reasonable assurance level, with no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether SUNRISE-3 was initiated on the expected timeline and whether enrollment, trial design and regulatory interactions remained consistent with the stated plan.
- Whether subsequent clinical data validate the exploratory MORNINGSKY hospitalization result despite failure of the primary endpoint.
- The sustainability and timing of future cash use, particularly as Atea assumes full development costs after Roche’s termination.
- Whether the stated cash runway through at least 2025 remains valid under updated clinical-development plans and market conditions.
- The status of the HCV ruzasvir manufacturing program, planned Phase 2 trial and obligations under the Merck license.
- Potential dilution or financing risk under the $200.0 million equity sales agreement; no shares had been issued under that agreement as of September 30, 2022.
- The status and potential impact of the Indian patent opposition and other patent challenges.