SEC Filing | Atea Pharmaceuticals, Inc.

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avir-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number: 001-39661

ATEA PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	46-0574869
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
125 Summer Street Boston, MA	02110
(Address of principal executive offices)	(Zip Code)

(857) 284-8891

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

AVIR

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2021, the registrant had 83,102,730 shares of common stock, $0.001 par value per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our clinical results and other future conditions. The words “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” "on track," “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

•

our expectations relating to clinical trials for our product candidates, including projected costs, study designs or the timing for initiation, recruitment, completion, or reporting top-line data;

•

the potential therapeutic benefits of our product candidates and the potential indications and market opportunities therefor;

•

the safety profile and related adverse events of our product candidates;

•

our plans to research, develop and commercialize our current and future product candidates;

•

the potential benefits of our collaboration with Roche or any future collaboration we may enter into with Roche or others;

•

the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;

•

the rate and degree of market acceptance and clinical utility of any products for which we may receive marketing approval;

•

our commercialization, marketing and manufacturing capabilities and strategy;

•

our estimates regarding future revenue, expenses and results of operations;

•

the progress of, timing of and amount of expenses associated with our research, development and commercialization activities;

•

our future financial position, capital requirements and needs for additional financing;

•

our business strategy;

•

developments relating to our competitors, competing treatments and vaccines and our industry;

•

our expectations regarding federal, state and foreign laws and regulations;

•

our ability to attract, motivate, and retain key personnel; and

•

the impact of the COVID-19 pandemic on our business, including our preclinical studies and clinical trials.

These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that may cause actual results to differ materially from current expectations include the initiation, execution and completion of clinical trials, uncertainties surrounding the timing of availability of data from our clinical trials, ongoing discussions with and actions by regulatory authorities, our development activities and those other factors we discuss in Part II, Item 1A. “Risk Factors.” You should read these factors and the other cautionary statements made in this report as being applicable to all related forward-looking statements wherever they appear in this report. These risk factors are not exhaustive and other sections of this report may include additional factors which could adversely impact our business and financial performance. Given these uncertainties, you should not rely on these forward-looking statements as predictions of future events. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

As used in this Quarterly Report on Form 10-Q, unless otherwise specified or the context otherwise requires, the terms “we,” “our,” “us,” the “Company” refer to Atea Pharmaceuticals, Inc. and its subsidiary. All brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. The principal risks and uncertainties affecting our business include the following:

•

There is significant uncertainty around our development of AT-527 as a potential treatment for COVID-19.

•

We are highly dependent on our management, directors and other key personnel.

•

We may expend resources in anticipation of potential clinical trials and commercialization of AT-527, which we may not be able to recover if AT-527 is not approved for the treatment of COVID-19 or we are not successful at commercializing AT-527.

•

The market for therapeutics for the treatment of COVID-19 may be reduced, perhaps significantly, as uptake of vaccines that are effective in providing immunity continues to increase.

•

AT-527 may face significant competition from other treatments for COVID-19 that are currently marketed or are in development.

•

The COVID-19 pandemic continues to rapidly evolve and may materially and adversely affect our other business opportunities and financial results.

•

We have a limited operating history and no history of successfully developing or commercializing any approved antiviral products, which may make it difficult to evaluate the success of our business to date and to assess the prospects for our future viability.

•

We have incurred significant losses since inception. We expect our expenditures will increase for the foreseeable future. We have no products that have generated any commercial revenue and we may never achieve or maintain sustainable profitability.

•

We will require substantial additional financing, which may not be available on acceptable terms, or at all. A failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

•

Our ability to use our net operating loss carryforwards and other tax attributes to offset future taxable income may be subject to certain limitations.

•

Our business is highly dependent on the success of our most advanced product candidates. If these product candidates fail in preclinical or clinical development, do not receive regulatory approval or are not successfully commercialized, or are significantly delayed in doing so, our business will be harmed.

