UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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Emerging growth company |
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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
As of May 5, 2022, the registrant had
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:
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.
i
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:
ii
iii
Table of Contents
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PART I. |
1 |
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Item 1. |
1 |
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1 |
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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
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4 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
19 |
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PART II. |
21 |
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Item 1. |
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Item 1A. |
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Item 2. |
82 |
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Item 5. |
82 |
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Item 6. |
83 |
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84 |
iv
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)
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March 31, |
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December 31, |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Restricted cash |
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Operating lease right-of-use assets, net |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of operating lease liabilities |
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Total current liabilities |
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Operating lease liabilities |
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— |
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Income taxes payable |
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Total liabilities |
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(see Note 11) |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
ATEA PHARMACEUTICALS, INC. and Subsidiary
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended |
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2022 |
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2021 |
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Collaboration revenue |
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$ |
— |
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$ |
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Operating expenses |
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Research and development |
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General and administrative |
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Total operating expenses |
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Income (loss) from operations |
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Interest income and other, net |
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Income (loss) before income taxes |
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Income tax expense |
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— |
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— |
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Net income (loss) and comprehensive income (loss) |
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$ |
( |
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$ |
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Net income (loss) per share attributable to common |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted-average common shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ATEA PHARMACEUTICALS, INC. and Subsidiary
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)
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Common Stock |
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Additional |
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Retained |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Equity |
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Balance—December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock upon exercise of |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net income (loss) |
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— |
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— |
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— |
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( |
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( |
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Balance—March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance—December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock upon exercise of |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net income (loss) |
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— |
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— |
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— |
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Balance—March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ATEA PHARMACEUTICALS, INC. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
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Three Months Ended |
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2022 |
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2021 |
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Cash flows from operating activities |
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Net income (loss) |
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$ |
( |
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$ |
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Adjustments to reconcile net income (loss) to net cash used in |
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Stock-based compensation expense |
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Non-cash lease expense |
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— |
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Depreciation and amortization expense |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Other assets |
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— |
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( |
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Accounts payable |
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( |
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Accrued expenses and other liabilities |
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( |
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Deferred revenue |
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— |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Additions to property and equipment |
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( |
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— |
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Net cash used in investing activities |
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( |
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— |
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Cash flows from financing activities |
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Cash flows from financing activities |
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Proceeds from issuance of common stock for exercise of stock options |
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Net cash provided by financing activities |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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( |
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( |
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Cash, cash equivalents and restricted cash at the beginning of period |
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Cash, cash equivalents and restricted cash at the end of period |
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$ |
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$ |
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Cash, cash equivalents and restricted cash at the end of period: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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Supplemental cash flow information: |
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Property and equipment purchases unpaid at period end |
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$ |
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$ |
— |
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Right of use assets obtained in exchange for operating |
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$ |
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$ |
— |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
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 $
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.
5
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
6
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 $
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 $
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:
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Fair Value Measurements as of |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash equivalents |
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Money market funds |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Total cash equivalents |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Fair Value Measurements as of |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash equivalents |
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Money market funds |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Total cash equivalents |
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$ |
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$ |
— |
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$ |
— |
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$ |
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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.
7
5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
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March 31, |
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December 31, |
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Research and development, including manufacturing and clinical expenditures |
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$ |
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$ |
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License fee |
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Income taxes |
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Payroll and payroll related |
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Professional fees and other |
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Total accrued expenses and other current liabilities |
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$ |
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$ |
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6. Common Stock
At March 31, 2022, the authorized capital of the Company included
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
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
As of March 31, 2022 there were
Stock Options
During the three months ended March 31, 2022 and 2021, the Company granted
Restricted Stock Units
During the three months ended March 31, 2022, the Company granted
Performance-based Restricted Stock Units
During the three months ended March 31, 2022, the Company granted
8
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:
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Three Months Ended |
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2022 |
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2021 |
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Stock options |
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$ |
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$ |
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Restricted stock units |
|
|
|
|
|
— |
|
|
Performance-based stock units |
|
|
— |
|
|
|
— |
|
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
Stock-based compensation expense is classified as follows:
|
|
Three Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Research and development expense |
|
$ |
|
|
$ |
|
||
General and administrative |
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
8. Net Income (Loss) Per Share Attributable to Common Stockholders
Basic and diluted earnings per share are calculated as follows:
|
|
Three Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
|
|
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
||
Dilutive effect of outstanding stock options |
|
|
— |
|
|
|
|
|
Weighted average common shares outstanding, diluted |
|
|
|
|
|
|
||
Net income (loss) per share, basic |
|
$ |
( |
) |
|
$ |
|
|
Net income (loss) per share, diluted |
|
$ |
( |
) |
|
$ |
|
Stock options for the purchase of
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
In connection with the 225 Lease commencement, the Company recorded a right-of-use asset and operating lease liability of $
9
Future minimum payments under the Company’s operating leases as of March 31, 2022 were as follows:
|
|
As of March 31, |
|
|
|
|
2022 |
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Total lease payments |
|
|
|
|
Less amount representing implied interest |
|
|
( |
) |
Less amount representing tenant improvement allowance |
|
|
( |
) |
Total lease liability |
|
$ |
|
|
Current portion of operating lease liabilities |
|
$ |
|
|
Noncurrent portion of operating lease liabilities |
|
$ |
|
For the three months ended March 31, 2022 and 2021, the Company recorded operating lease costs of $
The 225 Lease includes a leasehold improvement allowance of $
10. Income Taxes
The Company recorded
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 $
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
10
March 31, 2022 and 2021 the Company recognized expense of $
13. Related Party Transactions
During the year ended December 31, 2021, the Company entered into a consulting agreement with an entity controlled by
11
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
12
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.
13
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:
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
14
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 |
|
|||||
|
|
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.
15
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 |
|
|
|
|
||||||
|
|
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.
16