Atea Pharmaceuticals, Inc. quarterly report, Q1 FY2022

Atea Pharmaceuticals, Inc. — Form 10-Q Summary

Reporting period: Three months ended March 31, 2022. The filing was signed May 10, 2022. Atea is a clinical-stage biopharmaceutical company developing antiviral therapies, with programs targeting COVID-19, hepatitis C, dengue and respiratory syncytial virus. It has no approved products or product-sales revenue.

Financial position and operating metrics

Metric	Q1 2022	Q1 2021 / prior period
Collaboration revenue	$0	$66.0 million
Research and development expense	$29.6 million	$26.6 million
General and administrative expense	$12.5 million	$8.8 million
Total operating expenses	$42.2 million	$35.3 million
Net income (loss)	$(42.1) million	$30.7 million
Basic and diluted loss per share	$(0.51)	Basic $0.37; diluted $0.34
Net cash used in operating activities	$(59.0) million	$(16.8) million
Cash, cash equivalents and restricted cash at period end	$705.9 million	$833.9 million

Amounts are from the filing and are presented in millions unless otherwise stated. The company has no meaningful gross margin or product margin because it has no product sales. Operating margin was not meaningful in Q1 2022 because revenue was zero; the operating loss was $42.2 million.

Cash and cash equivalents were $705.5 million at March 31, 2022, primarily held in money market funds. Restricted cash was $0.3 million.
Total assets were $717.2 million and total stockholders’ equity was $679.9 million.
Total liabilities were $37.3 million, including $2.9 million of operating lease liabilities and $5.9 million of income taxes payable. The filing does not identify material debt financing.
Operating cash use increased primarily because of the net loss and a $28.0 million decrease in accrued expenses and other current liabilities.
Stock-based compensation was $11.7 million, compared with $7.3 million in Q1 2021.
Cash used in investing activities was $0.04 million, while financing activities provided $0.2 million from stock-option exercises.

Material changes versus Q1 2021

Revenue declined $66.0 million to zero. The prior-year amount related to the Roche License Agreement; no product revenue was generated in either period.
Roche terminated the license agreement effective February 10, 2022. Atea regained worldwide rights to bemnifosbuvir but also assumed responsibility for future development costs and no longer receives Roche cost sharing or future collaboration revenue.
Research and development expense increased $3.1 million, or approximately 12%, to $29.6 million. COVID-19 external costs declined, but dengue, HCV and internal development costs increased.
General and administrative expense increased $3.8 million, or approximately 43%, mainly due to organizational expansion and higher personnel-related costs.
The company moved from $30.7 million of net income in Q1 2021 to a $42.1 million net loss in Q1 2022.
Operating cash burn increased by $42.2 million year over year, and period-end cash, cash equivalents and restricted cash declined by $58.8 million from December 31, 2021.

Pipeline, outlook and management commentary

Bemnifosbuvir/COVID-19: Atea reported that the MORNINGSKY Phase 3 primary endpoint, time to symptom alleviation, was not achieved. Management nevertheless cited an exploratory 71% reduction in hospitalization, 2.9% versus 10%, with no deaths in the trial. The company was pursuing discussions with regulators regarding further development.
Hospitalized COVID-19 study: In a Phase 2 study, progression of respiratory insufficiency was 7.5% for bemnifosbuvir versus 10% for placebo. The sample size was insufficient for statistical comparisons; no deaths occurred in the bemnifosbuvir group versus three with placebo.
HCV: Atea is developing bemnifosbuvir with ruzasvir, which it in-licensed from Merck in December 2021. It was manufacturing clinical supplies and evaluating designs for a Phase 2 combination study.
Dengue: The company initiated the Phase 2 DEFEND-2 study of AT-752, planned to enroll up to 60 adults, and initiated a U.S. dengue human-challenge study.
Cash runway: Management stated in the financial statement notes that cash and cash equivalents were sufficient for at least 12 months from issuance of the report, while the MD&A stated that available cash was expected to fund planned operations through at least 2025. These statements depend on assumptions, including development spending and clinical progress.
Management expects research and development expenses and overall cash use to increase as clinical programs advance, additional candidates are developed, regulatory activities continue and the company builds capabilities for potential commercialization.

Risks, contingencies and unusual items

The company remains dependent on successful clinical development and regulatory approval, particularly for bemnifosbuvir. Its COVID-19 programs face changing standards of care, evolving variants, competition from authorized antivirals and vaccines, and uncertain market demand.
Atea has a limited operating history, no approved products and no history of commercializing an antiviral. It expects continuing operating losses and does not expect product revenue for the foreseeable future.
The company expects to require substantial additional financing. Future equity financing could dilute stockholders, while debt or collaboration financing could impose restrictive terms or require the company to surrender rights.
Atea relies extensively on CROs, CMOs and other third parties for clinical development and manufacturing, including suppliers in China. Supply interruptions, quality problems, regulatory issues or delays could affect development timelines.
The company is exposed to clinical-trial enrollment and execution risks, adverse events, regulatory delays, intellectual-property challenges, cybersecurity incidents, COVID-19 disruptions, geopolitical events and market volatility.
A consultant success fee of up to $5.0 million is contingent on future product sales; the timing and likelihood of payment were not probable or estimable at March 31, 2022.
An Indian pre-grant patent opposition filed April 12, 2022 challenges pending AT-511/bemnifosbuvir claims. Atea stated that it intended to respond by July 12, 2022.
The company entered into a new Boston office lease running through December 2026, with total future lease payments of $4.0 million before stated deductions for interest and tenant improvements.
Management concluded that disclosure controls and procedures were effective at the reasonable assurance level, with no material changes to internal control over financial reporting during the quarter.

Facts investors should verify

Reconcile the stated cash runway through at least 2025 with the note disclosure referring to at least 12 months of funding and with projected clinical-development spending.
Track regulatory feedback and the next clinical-development strategy for bemnifosbuvir following the unsuccessful MORNINGSKY primary endpoint.
Confirm whether Roche cost sharing has fully ended and quantify Atea’s incremental standalone development and manufacturing obligations.
Monitor cash burn, stock-based compensation, headcount growth and the timing and terms of any future financing.
Verify progress, supply availability and trial initiation for the bemnifosbuvir/ruzasvir HCV program and AT-752 dengue studies.
Follow the Indian patent opposition and other patent prosecution or infringement matters affecting bemnifosbuvir and related compounds.