•

The regulatory approval processes of the U.S. Food and Drug Administration (“FDA”) and comparable foreign regulatory authorities are lengthy, expensive, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be seriously harmed. Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us, our current collaboration partner, Roche, or any future collaboration partners from obtaining approvals for the commercialization of any product candidate we develop.

•

Clinical development is lengthy and uncertain. We may encounter substantial delays and costs in our clinical trials, or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all.

•

Our product candidates may be associated with serious adverse events, undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.

•

We currently conduct clinical trials, and may in the future choose to conduct additional clinical trials, of our product candidates in sites outside the United States, and the FDA may not accept data from trials conducted in foreign locations.

•

Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data.

•

We may not be successful in our efforts to identify and successfully develop additional product candidates.

•

Risks related to healthcare laws and other legal compliance matters may materially and adversely affect our business and financial results.

•

Risks related to commercialization may materially and adversely affect our business and financial results.

•

Risks related to manufacturing and our dependence on third parties may materially and adversely affect our business and financial results.

•

Risks related to intellectual property may materially and adversely affect our business and financial results, including if we are unable to obtain, maintain, enforce and adequately protect our intellectual property rights with respect to our technology and product candidates, or if the scope of the patent or other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

•

We have only a limited number of employees which may be inadequate to manage and operate our business.

•

Our business and operations would suffer in the event of system failures, deficiencies or intrusions.

•

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

•

We may engage in acquisitions or strategic partnerships that could disrupt our business, cause dilution to our stockholders, reduce our financial resources, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

•

We or the third parties upon whom we depend may be adversely affected by natural disasters or other unforeseen events resulting in business interruptions and our business continuity and disaster recovery plans may not adequately protect us from such business interruptions.

•

Litigation against us could be costly and time-consuming to defend and could result in additional liabilities.

•

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

•

Risks related to our common stock may materially and adversely affect our stock price.

•

If we fail to maintain effective internal control over financial reporting and effective disclosure controls and procedures, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our company.

•

We could be subject to securities class action litigation.

iii

Table of Contents

		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		i
SUMMARY RISK FACTORS		ii

PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	2
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II.	OTHER INFORMATION	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
SIGNATURES		87

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ATEA PHARMACEUTICALS, INC. and Subsidiary

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

	September 30, 2021			December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	839,660		$	850,117
Unbilled other receivable		—			5,815
Prepaid expenses and other current assets		3,286			7,545
Total current assets		842,946			863,477
Property and equipment, net		26			48
Other assets		532			107
Total assets	$	843,504		$	863,632
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		22,190			60
Accrued expenses and other current liabilities		47,682			14,368
Deferred revenue		192,180			301,367
Total current liabilities		262,052			315,795
Other liabilities		—			36
Total liabilities		262,052			315,831
Commitments and contingencies (see Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value; 300,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 83,047,079 and 82,436,937 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		83			82
Additional paid-in capital		642,471			612,879
Accumulated deficit		(61,102	)		(65,160	)
Total stockholders’ equity		581,452			547,801
Total liabilities and stockholders’ equity	$	843,504		$	863,632

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ATEA PHARMACEUTICALS, INC. and Subsidiary

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Collaboration revenue	$	32,811		$	—		$	159,187		$	—
Operating expenses
Research and development		43,019			13,601			109,394			24,177
General and administrative		11,939			4,028			32,597			7,500
Total operating expenses		54,958			17,629			141,991			31,677
Income (loss) from operations		(22,147	)		(17,629	)		17,196			(31,677	)
Interest income and other, net		53			7			162			74
Income (loss) before income taxes		(22,094	)		(17,622	)		17,358			(31,603	)
Income tax expense		(6,100	)		—			(13,300	)		—
Net income (loss) and comprehensive income (loss)	$	(28,194	)	$	(17,622	)	$	4,058		$	(31,603	)
Net income (loss) per share attributable to common stockholders
Basic	$	(0.34	)	$	(1.74	)	$	0.05		$	(3.13	)
Diluted	$	(0.34	)	$	(1.74	)	$	0.05		$	(3.13	)
Weighted-average common shares outstanding
Basic		82,815,636			10,109,847			82,727,268			10,099,134
Diluted		82,815,636			10,109,847			88,462,074			10,099,134

