SEC Filing | Atea Pharmaceuticals, Inc.

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10-Q

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 March 31, 2022


☐	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.)
225 Franklin Street, Suite 2100 Boston, MA	02110
(Address of principal executive offices)	(Zip Code)

(857) 284-8891

(Registrant’s telephone number, including area code)

125 Summer Street, Boston, MA 02110

(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 May 5, 2022, the registrant had 83,257,591 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 any future collaboration we may enter into;

•

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 COVID-19 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 I, 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 bemnifosbuvir 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 bemnifosbuvir, which we may not be able to recover if bemnifosbuvir is not approved for the treatment of COVID-19 or we are not successful at commercializing bemnifosbuvir.

•

The market for therapeutics for the treatment of COVID-19 may be reduced, perhaps significantly, if vaccines are effective and widely accepted.

•

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

•

The COVID-19 pandemic may materially and adversely affect our business opportunities, clinical trials 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 operating expenses 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 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 taxable income may be subject to certain limitations.

•

Our business is highly dependent on the success of our most advanced product candidates, including bemnifosbuvir. If we fail to successfully develop bemnifosbuvir for the treatment of COVID-19 or if our other product candidates for the treatment of hepatitis C ("HCV") or dengue fail in nonclinical or clinical development, or we are unable to obtain regulatory approval or successfully commercialize any of our product candidates, 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, 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.

•

We intend to develop certain of our product candidates in combination with other therapies, which exposes us to additional risks.

•

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 may suffer in the event of system failures, deficiencies or intrusions which could materially affect our results.

•

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 Stockholders’ Equity	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	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19

PART II.	OTHER INFORMATION	21
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
Item 5.	Other Information	82
Item 6.	Exhibits	83
SIGNATURES		84

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)


	March 31, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	705,545	$	764,375
Prepaid expenses and other current assets		7,687		8,028
Total current assets		713,232		772,403
Property and equipment, net		762		23
Restricted cash		305		305
Operating lease right-of-use assets, net		2,890		161
Total assets	$	717,189	$	772,892
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	3,657	$	4,534
Accrued expenses and other current liabilities		24,840		52,152
Current portion of operating lease liabilities		113		197
Total current liabilities		28,610		56,883
Operating lease liabilities		2,763		—
Income taxes payable		5,932		5,932
Total liabilities		37,305		62,815
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 March 31, 2022, and December 31, 2021		—		—
Common stock, $0.001 par value; 300,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 83,257,591 and 83,102,730 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		83		83
Additional paid-in capital		665,848		653,964
Retained earnings		13,953		56,030
Total stockholders’ equity		679,884		710,077
Total liabilities and stockholders’ equity	$	717,189	$	772,892

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 March 31,
	2022			2021
Collaboration revenue	$	—		$	65,985
Operating expenses
Research and development		29,633			26,571
General and administrative		12,542			8,759
Total operating expenses		42,175			35,330
Income (loss) from operations		(42,175	)		30,655
Interest income and other, net		98			58
Income (loss) before income taxes		(42,077	)		30,713
Income tax expense		—			—
Net income (loss) and comprehensive income (loss)	$	(42,077	)	$	30,713
Net income (loss) per share attributable to common stockholders
Basic	$	(0.51	)	$	0.37
Diluted	$	(0.51	)	$	0.34
Weighted-average common shares outstanding
Basic		83,176,408			82,577,836
Diluted		83,176,408			89,099,075

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

ATEA PHARMACEUTICALS, INC. and Subsidiary

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)


	Common Stock				Additional Paid-in		Retained			Total Stockholders’
	Shares		Amount		Capital		Earnings			Equity
Balance—December 31, 2021		83,102,730	$	83	$	653,964	$	56,030		$	710,077
Issuance of common stock upon exercise of stock options		154,861		—		223		—			223
Stock-based compensation expense		—		—		11,661		—			11,661
Net income (loss)		—		—		—		(42,077	)		(42,077	)
Balance—March 31, 2022		83,257,591	$	83	$	665,848	$	13,953		$	679,884


