Atea Pharmaceuticals, Inc. — 2023 First-Quarter Form 10-Q
Business context and reporting period
Atea is a clinical-stage biopharmaceutical company developing antiviral therapeutics. The report covers the three months ended March 31, 2023, and compares results with the three months ended March 31, 2022. The primary programs are bemnifosbuvir for COVID-19, including the Phase 3 SUNRISE-3 trial, and bemnifosbuvir in combination with ruzasvir for hepatitis C. The company has no approved products and has generated no product revenue.
Financial condition and results
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Research and development expense | $29.0 million | $29.6 million | Down $0.7 million |
| General and administrative expense | $12.6 million | $12.5 million | Up $0.1 million |
| Total operating expenses | $41.6 million | $42.2 million | Down $0.6 million |
| Loss from operations | $41.6 million | $42.2 million | Improved by $0.6 million |
| Interest income and other, net | $6.3 million | $0.1 million | Up $6.2 million |
| Net loss | $35.5 million | $42.1 million | Improved by $6.6 million |
| Net loss per share | $0.43 | $0.51 | Improved by $0.08 |
| Net cash used in operating activities | $29.9 million | $59.0 million | Improved by $29.2 million |
Because the company has no product revenue, gross margin, operating margin and net margin are not meaningful. The company expects operating losses and increasing expenses for the foreseeable future.
- Cash and cash equivalents were $183.3 million at March 31, 2023, compared with $188.5 million at December 31, 2022.
- Marketable securities were $437.2 million, resulting in cash, cash equivalents and marketable securities of approximately $620.5 million.
- Total assets were $638.1 million and stockholders’ equity was $618.2 million.
- The filing does not disclose conventional debt. Total liabilities were $19.9 million, including $2.9 million of operating lease liabilities and $5.4 million of income taxes payable.
- Cash, cash equivalents and restricted cash decreased by $5.2 million during the quarter. Investing activities provided $24.5 million, primarily reflecting $181.1 million of marketable-security sales and maturities partially offset by $156.6 million of purchases.
- Stock-based compensation was $12.5 million, compared with $11.7 million in Q1 2022, and represented a significant non-cash expense.
Material changes versus the prior comparable period
- Research and development expense declined modestly, primarily because Roche-related cost-sharing expense of $9.6 million in Q1 2022 was replaced by a $1.0 million credit in Q1 2023 related to close-out adjustments.
- COVID-19 external research costs declined to $8.9 million from $13.3 million, while HCV external costs increased to $3.4 million from $1.4 million. Internal research and development costs increased to $13.3 million from $11.1 million.
- Interest income increased substantially due to higher interest rates and investment of cash in higher-yielding marketable securities.
- Operating cash burn was lower than in Q1 2022, partly because Q1 2022 included substantial reductions in accounts payable and accrued expenses.
- The company granted 2.1 million restricted stock units and 3.3 million stock options during Q1 2023, increasing potential future dilution and unrecognized compensation expense.
- Atea discontinued further development of AT-752 for dengue in February 2023 because of enrollment timelines, operational challenges and expected resource requirements. The company also stated that it terminated RSV discovery efforts to focus resources on more advanced programs.
- The Roche license agreement had terminated in February 2022, returning worldwide rights to bemnifosbuvir to Atea and leaving Atea responsible for related development and commercialization activities.
Guidance, outlook, commentary and risks
- Management expects existing cash, cash equivalents and marketable securities to fund planned operations into 2026, including current and planned clinical programs. This estimate depends on assumptions that may prove incorrect.
- SUNRISE-3 is a global Phase 3 trial intended to enroll at least 1,500 high-risk, non-hospitalized COVID-19 patients. The primary endpoint is hospitalization or death through Day 29 in the supportive-care population.
- Management planned to initiate a Phase 2 HCV trial of bemnifosbuvir and ruzasvir during Q2 2023, targeting approximately 280 treatment-naive patients.
- The filing states that the FDA granted Fast Track designation to bemnifosbuvir for COVID-19 in April 2023, after the quarter-end. Fast Track designation does not assure faster approval or regulatory success.
- The company expects research and development expenses to increase substantially as it advances SUNRISE-3, the HCV program, potential COVID-19 combination therapy and manufacturing activities.
- Key risks include clinical-trial enrollment and execution, changing COVID-19 hospitalization and testing rates, evolving SARS-CoV-2 variants, competition from approved and developing antivirals, regulatory uncertainty, safety findings, reliance on CROs and CMOs, manufacturing and supply risks, intellectual-property challenges, and the need for additional financing.
- Management disclosed exposure to uninsured or underinsured cash balances at financial institutions, including risks highlighted by the March 2023 failure of Silicon Valley Bank, although no loss was reported.
- A contingent consulting success fee may reach $5.0 million based on certain future product sales; the timing and likelihood were not considered probable or estimable.
- No material legal proceedings were reported. Disclosure controls and procedures were concluded to be effective at the reasonable-assurance level, with no material changes in internal control over financial reporting.
Important facts for investors to verify
- Progress, enrollment rate, interim analysis timing and eventual efficacy and safety results of SUNRISE-3.
- Whether the planned HCV Phase 2 trial began on schedule and the status of bemnifosbuvir-ruzasvir development.
- The cash-burn trajectory and whether the projected runway to 2026 remains valid as clinical and manufacturing spending increases.
- Potential dilution from the company’s equity sales agreement, stock options and restricted stock units; no shares had been issued under the $200 million sales agreement as of March 31, 2023.
- The effect of changing COVID-19 epidemiology, commercial payer transitions and competing treatments on the addressable market.
- Manufacturing capacity, supplier concentration in China and the company’s ability to secure clinical and potential commercial supply.
- Outstanding intellectual-property matters, including patent challenges and the Indian pre-grant opposition involving AT-511/bemnifosbuvir.