10-Q
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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 June 30, 2022

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: 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)

 

 

(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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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 August 5, 2022, the registrant had 83,258,603 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 potential of bemnifosbuvir to retain antiviral activity against circulating COVID-19 variants of concern and to treat COVID-19;
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 Risk 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. The 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,” and 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:

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, we are not successful at commercializing bemnifosbuvir or bemnifosbuvir is rendered inferior or obsolete due to rapid changes in COVID -19 epidemiology as a result of the emergence of new SARS-CoV-2 variants or subvariants.
The market for new therapeutics for the treatment of COVID-19 may be reduced, perhaps significantly, if vaccines and current therapeutics remain effective in minimizing serious consequences of the disease.
Bemnifosbuvir will face significant competition from other treatments for COVID-19 that are currently marketed or are in development.
The COVID-19 pandemic and future variant fueled pandemic surges may materially and adversely affect our business opportunities, clinical trials and financial results.
We have a limited operating history and no organizational 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, including enrollment of patients in clinical trials, is an expensive, lengthy and uncertain process. 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.

ii


 

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.
If our information systems, or those maintained on our behalf, fail or suffer security breaches, such events could result in, without limitation, the following: a significant disruption of our product development programs; an inability to operate our business effectively; unauthorized access to or disclosure of the personal information we process; and other adverse effects on our business, financial condition, results of operations and prospects.
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

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

 

 

 

PART II.

OTHER INFORMATION

23

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

84

Item 5.

Other Information

85

Item 6.

Exhibits

86

SIGNATURES

87

 

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)

 

 

 

June 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

684,480

 

 

$

764,375

 

Prepaid expenses and other current assets

 

 

4,971

 

 

 

8,028

 

Total current assets

 

 

689,451

 

 

 

772,403

 

Property and equipment, net

 

 

1,896

 

 

 

23

 

Restricted cash

 

 

305

 

 

 

305

 

Operating lease right-of-use assets, net

 

 

2,686

 

 

 

161

 

Total assets

 

$

694,338

 

 

$

772,892

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

13,885

 

 

$

4,534

 

Accrued expenses and other current liabilities

 

 

10,492

 

 

 

52,152

 

Current portion of operating lease liabilities

 

 

730

 

 

 

197

 

Total current liabilities

 

 

25,107

 

 

 

56,883

 

Operating lease liabilities

 

 

2,766

 

 

 

 

Income taxes payable

 

 

6,008

 

 

 

5,932

 

Total liabilities

 

 

33,881

 

 

 

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 June 30, 2022,
   and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 shares authorized
   as of June 30, 2022 and December 31, 2021;
   
83,257,591 and 83,102,730 shares issued and outstanding
   as of June 30, 2022 and December 31, 2021, respectively

 

 

83

 

 

 

83

 

Additional paid-in capital

 

 

677,756

 

 

 

653,964

 

Retained earnings (accumulated deficit)

 

 

(17,382

)

 

 

56,030

 

Total stockholders’ equity

 

 

660,457

 

 

 

710,077

 

Total liabilities and stockholders’ equity

 

$

694,338

 

 

$

772,892

 

 

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)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Collaboration revenue

 

$

 

 

$

60,391

 

 

$

 

 

$

126,376

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

19,858

 

 

 

39,803

 

 

 

49,491

 

 

 

66,375

 

General and administrative

 

 

12,437

 

 

 

11,901

 

 

 

24,979

 

 

 

20,658

 

Total operating expenses

 

 

32,295

 

 

 

51,704

 

 

 

74,470

 

 

 

87,033

 

Income (loss) from operations

 

 

(32,295

)

 

 

8,687

 

 

 

(74,470

)

 

 

39,343

 

Interest income and other, net

 

 

1,080

 

 

 

52

 

 

 

1,178

 

 

 

109

 

Income (loss) before income taxes

 

 

(31,215

)

 

 

8,739

 

 

 

(73,292

)

 

 

39,452

 

Income tax expense

 

 

(120

)

 

 

(7,200

)

 

 

(120

)

 

 

(7,200

)

Net income (loss) and comprehensive income (loss)

 

$

(31,335

)

 

$

1,539

 

 

$

(73,412

)

 

$

32,252

 

Net income (loss) per share attributable to common
   stockholders

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.38

)

 

$

0.02

 

 

$

(0.88

)

 

$

0.39

 

Diluted

 

$

(0.38

)

 

$

0.02

 