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ATEA PHARMACEUTICALS, INC. and Subsidiary

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance—December 31, 2020		—	$	—		82,436,937	$	82	$	612,879	$	(65,160	)	$	547,801
Issuance of common stock upon exercise of stock options		—		—		300,000		1		470		—			471
Stock-based compensation expense		—		—		—		—		7,273		—			7,273
Net income (loss)		—		—		—		—		—		30,713			30,713
Balance—March 31, 2021		—		—		82,736,937		83		620,622		(34,447	)		586,258
Issuance of common stock upon exercise of stock options		—		—		40,000		—		57		—			57
Stock-based compensation expense		—		—		—		—		10,007		—			10,007
Net income (loss)		—		—		—		—		—		1,539			1,539
Balance—June 30, 2021		—		—		82,776,937		83		630,686		(32,908	)		597,861
Issuance of common stock upon exercise of stock options		—		—		270,142		—		795		—			795
Stock-based compensation expense		—		—		—		—		10,990		—			10,990
Net income (loss)		—		—		—		—		—		(28,194	)		(28,194	)
Balance—September 30, 2021		—	$	—		83,047,079	$	83	$	642,471	$	(61,102	)	$	581,452

	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance—December 31, 2019		33,645,447	$	69,114		10,091,100	$	10	$	4,632	$	(54,213	)	$	(49,571	)
Stock-based compensation expense		—		—		—		—		189		—			189
Net income (loss)		—		—		—		—		—		(3,988	)		(3,988	)
Balance—March 31, 2020		33,645,447		69,114		10,091,100		10		4,821		(58,201	)		(53,370	)
Issuance of Series D convertible preferred stock, net of issuance costs of $869		15,313,382		106,631		—		—		—		—			—
Issuance of common stock upon exercise of stock options		—		—		18,747		—		27		—			27
Stock-based compensation expense		—		—		—		—		209		—			209
Net income (loss)		—		—		—		—		—		(9,993	)		(9,993	)
Balance—June 30, 2020		48,958,829		175,745		10,109,847		10		5,057		(68,194	)		(63,127	)
Issuance of common stock upon exercise of stock options		—		—		—		—		—		—			—
Stock-based compensation expense		—		—		—		—		4,238		—			4,238
Net income (loss)		—		—		—		—		—		(17,622	)		(17,622	)
Balance—September 30, 2020		48,958,829	$	175,745		10,109,847	$	10	$	9,295	$	(85,816	)	$	(76,511	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ATEA PHARMACEUTICALS, INC. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities
Net income (loss)	$	4,058		$	(31,603	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation expense		28,270			4,636
Depreciation and amortization expense		22			13
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		4,259			(2,781	)
Other assets		(227	)		—
Accounts payable		27,945			3,689
Accrued expenses and other liabilities		33,278			4,259
Deferred revenue		(109,187	)		—
Net cash used in operating activities		(11,582	)		(21,787	)
Cash flows from investing activities
Additions to property and equipment		—			(21	)
Net cash used in investing activities		—			(21	)
Cash flows from financing activities
Cash flows from financing activities
Proceeds from issuance of convertible preferred stock, net of issuance costs		—			106,631
Proceeds from issuance of common stock for exercise of stock options		1,323			27
Payments made for initial public offering costs		—			(1,128	)
Net cash provided by financing activities		1,323			105,530
Net increase (decrease) in cash, cash equivalents and restricted cash		(10,259	)		83,722
Cash, cash equivalents and restricted cash at the beginning of period		850,224			21,768
Cash, cash equivalents and restricted cash at the end of period	$	839,965		$	105,490
Cash, cash equivalents and restricted cash at the end of period:
Cash and cash equivalents	$	839,660		$	105,383
Restricted cash		305			107
Total cash, cash equivalents and restricted cash	$	839,965		$	105,490

Supplemental disclosure of noncash financing activities
Equity issuance costs included in accounts payable and accrued expenses	$	—		$	394

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ATEA PHARMACEUTICALS, INC. and Subsidiary

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

1. Nature of Business

Background

Atea Pharmaceuticals, Inc., together with its subsidiary Atea Pharmaceuticals Securities Corporation, is referred to on a consolidated basis as “the Company”.