	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	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

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)


	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities
Net income (loss)	$	(42,077	)	$	30,713
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation expense		11,661			7,273
Non-cash lease expense		16			—
Depreciation and amortization expense		7			7
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		275			1,151
Other assets		—			(356	)
Accounts payable		(877	)		3,732
Accrued expenses and other liabilities		(28,014	)		6,628
Deferred revenue		—			(65,985	)
Net cash used in operating activities		(59,009	)		(16,837	)
Cash flows from investing activities
Additions to property and equipment		(44	)		—
Net cash used in investing activities		(44	)		—
Cash flows from financing activities
Cash flows from financing activities
Proceeds from issuance of common stock for exercise of stock options		223			471
Net cash provided by financing activities		223			471
Net increase (decrease) in cash, cash equivalents and restricted cash		(58,830	)		(16,366	)
Cash, cash equivalents and restricted cash at the beginning of period		764,680			850,224
Cash, cash equivalents and restricted cash at the end of period	$	705,850		$	833,858
Cash, cash equivalents and restricted cash at the end of period:
Cash and cash equivalents	$	705,545		$	833,751
Restricted cash		305			107
Total cash, cash equivalents and restricted cash	$	705,850		$	833,858

Supplemental cash flow information:
Property and equipment purchases unpaid at period end	$	702		$	—
Right of use assets obtained in exchange for operating lease liabilities	$	2,938		$	—

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 severe viral infections.

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 new 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 stockholders. The Company believes that its cash and cash equivalents of $705,545 as of March 31, 2022 will be sufficient to fund its operations as currently planned through at least twelve months from the issuance of this Quarterly Report on Form 10-Q.

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, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2022.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2022 and 2021, and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 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 March 31, 2022, the results of its operations for the three months ended March 31, 2022 and 2021 and its cash flows for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, 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 accrued research and development expenses, valuation of stock-based awards, valuation of operating lease right-of-use assets and lease liabilities and income taxes. 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, 2021 filed with the SEC on February 28, 2022.

Reclassification

Certain items in the prior year’s condensed consolidated financial statements have been reclassified to conform to the current presentation.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the adoption of recently issued standards have or may have a material impact on its consolidated financial statements and disclosures.

3. Collaboration Revenue

Background

In October 2020, the Company entered into a License Agreement (the “Roche License Agreement”) with F. Hoffmann-LaRoche Ltd. and Genentech, Inc. (together, “Roche”) under which the Company granted an exclusive license for certain development and commercialization rights related to bemnifosbuvir outside of the United States (other than for certain HCV uses) to Roche.

On November 12, 2021, Roche provided the Company with a notice of termination of the Roche License Agreement. Under the terms of the Roche License Agreement, the termination was effective in February 2022. Upon termination, the rights and licenses granted by the Company to Roche under the Roche License Agreement were returned to the Company, resulting in the Company having all rights to continue the clinical development

and future commercialization of bemnifosbuvir worldwide. Global development plan activities and related cost sharing between the parties continued through the effective date of the termination.

The Company concluded that the notice of termination represented a contract modification for accounting purposes. The Company further concluded that upon receipt of the notice of termination, all of the Company's performance obligations had been completely satisfied. As a result, the Company recognized all remaining deferred revenue as collaboration revenue within the consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2021.

The Company classified all revenues recognized under the Roche License Agreement as collaboration revenue within the accompanying consolidated statements of operations and comprehensive income (loss). For the three months ended March 31, 2021, the Company recognized collaboration revenue of $65,985 related to the Roche License Agreement.

The activities to complete the global development plan were accounted for under ASC 808. Expenses incurred and reimbursements made or received from Roche were accounted for pursuant to ASC 730, Research and Development. As such, the Company was expensing costs as incurred, including any reimbursements made to Roche, and recognizing reimbursement received from Roche as a reduction of research and development expense through the effective date of the termination.

For the three months ended March 31, 2022 and 2021, costs reimbursable by Roche, which are reflected as a reduction to operating expenses were $845 and $3,419, respectively. The Company recorded research and development expense of $9,578 and $14,517 during the three months ended March 31, 2022 and 2021, respectively, related to its share of costs incurred by Roche. As of March 31, 2022 and December 31, 2021, the Company recorded accrued expenses of $8,733 and $10,417, respectively, related to amounts payable to Roche pursuant to the cost share agreement.

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:


	Fair Value Measurements as of March 31, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	656,853	$	—	$	—	$	656,853
Total cash equivalents	$	656,853	$	—	$	—	$	656,853


	Fair Value Measurements as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	731,767	$	—	$	—	$	731,767
Total cash equivalents	$	731,767	$	—	$	—	$	731,767

The Company’s assets with fair value categorized as Level 1 within the fair value hierarchy include money market funds. Money market funds are publicly traded mutual funds and are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

There were no transfers among Level 1, Level 2 or Level 3 categories in the three months ended March 31, 2022 and 2021.

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	March 31, 2022		December 31, 2021
Research and development, including manufacturing and clinical expenditures	$	17,280	$	18,080
License fee		-		25,000
Income taxes		2,572		2,572
Payroll and payroll related		1,914		4,209
Professional fees and other		3,074		2,291
Total accrued expenses and other current liabilities	$	24,840	$	52,152

6. Common Stock

At March 31, 2022, the authorized capital of the Company included 300,000,000 shares of common stock, of which 83,257,591 shares of common stock were issued and outstanding. On all matters to be voted upon by the holders of common stock, holders of common stock are entitled to one vote per share. The holders of common stock have no preemptive, redemption or conversion rights.

7. Stock-based Compensation

In October 2020, the Company’s stockholders approved the Company’s 2020 Incentive Award Plan (the “2020 Plan”). The 2020 Plan provided for the initial issuance of up to 7,924,000 shares of common stock and for grant of incentive stock options or other incentive awards to employees, officers, directors and consultants of the Company. The number of shares of common stock that may be issued under the 2020 Plan is also subject to increase on the first day of each calendar year equal to the lesser of i) 5% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year or ii) such smaller number of shares of common stock as is determined by the board of directors. In January 2022 and 2021, the shares of common stock available for issuance under the 2020 Plan were increased by 4,155,136 and 4,130,847 shares, respectively.

The 2020 Plan replaced and is the successor of the 2013 Equity Incentive Plan, as amended (the “2013 Plan”). Any cancellation of outstanding option awards to purchase up to 5,982,266 shares of common stock under the 2013 Plan will be made available for grant under 2020 Plan.

As of March 31, 2022 there were 8,373,712 shares of common stock remaining available for future issuance under the 2020 Plan.

Stock Options

During the three months ended March 31, 2022 and 2021, the Company granted 2,900,833 and 2,212,250 options, respectively, to employees with an aggregate grant date fair market value of $14,811 and $112,471, respectively.

Restricted Stock Units

During the three months ended March 31, 2022, the Company granted 182,350 restricted stock units, to employees with an aggregate grant date fair market value of $1,302. No restricted units were granted during the three months ended March 31, 2021. The restricted stock unit awards vest in three annual installments, the first of which will occur on January 31, 2023.

Performance-based Restricted Stock Units

During the three months ended March 31, 2022, the Company granted 742,070 performance-based restricted stock units, to employees with an aggregate grant date fair market value of $5,298. No performance-based restricted stock units were granted during the three months ended March 31, 2021. The performance stock unit awards provide for a performance period from February 1, 2022 through January 31, 2025 to complete up to six defined performance metrics. The percentage of awards eligible to vest will be determined based on the number of metrics achieved during the performance period and may range from 0% to 200%. The vesting of any eligible awards will occur in equal installments on January 31, 2025 and January 31, 2026.

Stock-based Compensation Expense

Stock-based compensation expense by award type included within the unaudited condensed consolidated statements of operations and comprehensive income (loss) was as follows:


	Three Months Ended March 31,
	2022		2021
Stock options	$	11,591	$	7,273
Restricted stock units		70		—
Performance-based stock units		—		—
Total stock-based compensation expense	$	11,661	$	7,273

Stock-based compensation expense is classified as follows:


	Three Months Ended March 31,
	2022		2021
Research and development expense	$	5,428	$	3,198
General and administrative		6,233		4,075
Total stock-based compensation expense	$	11,661	$	7,273

8. Net Income (Loss) Per Share Attributable to Common Stockholders

Basic and diluted earnings per share are calculated as follows:


	Three Months Ended March 31,
	2022			2021
Net income (loss)	$	(42,077	)	$	30,713
Weighted average common shares outstanding, basic		83,176,408			82,577,836
Dilutive effect of outstanding stock options		—			6,521,239
Weighted average common shares outstanding, diluted		83,176,408			89,099,075
Net income (loss) per share, basic	$	(0.51	)	$	0.37
Net income (loss) per share, diluted	$	(0.51	)	$	0.34

Stock options for the purchase of 13,182,944 weighted average shares were excluded from the computation of the net loss per share attributable to common stockholders for the three months ended March 31, 2022 due to net loss during the period as their effect is anti-dilutive. Stock options for the purchase of 1,532,944 weighted average shares were excluded from the computation of diluted net income per share attributable to common stockholders for the three months ended March 31, 2021 because those options had an anti-dilutive impact due to the assumed proceeds per share using the treasury stock method being greater than the average fair value of the Company’s common shares for the period.

9. Leases

The Company’s building leases are comprised of office space under non-cancelable operating leases. As of March 31, 2022, the Company’s principal office was located at 125 Summer Street in Boston, Massachusetts pursuant to a lease that expires in July 2022. In July 2021, the Company entered into a lease agreement pursuant to which the Company leased additional office space in Boston, Massachusetts at 225 Franklin Street (the "225 Lease"). The 225 Lease commencement date was January 1, 2022 and the 225 Lease runs through December 31, 2026. The leases do not contain any options for renewal or extension. The Company began to occupy the additional space in April 2022.

In connection with the 225 Lease commencement, the Company recorded a right-of-use asset and operating lease liability of $2,938 and $2,873 as of January 1, 2022.

Future minimum payments under the Company’s operating leases as of March 31, 2022 were as follows:


	As of March 31,
	2022
2022	$	706
2023		805
2024		821
2025		838
2026		855
Total lease payments		4,025
Less amount representing implied interest		(272	)
Less amount representing tenant improvement allowance		(877	)
Total lease liability	$	2,876
Current portion of operating lease liabilities	$	113
Noncurrent portion of operating lease liabilities	$	2,763

For the three months ended March 31, 2022 and 2021, the Company recorded operating lease costs of $232 and $76, respectively relating to its operating lease agreements.

The 225 Lease includes a leasehold improvement allowance of $877 for certain improvements the Company is constructing in the space. The Company has not received or recorded any amounts related to the improvement allowance as of March 31, 2022.

10. Income Taxes

The Company recorded no provision for federal or state income taxes for the three months ended March 31, 2022 and 2021, respectively. The Company maintained a full valuation allowance for the three months ended March 31, 2022 and 2021 due to uncertainty regarding ability to utilize deferred tax assets.

11. Commitments and Contingencies

The Company has an agreement with a consultant that requires payment of a success fee calculated as a percentage of certain product sales, subject to a cumulative maximum payout of $5.0 million. This success payment is contingent upon the occurrence of future events and the timing and likelihood of such payment is neither probable nor estimable.

Indemnification

The Company enters into certain types of contracts that contingently require the Company to indemnify various parties against claims from third parties. These contracts primarily relate to (i) the Company’s bylaws, under which the Company must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship, (ii) contracts under which the Company must indemnify directors and certain officers and consultants for liabilities arising out of their relationship, and (iii) procurement, service or license agreements under which the Company may be required to indemnify vendors, service providers or licensees for certain claims, including claims that may be brought against them arising from the Company’s acts or omissions with respect to the Company’s products, technology, intellectual property or services.

From time to time, the Company may receive indemnification claims under these contracts in the normal course of business. In the event that one or more of these matters were to result in a claim against the Company, an adverse outcome, including a judgment or settlement, may cause a material adverse effect on the Company’s future business, operating results or financial condition. It is not possible to determine the maximum potential amount potentially payable under these contracts since the Company has no history of prior indemnification claims and the unique facts and circumstances involved in each particular claim will be determinative.

12. Benefit Plan

During the year ended December 31, 2021, the Company implemented a defined contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers substantially all employees who meet minimum age and service requirements. Under the terms of the 401(k) Plan, the Company records matching contributions up to 4% of each participant’s eligible compensation. During the three months ended

March 31, 2022 and 2021 the Company recognized expense of $240 and $0 relating to matching contributions to the 401(k) Plan.

13. Related Party Transactions

During the year ended December 31, 2021, the Company entered into a consulting agreement with an entity controlled by one of its directors. The agreement provides for an annual retainer of $110; the Company recognized expense in connection with the consulting agreement in the amount of $27 and $0, respectively, for the three months ended March 31, 2022 and 2021.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K, dated December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A, “Risk Factors” and other factors set forth in other parts of this Quarterly Report on Form 10-Q.

Overview

We are a clinical stage biopharmaceutical company focused on discovering, developing and commercializing antiviral therapeutics to improve the lives of patients suffering from severe viral infections. Leveraging our deep understanding of antiviral drug development, nucleos(t)ide biology, and medicinal chemistry, we have built a proprietary purine nucleos(t)ide prodrug platform to develop novel product candidates to treat single stranded ribonucleic acid viruses, which are a prevalent cause of severe viral diseases. Currently, we are focused on the development of orally available, potent, and selective nucleos(t)ide prodrugs for difficult to treat, life-threatening viral infections, including SARS-CoV-2, the virus that causes COVID-19, dengue virus, chronic hepatitis C infection (“HCV”), and respiratory syncytial virus (“RSV”).

COVID 19 – Bemnifosubvir

Our most advanced product candidate for the treatment of COVID-19 is an investigational, novel, orally administered guanosine nucleotide analog polymerase inhibitor. Bemnifosbuvir has a unique dual mechanism of action at both the RNA-dependent RNA polymerase (RdRp) and NiRAN active sites on the highly conserved SARS-CoV-2 RNA polymerase.

Topline Efficacy Results from the MORNINGSKY Trial: In a topline analysis of data from the MORNINGSKY trial, the primary endpoint, time to symptom alleviation, was not achieved. However, a 71% reduction in hospitalization (2.9% versus 10%) was observed (p=0.047, unadjusted, exploratory) in the bemnifosbuvir arm (n=137) versus placebo (n=70). There were no deaths in the trial.

The study enrolled a broad patient population of whom approximately 50% were high risk; 50% were standard risk; 28% of patients were vaccinated; and 56% were seropositive at baseline. Consistent with previous studies, bemnifosbuvir was generally well tolerated. Adverse events leading to treatment discontinuation were 3% for bemnifosbuvir versus 7% for placebo and there were no gastrointestinal-related events leading to treatment discontinuation.

MORNINGSKY was a randomized, double-blind, multi-center, placebo-controlled Phase 3 trial designed to evaluate the antiviral activity, safety and pharmacokinetics of bemnifosbuvir in up to 1,400 patients randomized 2:1 to receive bemnifosbuvir 550 mg twice-daily (BID) or placebo in an outpatient setting. The study was closed out early in December 2021 having enrolled and treated 216 patients of which 207 were evaluable for efficacy. Atea plans to present the full results of this study at an upcoming scientific meeting.

Final Analysis from Phase 2 Hospitalized Study in High-Risk Patients with COVID-19: Final clinical efficacy results from the Phase 2 hospitalized study in high-risk patients with COVID-19 (n=83) suggest potential clinical benefits. The overall rate of disease progression was low, which had an impact on the ability to assess the primary endpoint of progression of respiratory insufficiency (PRI) rate, showing a 7.5% PRI rate for bemnifosbuvir versus a 10% PRI rate for placebo (primary endpoint). There were three deaths in the study, no deaths reported with patients treated with bemnifosbuvir versus three deaths with placebo (secondary endpoint).

Final virology results in 83 patients (secondary endpoint) were consistent with previously reported interim data of 62 evaluable patients from this study. Bemnifosbuvir was generally well tolerated with no drug related serious adverse events and no adverse events leading to treatment discontinuation were observed. The sample size evaluated was insufficient for statistical comparisons.

The global Phase 2 trial was a randomized, double-blind, placebo-controlled, multi-center study to evaluate bemnifosbuvir in patients with moderate COVID-19 in the hospital setting. The key inclusion criteria for this study were adult patients over 18 years and older with risk factors such as obesity, diabetes and hypertension. Study objectives were to assess safety, tolerability, and clinical and antiviral efficacy. Patients in Cohort A were

randomized within five days of symptom onset to receive either bemnifosbuvir 550 mg BID or placebo and were dosed for five days. An additional cohort evaluating bemnifosbuvir 1100 mg BID versus placebo enrolled a very small number of patients prior to closing out early due to the evolving nature of the standard of care in the hospital setting.

Next Steps for Bemnifosbuvir Clinical Development for COVID-19: In light of the new MORNINGSKY outpatient and Phase 2 hospitalized data for bemnifosbuvir, we are pursuing interactions with regulatory authorities to review the data package and to discuss the next steps in our clinical development program for COVID-19.

HCV – Bemnifosbuvir in combination with ruzasvir

For the treatment of chronic HCV infection, we are advancing a novel combination of bemnifosbuvir and ruzasvir, an investigational nonstructural protein 5A (“NS5A”) inhibitor that we exclusively in-licensed from Merck in December 2021. As single agents, both bemnifosbuvir and ruzasvir have demonstrated potent pan-genotypic antiviral activity against HCV. We are currently manufacturing clinical trial supplies of ruzasvir and are evaluating clinical trial designs for a Phase 2 combination study of bemnifosbuvir and ruzasvir.

Dengue – AT-752

Dengue is a mosquito-borne viral infection that infects up to 400 million people worldwide a year, causing substantial public health and economic burden. Currently there are no antiviral therapies approved by either the U.S. Food and Drug Administration (“FDA”) or the European Commission. To address this unmet medical need, we are developing AT-752, an oral, purine nucleotide prodrug product candidate for the treatment of dengue. AT-752 targets the inhibition of the dengue viral polymerase and, in preclinical studies, the drug candidate showed potent in vitro activity against all dengue serotypes tested, as well as potent in vivo antiviral activity in small animal models.

We have initiated the global Phase 2 DEFEND-2 (DEngue Fever END) study of AT-752 for the treatment of dengue. The randomized, double-blind, placebo-controlled study will evaluate multiple doses of AT-752 and enroll up to 60 adult patients infected with dengue. The primary objective of the study is to evaluate antiviral activity, with change from baseline in dengue virus (DENV) viral load as the primary endpoint [DENV RNA by reverse transcription-polymerase chain reaction (RT-PCR)].

In addition to the DEFEND-2 study, we have initiated a dengue human challenge trial. This trial, which is being conducted exclusively in the United States, is designed to evaluate the effect of AT-752 in healthy volunteers who are challenged with an attenuated DENV-1 virus strain after receiving AT-752 or placebo.

Roche collaboration

In October 2020, we entered into a License Agreement (the “Roche License Agreement”) with F. Hoffmann-LaRoche Ltd. and Genentech, Inc. (together, “Roche”) under which we granted an exclusive license for certain development and commercialization rights related to bemnifosbuvir outside of the United States (other than for certain HCV uses) to Roche. As partial consideration, Roche paid us an upfront payment of $350.0 million which was received in November 2020. Additionally, upon realization of a development milestone in June 2021, we received an additional $50.0 million from Roche.

In November 2021, we received notice from Roche that they had elected to terminate the Roche License Agreement in its entirety on a worldwide basis including Japan, with an effective date of February 10, 2022. In December 2021, we delivered to Roche notice that we intended to continue the development of bemnifosbuvir and we have been working with Roche to effect an orderly wind down of activities in accordance with the terms of the Roche License Agreement. The obligations of Roche to equally share the costs associated with development activities terminated on February 10, 2022. We are now responsible for, and alone will bear the costs associated with the development of bemnifosbuvir. Additionally, we remain liable to Roche for certain expenses associated with transition related activities occurring after the effective date of the termination of the Roche License Agreement.

As a result of the termination of the Roche License Agreement, we have regained worldwide exclusive rights from Roche to research, develop, manufacture and commercialize bemnifosbuvir in all fields of use.

Financial Operations Overview

As of March 31, 2022, we had cash and cash equivalents of $705.5 million. Net cash used in operating activities was $59.0 million for the three months ended March 31, 2022.

We expect that our net cash used in operating activities will increase significantly as we advance our product candidates through preclinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. In addition, we may incur additional costs as we continue to operate as a public company. We believe that our available cash and cash equivalents will be sufficient to fund our planned operations through at least 2025.

We do not have any products approved for sale and have not generated any product revenue since inception. We do not anticipate generating any revenue from product sales for the foreseeable future. Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.

We plan to continue to use third-party service providers, including contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”), to carry out our preclinical and clinical development and to manufacture and supply the materials to be used during the development and commercialization of our product candidates.

As we continue to advance our programs, we expect to incur significantly higher expenses over the next several years. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

•

continue clinical development of bemnifosbuvir for the treatment of COVID-19;

•

continue clinical development of AT-752 for the treatment of dengue;

•

initiate clinical development of bemnifosbuvir and ruzasvir for the treatment of HCV;

•

continue discovery and IND-enabling activities in anticipation of a nominating a product candidate for the treatment of RSV;

•

maintain, expand, protect and enforce our intellectual property portfolio;

•

hire additional research, development and administrative personnel; and

•

establish commercialization capabilities if we are successful in developing our product candidates.

Components of Results of Operations

Revenue

To date, we have not generated any revenue from product sales. Our revenue has been collaboration revenue solely derived from the Roche License Agreement, which was terminated in February 2022. If our development efforts for our product candidates are successful and result in commercialization, we may generate additional revenue in the future from a combination of product sales or payments from collaboration or license agreements that we may enter into with third parties.

Operating Expenses

Research and Development Expenses

Substantially all of our research and development expenses consist of expenses incurred in connection with the development of our product candidates. These expenses include fees paid to third parties, including CROs and CMOs, to conduct certain research and development activities on our behalf, consulting costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities attributable to research and development

personnel. We expense both internal and external research and development expenses as they are incurred. In circumstances where amounts have been paid in advance or in excess of costs incurred, we record a prepaid expense, which is expensed as services are performed or goods are delivered.

A significant portion of our research and development costs have been external costs, which we track by therapeutic area. Our internal research and development costs are primarily personnel-related costs, including stock-based compensation, facility costs, including depreciation and lab consumables. We have not historically tracked our internal research and development expenses by therapeutic area as they are deployed across multiple programs.

As discussed in Note 3 to our unaudited condensed consolidated financial statements, during the term of the Roche License Agreement which terminated in February 2022, we and Roche shared certain manufacturing and clinical development costs on a 50/50 basis. Billings to us by Roche for our percentage share of such expenses are recorded in research and development expenses. While these costs represented a material portion of our total expenses through March 31, 2022 we do not expect such costs to be a material portion of our global expenses in the future.

The following table summarizes our external research and development expenses by indication and internal research and development expenses:


	Three Months Ended March 31,
	2022		2021
	(in thousands)
COVID-19 external costs	$	13,331	$	18,113
Dengue external costs		3,227		1,279
HCV external costs		1,424		15
RSV external costs		537		396
Internal research and development costs		11,114		6,768
Total research and development costs	$	29,633	$	26,571

We are focusing substantially all of our resources on the development of our product candidates, particularly bemnifosbuvir. We expect our research and development expenses to increase substantially for at least the next few years, as we seek to initiate additional clinical trials for our product candidates, complete our clinical programs, pursue regulatory approval of our product candidates and prepare for the possible commercialization of these product candidates. Predicting the timing or cost to complete our clinical programs or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.

General and Administrative Expenses

General and administrative expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, allocated overhead, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses may increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with Nasdaq and SEC requirements, investor relations costs and director and officer insurance premiums associated with being a public company.

Interest Income and Other, Net

Interest income and other, net, consists primarily of interest income earned on our cash and cash equivalents.

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the periods indicated:


	Three Months Ended March 31,
	2022			2021		Change
	(in thousands)
Collaboration revenue	$	—		$	65,985	$	(65,985	)
Operating expenses:
Research and development		29,633			26,571		3,062
General and administrative		12,542			8,759		3,783
Total operating expenses		42,175			35,330		6,845
Income (loss) from operations		(42,175	)		30,655		(72,830	)
Interest income and other, net		98			58		40
Income (loss) before income taxes		(42,077	)		30,713		(72,790	)
Income tax expense		—			—		—
Net income (loss) and comprehensive income (loss)	$	(42,077	)	$	30,713	$	(72,790	)

Revenue

Collaboration revenue for the three months ended March 31, 2021 was derived from the Roche License Agreement that was executed in October 2020 and terminated in February 2022. As discussed in Note 3 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, following receipt in November 2021 of the notice from Roche terminating the agreement, the Company recognized all remaining revenue and consequently we had no collaboration revenue for the three months ended March 31, 2022.

Research and Development Expenses

Research and development expenses increased by $3.1 million from $26.6 million for the three months ended March 31, 2021 to $29.7 million for the three months ended March 31, 2022. Research and development expenses primarily consists of external expenses incurred related to services provided by the CROs and CMOs in conjunction with the advancement of product candidates, including $9.6 million and $14.5 million for the three months ended March 31, 2022 and 2021, respectively, related to our share of costs incurred by Roche. In addition, increase in internal spend consists primarily of salaries and bonuses, benefits and stock-based compensation expense of $2.2 million for our research and product development employees and consulting fees and other research and development expenses. Research and development expenses include a reduction of $0.9 million and $3.4 million, respectively, representing Roche’s share of certain expenses we incurred that are subject to ASC 808 as discussed in Note 3 to our unaudited condensed consolidated financial statements for the three months ended March 31, 2022 and 2021.

General and Administrative Expenses

General and administrative expenses increased by $3.7 million from $8.8 million for the three months ended March 31, 2021 to $12.5 million for the three months ended March 31, 2022. The increase in general and administrative expenses was primarily due to the expansion of our organization resulting in an increase in payroll and personnel-related expenses of $2.4 million, including salaries, benefits and stock-based compensation expense of $2.1 million and an increase in other general and administrative expenses of $0.8 million.

Interest Income and Other, Net

Interest income and other, net, remained substantially consistent during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Income Tax Expense

Income tax expense was $0 for the three months ended March 31, 2022 and 2021.