 

$

(0.88

)

 

$

0.36

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

83,257,591

 

 

 

82,743,530

 

 

 

83,217,223

 

 

 

82,662,019

 

Diluted

 

 

83,257,591

 

 

 

88,091,384

 

 

 

83,217,223

 

 

 

88,683,767

 

 

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)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Retained Earnings

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Accumulated Deficit)

 

 

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

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

11,908

 

 

 

 

 

 

11,908

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(31,335

)

 

 

(31,335

)

Balance—June 30, 2022

 

 

83,257,591

 

 

$

83

 

 

$

677,756

 

 

$

(17,382

)

 

$

660,457

 

 

 

 

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

 

Issuance of common stock upon exercise of
   stock options

 

 

40,000

 

 

 

 

 

 

57

 

 

 

 

 

 

57

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

10,007

 

 

 

 

 

 

10,007

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

1,539

 

 

 

1,539

 

Balance—June 30, 2021

 

 

82,776,937

 

 

$

83

 

 

$

630,686

 

 

$

(32,908

)

 

$

597,861

 

 

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)

 

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

(73,412

)

 

$

32,252

 

Adjustments to reconcile net income (loss) to net cash used in
   operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

23,569

 

 

 

17,280

 

Depreciation and amortization expense

 

 

50

 

 

 

15

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

(50,000

)

Prepaid expenses and other current assets

 

 

2,991

 

 

 

2,895

 

Other assets

 

 

 

 

 

(293

)

Accounts payable

 

 

9,351

 

 

 

16,456

 

Accrued expenses and other liabilities

 

 

(41,584

)

 

 

23,586

 

Deferred revenue

 

 

 

 

 

(76,376

)

Operating lease liabilities

 

 

840

 

 

 

 

Net cash used in operating activities

 

 

(78,195

)

 

 

(34,185

)

Cash flows from investing activities

 

 

 

 

 

 

Additions to property and equipment

 

 

(1,923

)

 

 

 

Net cash used in investing activities

 

 

(1,923

)

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock for exercise of stock options

 

 

223

 

 

 

528

 

Net cash provided by financing activities

 

 

223

 

 

 

528

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(79,895

)

 

 

(33,657

)

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

 

$

684,785

 

 

$

816,567

 

Cash, cash equivalents and restricted cash at the end of period:

 

 

 

 

 

 

Cash and cash equivalents

 

$

684,480

 

 

$

816,460

 

Restricted cash

 

 

305

 

 

 

107

 

Total cash, cash equivalents and restricted cash

 

$

684,785

 

 

$

816,567

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

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.

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 $684,480 as of June 30, 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.

 

In November 2021, the Company entered into an open market sales agreement (the “Sales Agreement”) with Jeffries LLC (“Jeffries”), under which the Company may from time to time offer and sell shares of its common stock for an aggregate offering price of up to $200.0 million, through or to Jeffries, acting as sales agent or principal. The shares will be offered and sold under the Company’s shelf registration statement on Form S-3 and a related prospectus filed with the Securities and Exchange Commission (the “SEC”) on November 24, 2021, as amended. The Company has agreed to pay Jeffries a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Jeffries with customary indemnification and contribution rights. As of June 30, 2022, no shares have been issued under the Sales Agreement.

 

The COVID-19 pandemic, including the evolution of new and existing variants of COVID-19, and geopolitical events, including civil or political unrest (such as the ongoing war between Ukraine and Russia), have resulted in a significant disruption of global financial markets. In addition, market volatility, inflation and interest rate fluctuations may increase our cost of financing or restrict our access to potential sources of future liquidity.

5


 

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 June 30, 2022, the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the six months ended June 30, 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 June 30, 2022, the results of its operations for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021. The results for the six months ended June 30, 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.

6


 

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.

Prior to receipt of the termination notice, 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 and six months ended June 30, 2021, the Company recognized collaboration revenue of $60,391 and $126,376, respectively, 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 and six months ended June 30, 2022, costs reimbursable by Roche, which are reflected as a reduction to operating expenses were $0 and $845, respectively. For the three and six months ended June 30, 2021, costs reimbursable by Roche, which are reflected as a reduction to operating expenses, were $2,478 and $5,897, respectively. The Company recorded research and development expense of $0 and $9,578 during the three and six months ended June 30, 2022, respectively, related to its share of costs incurred by Roche. The Company recorded research and development expense of $23,212 and $37,729 during the three and six months ended June 30, 2021, respectively, related to its share of costs incurred by Roche. As of June 30, 2022 the Company recorded accounts payable of $8,733 and as of December 31, 2021 the Company recorded accrued expenses of $10,417, 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
June 30, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

657,921

 

 

$

 

 

$

 

 

$

657,921

 

Total cash equivalents

 

$

657,921

 

 

$

 

 

$

 

 

$

657,921

 

 

 

 

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

 

 

7


 

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 June 30, 2022 and December 31, 2021.