The Company is a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing antiviral therapeutics to improve the lives of patients suffering from life-threatening viral infections.

On November 3, 2020, the Company completed an initial public offering of its common stock (the “IPO”). In connection with the IPO, the Company issued 14,375,000 shares of its common stock at $24.00 per share for net proceeds of $317,605 after deducting underwriting discounts and commissions and offering expenses. Upon closing of the IPO, all outstanding shares of the Company’s convertible preferred stock converted into 57,932,090 shares of common stock.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to clinical-stage biopharmaceutical companies. These risks include, but are not limited to, potential failure of preclinical and clinical studies, uncertainties associated with research and development activities generally, competition from technical innovations of others, dependence upon key personnel, compliance with governmental regulations, the need to obtain marketing approval for any product candidate that the Company may discover and develop, the need to gain broad acceptance among patients, payers and health care providers to successfully commercialize any product for which marketing approval is obtained and the need to secure and maintain adequate intellectual property protection for the Company’s proprietary technology and products. Further, the Company is currently dependent on third-party service providers for much of its preclinical research, clinical development and manufacturing activities. Product candidates currently under development will require significant amounts of additional capital, additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. Even if the Company is able to generate revenues from the sale of its product candidates, if approved, it may not become profitable or be able to sustain profitability. If the Company fails to become profitable or is unable to sustain profitability on a continuing basis, then it may be unable to continue its operations at planned levels and be forced to reduce its operations. The Company is also subject to risks associated with the COVID-19 global pandemic, including actual and potential delays associated with certain of its ongoing and anticipated trials, and potential negative impacts on the Company’s business operations and its ability to raise additional capital to finance its operations.

The Company may seek additional capital through one or more of a combination of financing through the sale of additional equity securities, debt financing, or funding in connection with any additional collaborative relationships it may enter into or other arrangements. There can be no assurance that the Company will be able to obtain such additional funding, on terms acceptable to the Company, on a timely basis or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s existing shareholders. The Company believes that its cash and cash equivalents of $839,660 as of September 30, 2021 will be sufficient to fund its operations as currently planned through at least 2023.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim condensed consolidated financial statements of the Company included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) as found in the Accounting Standards Codification (“ASC”), Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in

accordance with GAAP have been condensed or omitted from this report, as is permitted by such SEC rules and regulations. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2021.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020, the condensed consolidated statements of convertible preferred stock and stockholders’ equity (deficit) for the three and nine months ended September 30, 2021 and September 30, 2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2021, the results of its operations for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the three and nine months ended September 30, 2021 and 2020. The results for the nine months ended September 30, 2021 and 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2021, or any other interim period.

Use of Estimates

The preparation of unaudited financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in these accompanying notes. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors and assumptions that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, which include but are not limited to estimates of revenue recognition, accrued research and development expenses, income taxes and the valuation of common stock in connection with the issuance of stock-based awards prior to the Company’s IPO. Changes in estimates are recorded in the period in which they become known.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Atea Pharmaceuticals, Inc. and its wholly owned subsidiary, Atea Pharmaceuticals Securities Corporation. All intercompany amounts have been eliminated in consolidation.

Significant Accounting Policies

There were no changes in the Company’s significant accounting policies as described in the Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 30, 2021 except as discussed below.

Leases

The Company adopted Accounting Standards Updated (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”) effective January 1, 2021, using the modified retrospective method and utilized the effective date as its date of initial application, with prior periods presented in accordance with previous guidance under ASC 840, Leases (“ASC 840”).

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. The Company has elected not to recognize leases with an original term of one year or less on the unaudited condensed consolidated balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable.