There were no transfers among Level 1, Level 2 or Level 3 categories in the three and six months ended June 30, 2022 and 2021.

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

 

 

 

June 30,
2022

 

 

December 31,
2021

 

Research and development, including manufacturing and clinical expenditures

 

$

5,735

 

 

$

18,080

 

License fee

 

 

 

 

 

25,000

 

Income taxes

 

 

15

 

 

 

2,572

 

Payroll and payroll related

 

 

3,216

 

 

 

4,209

 

Professional fees and other

 

 

1,526

 

 

 

2,291

 

Total accrued expenses and other current liabilities

 

$

10,492

 

 

$

52,152

 

 

6. Common Stock

At June 30, 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 June 30, 2022, there were 8,333,341 shares of common stock remaining available for future issuance under the 2020 Plan.

Stock Options

During the three and six months ended June 30, 2022, the Company granted 481,584 and 3,382,417 options, respectively, to employees with an aggregate grant date fair market value of $2,218 and $17,029, respectively.

 

During the three and six months ended June 30, 2021, the Company granted 1,022,045 and 3,234,295 options, respectively, to employees with an aggregate grant date fair market value of $19,812 and $132,283, respectively.

Restricted Stock Units

During the three and six months ended June 30, 2022, the Company granted 0 and 182,350 restricted stock units, respectively, to employees with an aggregate grant date fair market value of $0 and $1,302, respectively. The restricted stock unit awards vest in three annual installments, the first of which will occur on January 31, 2023. No restricted stock units were granted during the three and six months ended June 30, 2021. During the three and

8


 

six months ended June 30, 2022, 20,000 and 20,000 restricted stock units, respectively, were cancelled due to terminations.

Performance-based Restricted Stock Units

During the three and six months ended June 30, 2022, the Company granted 0 and 742,070 performance-based restricted stock units, respectively, to employees with an aggregate grant date fair market value of $0 and $5,298, respectively. No performance-based restricted stock units were granted during the three and six months ended June 30, 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 Company has not recognized any compensation expense through June 30, 2022, as the minimum performance criteria had not been achieved. The vesting of any eligible awards will occur in equal installments on January 31, 2025 and January 31, 2026. During the three and six months ended June 30, 2022, 17,000 and 17,000 restricted stock units, respectively, were cancelled due to terminations.

 

Employee Stock Purchase Plan

 

In October 2020, the Company’s shareholders approved the 2020 Employee Stock Purchase Plan (the "ESPP"), which became effective upon the closing of the Company’s initial public offering in November 2020. The Company initially reserved a total of 1,187,000 shares of common stock for issuance under the ESPP. The ESPP provides that the number of shares reserved and available for issuance under the ESPP will be increased on January 1 of each calendar year by 1% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or such lesser amount as specified by the compensation committee of the board of directors. To date, there has been no increase in the number of shares reserved for issuance under the ESPP.

 

In April 2022, the Company initiated its first offering period under the ESPP. Each offering period is six months in duration with the purchase date being the last day of the offering period.

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
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Stock options

 

$

11,774

 

 

$

10,007

 

 

$

23,365

 

 

$

17,280

 

Restricted stock units

 

 

89

 

 

 

 

 

 

159

 

 

 

 

Performance-based stock units

 

 

 

 

 

 

 

 

 

 

 

 

Employee stock purchase plan

 

 

45

 

 

 

 

 

 

45

 

 

 

 

Total stock-based compensation expense

 

$

11,908

 

 

$

10,007

 

 

$

23,569

 

 

$

17,280

 

Stock-based compensation expense is classified as follows:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Research and development expense

 

$

5,591

 

 

$

4,573

 

 

$

11,020

 

 

$

7,771

 

General and administrative

 

 

6,317

 

 

 

5,434

 

 

 

12,549

 

 

 

9,509

 

Total stock-based compensation expense

 

$

11,908

 

 

$

10,007

 

 

$