Leases that are economically similar to the purchase of assets are generally classified as finance leases; otherwise the leases are classified as operating leases. Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease

term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

Net Income (Loss) Per Share Attributable to Common Stockholders

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities, including outstanding stock options. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options.

Prior to the Company’s IPO in November 2020, basic and diluted net loss per share attributable to common stockholders was determined using the two-class method, which is required for participating securities.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”), which requires a lessee to record a right-of-use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

In July 2018, an amendment was made that allows companies the option of using the effective date of the new standard as the initial application date (at the beginning of the period in which the new standard is adopted, rather than at the beginning of the earliest comparative period). This update includes a short-term lease exception for leases with a term of 12 months or less, in which a lessee can make an accounting policy election not to recognize the associated lease assets and lease liabilities on its balance sheet.

Additionally, in March 2019, the FASB issued ASU 2019-01 (“ASU No. 2019-01”). ASU No. 2019-01 clarifies the transition guidance related to interim disclosures provided in the year of adoption. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases, using classification criteria that are substantially similar to the previous guidance. For lessees, the recognition, measurement, and presentation of expenses and cash flows arising from a lease did not significantly change from previous U.S. GAAP. The modified retrospective method includes several optional practical expedients that entities may elect to apply, as well as transition guidance specific to nonstandard leasing transactions.

As the Company has elected to use the extended transition period for complying with new or revised accounting standards as available under the Jobs Act, the Company adopted the new standard effective January 1, 2021 using the modified retrospective method as of the beginning of the period of the adoption. The Company has elected the package of practical expedients permitted in ASC Topic 842. Accordingly, the Company accounted for its existing operating lease as an operating lease under the new guidance, without reassessing (a) whether the contracts contain a lease under ASC Topic 842, (b) whether classification of the operating leases would be different in accordance with ASC Topic 842, or (c) whether the unamortized initial direct costs would have met the definition of initial direct costs in ASC Topic 842 at lease commencement.

The adoption of this standard resulted in the recording of operating lease liabilities and right-of-use assets on the Company’s unaudited condensed consolidated balance sheet (see Note 9). The adoption of the standard did not have a material effect on the Company’s unaudited condensed consolidated statements of operations and comprehensive income (loss), unaudited condensed consolidated statements of cash flows or unaudited condensed consolidated statement of stockholders’ equity (deficit).

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with

Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. The Company adopted the standard effective January 1, 2021. The adoption of the standard did not have a material effect on the Company’s unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of operations and comprehensive income (loss), unaudited condensed consolidated statements of cash flows or unaudited condensed consolidated statement of stockholders’ equity (deficit).

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted the standard effective January 1, 2021. The adoption of the standard did not have a material effect on the Company’s unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of operations and comprehensive income (loss), unaudited condensed consolidated statements of cash flows or unaudited condensed consolidated statement of stockholders’ equity (deficit).

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements. The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The standard will be effective for the Company effective December 31, 2021 and the Company believes that the adoption of this standard will not have a material impact on its consolidated financial statements.

3. Collaboration Revenue

Background

In October 2020, the Company licensed to F. Hoffmann-LaRoche Ltd. and Genentech, Inc. (collectively, “Roche”) under a license agreement (the “Roche License Agreement”) ex-US rights to develop and commercialize certain of the Company’s compounds, including AT-527.

The Company is responsible for completing certain ongoing clinical and non-clinical and manufacturing activities at its own expense. These obligations are referred to as the Atea Ongoing Studies and the Atea Manufacturing Obligations, respectively. The parties are collaboratively executing a global development plan intended to support regulatory approvals and are sharing joint development costs equally.

The Roche License Agreement provided for a nonrefundable upfront payment of $350,000 which the Company received in November 2020. In addition, the Roche License Agreement further provides that Roche is obligated to pay the Company up to $330,000 in the aggregate upon the achievement of certain development and regulatory milestone events; up to $320,000 in the aggregate upon the achievement of certain sales based milestone events; and tiered royalties based on annual net sales of the products covered by the agreement, ranging between low double-digits and mid-twenties, subject to certain adjustments and limitations. The Company achieved a development milestone in the amount of $50,000 during the nine months ended September 30, 2021. Further, under the Roche License Agreement, the Company has a one time option to request that Roche co-promote with the Company in the United States products covered by the Roche License Agreement that are successfully developed and commercialized. Roche has the right to terminate the Roche License Agreement for convenience pursuant to the terms of the agreement.

Accounting Analysis

The Company concluded that the License Agreement is under the scope of ASC 808 as both parties will actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. ASC 808 provides that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all of the guidance in ASC 606 should be applied, including recognition, measurement, presentation, and disclosure requirements related to such unit of account. The unit-of-account guidance in ASC 808, which aligns with the guidance in ASC 606 (that is, a distinct good or service) is used when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606. Based on the Company’s analysis, it concluded that the delivery of the license to Roche, the performance of the Atea Ongoing Studies and the Atea Manufacturing Obligations should be accounted for under ASC 606. The Company’s efforts under the global development plan and certain Atea Manufacturing Obligations in the initial year of the contract, will be accounted for under ASC 808.

The Company concluded that the provision of the license to Roche, the performance of the Atea Ongoing Studies and the Atea Manufacturing Obligations should be combined as one performance obligation as Roche cannot receive the benefit of each promise without the other promises. Specifically, Roche is dependent on the Company’s expertise and ability to complete the Atea Ongoing Studies and the Atea Manufacturing Obligations, which cannot be performed by other third parties, in order to exploit the value from the license.

The initial transaction price was $350,000 which consisted of the upfront payment. The Company concluded that all other forms of variable consideration, including future development and regulatory milestones should be constrained at contract inception. As part of this conclusion, the Company assessed the stage of development and risk associated with remaining development required to achieve each milestone, including whether the achievement of certain milestones was outside the control of the Company. During the nine months ended September 30, 2021, the transaction price was increased to $400,000 which includes the $350,000 upfront payment and $50,000 related to the development milestone payment achieved during the nine months ended September 30, 2021. Sales based milestone payments and royalty payments qualify for the sales based royalty exception and will be recognized when the underlying sale transactions have occurred.

The transaction price is being recognized as collaboration revenue over the period in which the Company performs the Atea Ongoing Studies and the Atea Manufacturing Obligations. The Company concluded that an inputs method based on costs incurred compared to total estimated costs-to-complete approach most faithfully depicts the Company’s progress towards completion. Revenue recognized for the three months ended September 30, 2021 was calculated by applying the cumulative percent complete to the transaction price of $400,000 minus the cumulative revenue previously recognized.

The Company concluded that its efforts to complete the global development plan will be accounted for under ASC 808. The Company will account for expenses incurred and reimbursements made or received from Roche pursuant to ASC 730, Research and Development. As such, the Company will expense costs as incurred, including any reimbursements made to Roche, and recognize reimbursement received from Roche as a reduction of research and development expense.

The Company classifies all revenues recognized under the Roche License Agreement as collaboration revenues within the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss). For the three and nine months ended September 30, 2021, the Company recognized collaboration revenue of $32,811 and $159,187, respectively, related to the combined performance obligation. As of September 30, 2021, the Company had deferred revenue of $192,180 related to the Roche License Agreement. Deferred revenue is classified in current liabilities in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2021 as the performance obligation associated with the deferred revenue as of September 30, 2021 is expected to be completed within twelve months.

For the three and nine months ended September 30, 2021, costs reimbursable by Roche which are reflected as a reduction to operating expenses were $1,726 and $7,623, respectively. The Company recorded research and development expense of $25,257 and $62,986, respectively, related to its share of costs incurred by Roche. The net liability to Roche related to reimbursable costs was $44,264 as of September 30, 2021, with $18,414 recorded as accounts payable and $25,850 recorded as accrued expenses and other current liabilities in the accompanying unaudited condensed consolidated balance sheet.

4. Fair Value Measurements

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values: