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 March 31, 2024

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, a 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 May 13, 2024, the registrant had 84,223,100 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 development timelines and results and other future conditions. The words “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” "objective," "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 and the timing for initiation, recruitment, completion, and reporting interim, top-line and final 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 Coronavirus disease 2019 ("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 apply for, and if successful, 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 manufacturing and commercialization 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, cash runway, needs for additional financing and the availability of such financing;
our business strategy;
developments relating to our industry and our competitors, including competing treatments and vaccines for diseases we are treating;
our expectations regarding federal, state and foreign laws and regulations;
our ability to attract, motivate, and retain key personnel; and
the impact on our business as COVID-19 continues to evolve.

These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. 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

i


 

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.

Drug development and commercialization involve a high degree of risk, and only a small number of research and development programs result in commercialization of a product. Preliminary and interim results from any trial and results in early-stage clinical trials may not be indicative of full results or results from later stage or larger scale clinical trials and do not ensure regulatory approval. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

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.

ii


 

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 expending significant resources to develop bemnifosbuvir for the treatment of COVID-19 and to develop the combination of bemnifosbuvir and ruzasvir for the treatment of Hepatitis C virus ("HCV") and in anticipation of potential commercialization of these product candidates. We may not be able to recover these resources if these product candidates are not approved for the treatment of the respective indication for which they are being developed, we are not successful at commercializing these product candidates or in the case of the development of bemnifosbuvir for the treatment of COVID-19, 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.
If approved, each of our product candidates will face significant competition from other treatments, including direct acting antivirals, that are currently marketed and in the case of COVID-19, are in development.
Our business, operations and financial results may be materially and adversely affected by the continuing evolution of COVID-19.
We have a limited operating history and no history of successfully developing or commercializing any approved antiviral products, which may make it difficult to evaluate the success of our business to date and to assess the prospects for our future viability.
We have incurred significant operating expenses since inception. We expect our expenditures will increase for the foreseeable future. We have no products that have generated any commercial revenue and we may not again 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. If we fail to successfully develop bemnifosbuvir for the treatment of COVID-19 or the combination of bemnifosbuvir and ruzasvir for the treatment of HCV 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.
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 product candidates that we discover or acquire, which exposes us to additional risks.
Our product candidates may be associated with serious adverse events, undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.
We currently conduct and may in the future conduct clinical trials of our product candidates in sites outside the United States ("US"). The FDA may not accept data from trials conducted in foreign locations.

iii


 

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.
We are highly dependent on our management, directors and other key personnel.
We have only a limited number of employees, which may be inadequate to manage and operate our business.
We may need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
Our business and operations may suffer in the event of system failures, security breaches, deficiencies or intrusions which could materially affect our results.
We may engage in acquisitions or strategic collaborations 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 whom we depend upon 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.
Increased attention to, and evolving expectations for, environmental, social, and governance (“ESG”) initiatives could increase our costs, harm our reputation, or otherwise adversely impact our business.
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 stock 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.

 

iv


 

Table of Contents

 

Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

i

SUMMARY RISK FACTORS

iii

 

 

 

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

Condensed Consolidated Statements of Stockholders’ Equity

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

 

 

 

PART II.

OTHER INFORMATION

24

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

87

Item 5.

Other Information

88

Item 6.

Exhibits

89

SIGNATURES

90

 

v


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Atea Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

160,910

 

 

$

143,823

 

Marketable securities

 

 

380,581

 

 

 

434,283

 

Prepaid expenses and other current assets

 

 

7,273

 

 

 

12,349

 

Total current assets

 

 

548,764

 

 

 

590,455

 

Property and equipment, net

 

 

1,185

 

 

 

1,289

 

Other assets

 

 

1,396

 

 

 

1,396

 

Operating lease right-of-use assets, net

 

 

1,684

 

 

 

1,828

 

Total assets

 

$

553,029

 

 

$

594,968

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

21,137

 

 

$

4,252

 

Accrued expenses and other current liabilities

 

 

19,405

 

 

 

27,364

 

Current portion of operating lease liabilities

 

 

769

 

 

 

760

 

Total current liabilities

 

 

41,311

 

 

 

32,376

 

Operating lease liabilities

 

 

1,445

 

 

 

1,642

 

Income taxes payable

 

 

5,902

 

 

 

5,758

 

Total liabilities

 

 

48,658

 

 

 

39,776

 

Commitments and contingencies (see Note 12)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 10,000,000 shares
   authorized;
no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 shares authorized;
84,223,100 and 83,435,513 shares issued and outstanding
as of March 31, 2024 and December 31, 2023, respectively

 

 

84

 

 

 

83

 

Additional paid-in capital

 

 

763,472

 

 

 

750,737

 

Accumulated other comprehensive gain (loss)

 

 

(181

)

 

 

207

 

Accumulated deficit

 

 

(259,004

)

 

 

(195,835

)

Total stockholders’ equity

 

 

504,371

 

 

 

555,192

 

Total liabilities and stockholders’ equity

 

$

553,029

 

 

$

594,968

 

 

 

 

 

 

 

 

 

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

1


 

Atea Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating expenses

 

 

 

 

 

 

Research and development

 

$

57,575

 

 

$

28,954

 

General and administrative

 

 

12,231

 

 

 

12,615

 

Total operating expenses

 

 

69,806

 

 

 

41,569

 

Loss from operations

 

 

(69,806

)

 

 

(41,569

)

Interest income and other, net

 

 

6,868

 

 

 

6,299

 

Loss before income taxes

 

 

(62,938

)

 

 

(35,270

)

Income tax expense

 

 

(231

)

 

 

(197

)

Net loss

 

$

(63,169

)

 

$

(35,467

)

Other comprehensive loss

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale investments

 

 

(388

)

 

 

377

 

Comprehensive loss

 

$

(63,557

)

 

$

(35,090

)

Net loss per share - basic and diluted

 

$

(0.75

)

 

$

(0.43

)

Weighted-average number of common shares - basic and diluted

 

 

83,916,193

 

 

 

83,332,397

 

 

 

 

 

 

 

 

 

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

2


 

 

Atea Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

Common Stock

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Comprehensive Gain (Loss)

 

 

Accumulated
Deficit

 

 

Stockholders' Equity

 

Balance—January 1, 2024

 

 

83,435,513

 

 

$

83

 

 

$

750,737

 

 

$

207

 

 

$

(195,835

)

 

$

555,192

 

Issuance upon vesting of restricted stock units

 

 

729,032

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

 

58,555

 

 

 

 

 

 

150

 

 

 

 

 

 

 

 

 

150

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,586

 

 

 

 

 

 

 

 

 

12,586

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

(388

)

 

 

 

 

 

(388

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(63,169

)

 

 

(63,169

)

Balance—March 31, 2024

 

 

84,223,100

 

 

$

84

 

 

$

763,472

 

 

$

(181

)

 

$

(259,004

)

 

$

504,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Comprehensive Gain (Loss)

 

 

Accumulated
Deficit

 

 

Stockholders' Equity

 

Balance—January 1, 2023

 

 

83,287,639

 

 

$

83

 

 

$

701,052

 

 

$

(684

)

 

$

(59,879

)

 

$

640,572

 

Issuance upon vesting of restricted stock units

 

 

53,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

 

57,803

 

 

 

 

 

 

165

 

 

 

 

 

 

 

 

 

165

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,535

 

 

 

 

 

 

 

 

 

12,535

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

377

 

 

 

 

 

 

377

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,467

)

 

 

(35,467

)

Balance—March 31, 2023

 

 

83,399,377

 

 

$

83

 

 

$

713,752

 

 

$

(307

)

 

$

(95,346

)

 

$

618,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

3


 

Atea Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(63,169

)

 

$

(35,467

)

Adjustments to reconcile net loss to net cash used in
   operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

12,586

 

 

 

12,535

 

Depreciation and amortization expense

 

 

104

 

 

 

104

 

Accretion of premium and discounts on marketable securities

 

 

(3,488

)

 

 

(3,087

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

5,076

 

 

 

2,311

 

Other assets

 

 

 

 

 

(197

)

Accounts payable

 

 

16,885

 

 

 

(1,851

)

Accrued expenses and other liabilities

 

 

(7,815

)

 

 

(4,157

)

Operating lease liabilities

 

 

(44

)

 

 

(41

)

Net cash used in operating activities

 

 

(39,865

)

 

 

(29,850

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of marketable securities

 

 

(167,196

)

 

 

(156,626

)

Sales and maturities of marketable securities

 

 

223,998

 

 

 

181,106

 

Net cash provided by investing activities

 

 

56,802

 

 

 

24,480

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock under ESPP

 

 

150

 

 

 

165

 

Net cash provided by financing activities

 

 

150

 

 

 

165

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

17,087

 

 

 

(5,205

)

Cash, cash equivalents and restricted cash at the beginning of period

 

 

143,823

 

 

 

188,658

 

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

 

$

160,910

 

 

$

183,453

 

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

 

 

 

 

 

 

Cash and cash equivalents

 

$

160,910

 

 

$

183,255

 

Restricted cash

 

 

 

 

 

198

 

Total cash, cash equivalents and restricted cash

 

$

160,910

 

 

$

183,453

 

 

 

 

 

 

 

 

 

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

4


 

 

 

Atea Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

1. Organization

Business Overview

Atea Pharmaceuticals, Inc., together with its wholly owned subsidiary, Atea Pharmaceuticals Securities Corporation, is referred to herein on a consolidated basis as "Atea" or 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 serious viral infections. Currently, Atea is conducting SUNRISE-3, a Phase 3 clinical trial evaluating bemnifosbuvir for the treatment of Coronavirus disease 2019 ("COVID-19"). Atea is also currently conducting a Phase 2 clinical trial evaluating the combination of bemnifosbuvir and ruzasvir for the treatment of hepatitis C virus ("HCV").

Liquidity and Capital Resources

As of March 31, 2024, the Company had $541.5 million in cash, cash equivalents and marketable securities, which the Company believes will be sufficient to fund its operations for a period through at least twelve months from the issuance date of these condensed consolidated financial statements.

In November 2021, the Company entered into an open market sales agreement (“Sales Agreement”) with Jefferies LLC (“Jefferies”), 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 Jefferies, 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 (“SEC”) on November 24, 2021, as amended. The Company has agreed to pay Jefferies a commission of 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Jefferies with customary indemnification and contribution rights. As of March 31, 2024, no shares have been issued under the Sales Agreement.

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 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, including most notably the combination of bemnifosbuvir and ruzasvir for the treatment of HCV, will require significant amounts of additional capital and additional research and development efforts, and all the Company’s product candidates will require 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. 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 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. Geopolitical events, including civil or political unrest and terrorism, have resulted in a significant disruption of global business and financial markets. In addition, recent or future market volatility, increased inflation and higher interest rates, if

5


 

sustained, may increase the Company’s cost of financing and may restrict our access to potential sources of future liquidity.

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 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, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2024.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2024 and 2023, and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 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, 2024, the results of its operations for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, or any other interim period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed 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 marketable securities, the 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 such changes become known.

Principles of Consolidation

The 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, 2023 filed with the SEC on February 28, 2024.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the 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 condensed consolidated financial statements and disclosures.

3. Collaboration Agreement

In October 2020, the Company entered into a License Agreement (“Roche License Agreement”) with F. Hoffmann-LaRoche Ltd. and Genentech, Inc. (together, “Roche”) under which the Company granted an exclusive

6


 

license for certain development and commercialization rights related to bemnifosbuvir outside of the United States (other than for certain HCV uses) to Roche.

In November 2021, Roche provided the Company with a notice of termination of the Roche License Agreement which became 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 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, 2024 and 2023, the Company recorded net credits of $1,292 and $1,000, respectively, from Roche. The credits recorded represent changes in estimate as a result of close out activities and related reporting of amounts incurred by Roche associated with the global development plan. Included in prepaid expenses and other current assets as of March 31, 2024 is a net balance due from Roche of $1,292.

4. Marketable Securities

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2024

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Marketable Securities

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury obligations

 

$

179,473

 

 

$

14

 

 

$

(120

)

 

$

179,367

 

US Government agency securities

 

 

95,570

 

 

 

22

 

 

 

(28

)

 

 

95,564

 

Commercial paper

 

 

24,565

 

 

 

6

 

 

 

(19

)

 

 

24,552

 

Corporate bonds

 

 

81,150

 

 

 

14

 

 

 

(66

)

 

 

81,098

 

Total

 

$

380,758

 

 

$

56

 

 

$

(233

)

 

$

380,581

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2023

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Marketable Securities

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury obligations

 

$

155,816

 

 

$

145

 

 

$

(23

)

 

$

155,938

 

US Government agency securities

 

 

178,115

 

 

 

96

 

 

 

(51

)

 

 

178,160

 

Commercial paper

 

 

39,461

 

 

 

14

 

 

 

(27

)

 

 

39,448

 

Corporate bonds

 

 

60,684

 

 

 

65

 

 

 

(12

)

 

 

60,737

 

Total

 

$

434,076

 

 

$

320

 

 

$

(113

)

 

$

434,283

 

As of March 31, 2024, the Company held 54 securities that were in an unrealized loss position of $233 with an aggregate fair value of $261,065. The Company has the intent and ability to hold such securities until recovery. As a result, the Company did not record any charges for credit-related impairments for its marketable debt securities for the three months ended March 31, 2024.

None of the securities had remaining maturities longer than one year as of March 31, 2024.

The Company received proceeds of $223,998 and $181,106 from sales and maturities of marketable securities during the three months ended March 31, 2024 and 2023, respectively.

7


 

5. Fair Value Measurements

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

 

 

Fair Value Measurements as of
March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

151,176

 

 

$

 

 

$

 

 

$

151,176

 

Commercial Paper

 

 

 

 

 

7,432

 

 

 

 

 

 

7,432

 

Marketable Securities

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury obligations

 

 

 

 

 

179,367

 

 

 

 

 

 

179,367

 

US Government agency securities

 

 

 

 

 

95,564

 

 

 

 

 

 

95,564

 

Commercial paper

 

 

 

 

 

24,552

 

 

 

 

 

 

24,552

 

Corporate bonds

 

 

 

 

 

81,098

 

 

 

 

 

 

81,098

 

Total

 

$

151,176

 

 

$

388,013

 

 

$

 

 

$

539,189

 

 

 

 

Fair Value Measurements as of
December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

143,740

 

 

$

 

 

$

 

 

$

143,740

 

Marketable Securities

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury obligations

 

 

 

 

 

155,938

 

 

 

 

 

 

155,938

 

US Government agency securities

 

 

 

 

 

178,160

 

 

 

 

 

 

178,160

 

Commercial paper

 

 

 

 

 

39,448

 

 

 

 

 

 

39,448

 

Corporate bonds

 

 

 

 

 

60,737

 

 

 

 

 

 

60,737

 

Total

 

$

143,740

 

 

$

434,283

 

 

$

 

 

$

578,023

 

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, 2024 and December 31, 2023.

The Company's assets with fair value categorized as Level 2 within the fair value hierarchy include commercial paper, governmental and corporate bonds and asset-backed securities with fair values determined by utilizing information from third party pricing sources for identical or similar assets and liabilities in active market.

There were no transfers among Level 1, Level 2 or Level 3 categories in the three months ended March 31, 2024.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

 

 

March 31,
2024

 

 

December 31,
2023

 

Research and development, including manufacturing and clinical expenditures

 

$

16,214

 

 

$

20,999

 

Payroll and payroll related

 

 

2,333

 

 

 

5,696

 

Professional fees and other

 

 

858

 

 

 

669

 

Total accrued expenses and other current liabilities

 

$

19,405

 

 

$

27,364

 

 

7. Common Stock

At March 31, 2024, the authorized capital of the Company included 300,000,000 shares of Company's common stock, of which 84,223,100 shares of Company's common stock were issued and outstanding. On all matters to be voted upon by the holders of Company's common stock, holders of Company's common stock are entitled to

8


 

one vote per share. The holders of Company's common stock have no preemptive, redemption or conversion rights.

8. Stock-based Compensation

In October 2020, the Company’s shareholders approved the Company’s 2020 Incentive Award Plan (“2020 Plan”). The 2020 Plan initially provided for the issuance of up to 7,924,000 shares of Company's common stock and for the grant of incentive stock options or other incentive awards to employees, officers, directors and consultants of the Company. The number of shares of Company's 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 Company's common stock outstanding on the final day of the immediately preceding calendar year or ii) such smaller number of shares as is determined by the board of directors. Through December 31, 2023, the shares available under the plan were increased by 12,450,364 shares. In January 2024, the shares of the Company's common stock available under the 2020 Plan were increased by 4,171,775 shares. As of March 31, 2024, 5,743,729 shares of Company's common stock were available for future issuance under the 2020 Plan.

The 2020 Plan replaced and is the successor of the Company’s 2013 Equity Incentive Plan, as amended (“2013 Plan”). Upon any cancellation of outstanding option awards to purchase shares of Company's common stock under the 2013 Plan, such shares will be made available for grant under the 2020 Plan.

Restricted Stock Units

During the three months ended March 31, 2024, the Company granted 948,500 restricted stock units to employees under the 2020 Plan with an aggregate grant date fair market value of $3,946.

The restricted stock unit awards vest in three annual installments. Below is the activity related to restricted stock units for the three months ended March 31, 2024.

 

 

Number of
Shares

 

 

Weighted Average
Grant Date Fair Value

 

Outstanding at January 1, 2024

 

 

2,337,517

 

 

$

4.69

 

Granted

 

 

948,500

 

 

$

4.16

 

Released

 

 

(729,032

)

 

$

4.80

 

Cancelled

 

 

 

 

$

 

Unvested shares at March 31, 2024

 

 

2,556,985

 

 

$

4.46

 

As of March 31, 2024, total unrecognized compensation expense related to restricted stock units was $9,977, which amount is being recognized over a remaining weighted average period of 2.1 years.

Performance-based Restricted Stock Units

As of December 31, 2023 the Company had 724,970 performance-based restricted stock units (“2022 PSUs”) outstanding. The 2022 PSUs provide for a performance period from February 1, 2022 through January 31, 2025 to achieve up to six defined performance metrics. The percentage of 2022 PSUs 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 March 31, 2024, as achievement of the minimum performance criteria had not been deemed probable. The vesting of any eligible 2022 PSUs will occur in equal installments on January 31, 2025 and January 31, 2027.

During the three months ended March 31, 2024, the Company granted 1,057,900 performance-based restricted stock units (“2024 PSUs”) to employees with an aggregate grant date fair value of $4,401. The 2024 PSUs provide for a performance period from February 1, 2024 through January 31, 2027 to achieve up to four defined metrics. The percentage of 2024 PSUs eligible to vest will be determined based on the number of metrics achieved during the performance period and may range from 0% to 200%. As of March 31, 2024 one metric was deemed probable of achievement resulting in expense recognition of 50% of the grant date value of the 2024 PSUs. Compensation expense is being recognized from the grant date through the final vest date of January 31, 2027. The Company recorded compensation expense of $120 for the three months ended March 31, 2024.

9


 

The following table summarizes the activity related to performance-based restricted stock units for the three months ended March 31, 2024.

 

 

Number of
Shares

 

 

Weighted Average
Grant Date Fair Value

 

Outstanding at January 1, 2024

 

 

724,970

 

 

$

7.14

 

Granted

 

 

1,057,900

 

 

$

4.16

 

Released

 

 

 

 

$

 

Cancelled

 

 

 

 

$

 

Unvested shares at March 31, 2024

 

 

1,782,870

 

 

$

5.37

 

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2024.

 

 

Number of
Shares

 

 

Weighted
Average
Exercise Price
Per Share

 

 

Weighted
Average
Remaining
Contractual
Term (years)

 

 

Aggregate
Intrinsic
Value
($000s)

 

Outstanding at January 1, 2024

 

 

17,017,319

 

 

$

15.30

 

 

 

7.1

 

 

$

5,080

 

Granted

 

 

2,932,350

 

 

$

4.16

 

 

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

 

 

Cancelled

 

 

 

 

$

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

19,949,669

 

 

$

13.67

 

 

 

7.3

 

 

$

8,562

 

Vested and expected to vest at March 31, 2024

 

 

19,949,669

 

 

$

13.67

 

 

 

7.3

 

 

$

8,562

 

Vested and exercisable at March 31, 2024

 

 

12,080,821

 

 

$

16.40

 

 

 

6.3

 

 

$

8,370

 

During the three months ended March 31, 2024 the Company granted 2,932,350 stock options with an aggregate grant date fair value of $9,043.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

Stock options generally vest over a service period of four years after grant and have a contractual term of ten years. As of March 31, 2024, total unrecognized compensation expense related to stock option awards was $53,058, which amount is being recognized over a remaining weighted average period of 2.6 years.

Employee Stock Purchase Plan

In October 2020, the Company’s shareholders approved the Employee Stock Purchase Plan (“ESPP”), which became effective upon the closing of the Company’s initial public offering ("IPO") in November 2020. The Company initially reserved a total of 1,187,000 shares of Company's 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 Company's common stock issued and outstanding on the immediately preceding December 31 or such lesser amount as specified by the board of directors. Through December 31, 2022, there was no increase in the number of shares reserved for issuance under the ESPP. In January 2023 and January 2024, the number of shares of the Company's common stock available for issuance under the ESPP was increased by 832,876 shares and 834,355 shares, respectively. As of March 31, 2024, 2,672,701 shares of Company's common stock were available for issuance under the ESPP.

Under the ESPP, the Company issued 58,555 shares of Company's common stock for proceeds of $150 during the three months ended March 31, 2024.

10


 

Stock-based Compensation Expense

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

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Stock options

 

$

11,141

 

 

$

11,880

 

Restricted stock units

 

 

1,290

 

 

 

600

 

Performance-based stock units

 

 

120

 

 

 

 

Employee stock purchase plan

 

 

35

 

 

 

55

 

Total stock-based compensation expense

 

$

12,586

 

 

$

12,535

 

Stock-based compensation expense is classified as follows:

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development expense

 

$

5,981

 

 

$

5,928

 

General and administrative

 

 

6,605

 

 

 

6,607

 

Total stock-based compensation expense

 

$

12,586

 

 

$

12,535

 

 

9. Net Loss Per Share

Basic and diluted earnings per share are calculated as follows:

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(63,169

)

 

$

(35,467

)

Weighted average common shares outstanding, basic and diluted

 

 

83,916,193

 

 

 

83,332,397

 

Net loss per share, basic and diluted

 

$

(0.75

)

 

$

(0.43

)

The following shares were excluded from the computation of the net loss per share for the three months ended March 31, 2024 and 2023, respectively, due to the net loss during the periods as their effect is antidilutive.

 

 

 

As of March 31,
2024

 

 

 

2024

 

 

2023

 

Stock options

 

 

19,949,669

 

 

 

16,652,174

 

Restricted stock units

 

 

2,556,985

 

 

 

2,145,617

 

Performance-based restricted stock units

 

 

1,782,870

 

 

 

724,970

 

 

10. Leases

The Company has a non-cancelable operating lease agreement for its office space in Boston, Massachusetts at 225 Franklin Street ("225 Lease"). The 225 Lease commencement date was January 1, 2022 and the 225 Lease runs through December 31, 2026. The 225 Lease does not contain any options for renewal or extension.

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

11


 

The following assets and liabilities are recorded on the Company’s consolidated balance sheet as of March 31, 2024.

 

 

As of March 31,

 

 

 

2024

 

Right-of-use asset

 

$

1,684

 

Current lease liability

 

 

769

 

Non-current lease liability

 

 

1,445

 

Future minimum payments under the 225 Lease, currently the Company’s only operating lease as of March 31, 2024 were as follows.

 

 

As of March 31,

 

 

 

2024

 

Remainder of 2024

 

$

616

 

2025

 

 

838

 

2026

 

 

855

 

Total lease payments

 

 

2,309

 

Less amount representing implied interest

 

 

95

 

Total lease liability

 

$

2,214

 

Current portion of operating lease liabilities

 

$

769

 

Non-current portion of operating lease liabilities

 

$

1,445

 

For the three months ended March 31, 2024 and 2023, respectively, the Company recorded operating lease costs of $161, relating to its operating lease agreements.

11. Income Taxes

The Company recorded income tax expense of $231 and $197 for the three months ended March 31, 2024 and 2023, respectively.

The Company maintained a full valuation allowance for the three months ended March 31, 2024 and 2023 due to uncertainty regarding its ability to utilize deferred tax assets.

12. Commitments and Contingencies

 

License Agreement

In December 2021, the Company entered into a license agreement (“Merck License Agreement”) with MSD International GmbH, an affiliate of Merck & Co, Inc. (“Merck”) for the development, manufacture and commercialization of ruzasvir. Ruzasvir is the NS5A inhibitor the Company is developing in combination with bemnifosbuvir for the treatment of HCV.

Pursuant to the terms of the Merck License Agreement, the Company obtained from Merck a worldwide exclusive (subject to certain reserved rights to conduct internal research) and, sublicensable license under certain Merck patents and know-how to research, develop, manufacture, have manufactured, use, import, export, sell, offer for sale, and otherwise commercialize ruzasvir or products containing ruzasvir (each a “Product”) for all therapeutic or prophylactic uses in humans.

In addition to a non-refundable upfront payment that the Company made in February 2022, the Company will be required to pay Merck milestone payments upon its achievement of certain development, regulatory and sales-based milestones. Additionally, the Company will pay Merck tiered royalties based on annual net sales of Products ranging from high single digits to mid-teens percentages. The Company’s royalty payment obligations will continue until the later of (i) the expiration of the last to expire valid claim of a licensed Merck patent claiming such Product and (ii) a period of years after the first commercial sale of such Product in such country. The Company may terminate the Merck License Agreement for convenience upon prior written notice. The first potential milestone in the amount of $5.0 million would be payable upon the commencement of a Phase 3 clinical trial.

12


 

Contingent Consulting Fee

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

Indemnification

The Company enters into certain types of contracts that contingently require the Company to indemnify various parties against claims from third parties. These contracts primarily relate to (i) the Company’s bylaws, under which the Company must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship with the Company, (ii) contracts under which the Company must indemnify directors and certain officers and consultants for liabilities arising out of their relationship with the Company, 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 such third parties 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 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.

13. Benefit Plan

The Company's defined contribution plan under Section 401(k) of the Internal Revenue Code (“401(k) Plan”) covers substantially all employees who meet minimum age and service requirements. Under the terms of the 401(k) Plan, the Company records matching contributions up to 4% of the participant’s eligible compensation. During the three months ended March 31, 2024 and 2023, the Company recognized expense of $401 and $394, respectively, relating to matching contributions to the 401(k) Plan.

14. Related Party Transactions

The Company is party to a consulting agreement with an entity controlled by one of its directors. The agreement provides for an annual retainer of $110. The Company recognized expense in the amount of $27 for each of the three month periods ended March 31, 2024 and 2023, respectively.

In June 2022, the Company entered into a consulting agreement with one of its directors. No expense was recognized in connection with this agreement for the three months ended March 31, 2024 or 2023.

13


 

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, for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2024. 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 leveraging our deep understanding of antiviral drug development, medicinal chemistry, biology, biochemistry and virology to discover and develop novel orally administered product candidates to treat serious viral diseases. Currently, we are developing our lead product candidate, bemnifosbuvir, in a global Phase 3 clinical trial as a monotherapy for the treatment of COVID-19, and in a global Phase 2 clinical trial as part of a combination therapy with ruzasvir, an NS5A inhibitor, for the treatment of HCV infection.

Bemnifosbuvir

Derived from our internal discovery program, bemnifosbuvir (AT-527), is an investigational, novel, orally administered guanosine nucleotide analog polymerase inhibitor that combines a unique nucleotide scaffold with novel double prodrugs for the intended purpose of inhibiting the enzymes central to viral replication. We believe that utilizing this double prodrug moiety approach allows us to maximize formation of the active metabolite potentially resulting in an oral antiviral product candidate that is selective for and highly effective at preventing replication and transcription of SARS-CoV-2, the causative agent of COVID-19, HCV and other single ssRNA viruses while avoiding toxicity to host cells.

COVID-19

As COVID-19 continues to persist as a global endemic disease with variant fueled surges of infection, oral antivirals protecting against the development of severe infection and transmission remain urgently needed particularly for high-risk patients who currently have few or no treatment options due to the limitations of currently available vaccines and therapeutics. High-risk patients include those who are unvaccinated, patients who fail to respond to available vaccines, vaccinated patients with waning efficacy, which can occur between three to six months after immunization, and patients for whom current treatments are contraindicated. Without suitable treatments, high-risk patients remain vulnerable to severe COVID-19 and associated hospitalization and death.

Currently, we are conducting SUNRISE-3, a global multicenter, randomized, double-blind, placebo-controlled, Phase 3 clinical trial evaluating bemnifosbuvir or placebo administered concurrently with locally available standard of care (SOC) in high risk outpatients with mild to moderate COVID-19. In March 2024, we completed enrollment of patients in this study. The SUNRISE-3 patient population consists of those aged ≥70 years (regardless of other risk factors), individuals aged ≥55 years with one or more risk factors, those aged ≥50 years with two or more risk factors, and individuals aged ≥18 years with specific risk factors, including immunocompromised conditions, irrespective of COVID-19 vaccination status. Patients were randomized 1:1 to receive bemnifosbuvir 550 mg twice-daily (BID) or placebo BID for five days.

The trial is comprised of two study populations based on the type of SOC received: 1) the "supportive care population," evaluating bemnifosbuvir as monotherapy (primary analysis), and 2) the "combination antiviral population," assessing combination therapy if the SOC includes other compatible antiviral drugs against COVID-19 (secondary analysis). In this study, 2,221 patients were enrolled into the supportive care monotherapy cohort and only 74 patients were enrolled into the combination cohort.

The primary endpoint of the SUNRISE-3 study is all-cause hospitalization or death through Day 29 in the supportive care monotherapy cohort. Secondary endpoints include other measurements of patient outcomes though Day 60 post treatment.

Currently, we anticipate to report the results of the SUNRISE-3 study in the second half of 2024.

14


 

HCV

Despite the availability of direct acting antiviral oral combination treatment regimens, HCV continues to be a serious viral disease in the US and globally. Approximately 58 million people globally are living with chronic HCV infection. The WHO estimates a global incidence of 1.5 million new infections and 290,000 deaths per year.

In the US, HCV is recognized as a health crisis with approximately 2.4 million individuals estimated to be infected. Prevalence of HCV in the US is expected to remain constant over the coming years as rising HCV is incidence largely attributable to the opioid crisis, IV drug use, and HCV reinfection, especially among younger adults, offsets the number of new patients treated.

Our HCV strategy focuses on the development of bemnifosbuvir in combination with ruzasvir, an HCV NS5A inhibitor, a product candidate which we have exclusively licensed from Merck & Co, Inc. (“Merck”). Combination therapy utilizing two or more direct acting antivirals with different mechanisms of action is a scientifically and clinically well-established approach that is utilized by currently available human immunodeficiency virus, hepatitis B virus and HCV treatment regimens.

The objective of our HCV development program is to improve upon the current SOC by offering, if successfully developed, the combination of bemnifosbuvir and ruzasvir, as a potentially differentiated eight-week duration, pan-genotypic protease inhibitor-free regimen for HCV-infected patients with or without cirrhosis.

Currently, we are conducting a global Phase 2 clinical trial of bemnifosbuvir in combination with ruzasvir in treatment-naïve, HCV-infected patients either without cirrhosis or with compensated cirrhosis. This study is designed to evaluate the safety and efficacy of eight weeks of treatment with the combination consisting of once daily bemnifosbuvir 550 mg and ruzasvir 180 mg. Up to approximately 280 HCV-infected, treatment-naïve patients across HCV GTs, including a lead-in cohort of 60 patients without cirrhosis, are expected to be enrolled in this Phase 2 clinical trial. The primary endpoints of the study are safety and SVR12. Other virologic endpoints include virologic failure, SVR24 and resistance.

In February 2024, we announced final results from the full lead-in cohort in which a 98% SVR4 rate was observed [58 of 59 subjects achieved SVR4 with one patient who did not return for post-treatment follow-up]. The one patient who did not achieve SVR4 had poor adherence, and was infected with HCV GT-2. These results are consistent with the initial results announced in January 2024. The SVR4 rate exceeded the protocol-defined efficacy criterion of ≥90% SVR4 for continuing the study. As a result, in January 2024 we commenced enrolling up to an additional 220 patients in the study, including patients with cirrhosis. In the lead-in cohort, very rapid kinetics were observed with viral load for each patient near or below the LLOQ at four weeks of treatment, which we believe is supportive of an eight-week treatment regimen for the combination of bemnifosbuvir and ruzasvir. All 60 patients in the lead-in cohort achieved viral load below the LLOQ by the end of the eight-week treatment regimen.

The combination of bemnifosbuvir and ruzasvir in the lead-in cohort was generally safe and well tolerated and there were no drug related serious adverse events, no treatment discontinuations and adverse events AEs were mostly mild. Final SVR12 results from all patients enrolled in the global Phase 2 study are anticipated in the second half of 2024.

If the Phase 2 study is successfully completed, subject to discussion and alignment with regulatory authorities, we anticipate initiating a Phase 3 clinical development program in the second half of 2024.

Financial Resources

We believe we are well capitalized to advance our current programs. We had $541.5 million in cash, cash equivalents and marketable securities at March 31, 2024. Based on our current plans, we anticipate these financial resources will allow us to advance our current and planned clinical programs to and through key inflection points including the completion of our COVID-19 SUNRISE 3 clinical trial and the completion of clinical development of the combination of bemnifosbuvir and ruzasvir for the treatment of HCV and to fund our activities into 2027. We have based this estimate on assumptions that may prove to be wrong and we could exhaust our available capital resources sooner than we expect.

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

15


 

or other arrangements with third parties, 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.

Roche License Agreement

In October 2020, with Roche, we entered into a License Agreement ("Roche License Agreement") with F. Hoffmann-LaRoche Ltd. and Genentech, Inc. (together, "Roche") in connection with the global development, manufacture and commercialization of bemnifosbuvir, products containing bemnifosbuvir or AT-511, the free base of bemnifosbuvir, and related companion diagnostics. During the term of the Roche License Agreement, Roche and we jointly developed bemnifosbuvir for COVID-19 on a worldwide-basis and equally shared the costs associated with such development activities.

The Roche License Agreement terminated on February 10, 2022, and, accordingly, our obligations to share costs with Roche also ended. As a result of the termination of the Roche License Agreement, we regained worldwide exclusive rights from Roche to research, develop, manufacture and commercialize bemnifosbuvir, products containing bemnifosbuvir and related companion diagnostics in all fields of use.

Merck License Agreement

In December 2021, we entered into a license agreement ("Merck License Agreement") with MSD International GmbH, an affiliate of Merck & Co., Inc. ("Merck") for the development, manufacture and commercialization of ruzasvir. Ruzasvir is an investigational NS5A inhibitor we are developing in combination with bemnifosbuvir for the treatment of HCV.

Pursuant to the terms of the Merck License Agreement, we obtained from Merck an exclusive (subject to certain reserved rights to conduct internal research), sublicensable, and worldwide license under certain Merck patents and know-how to research, develop, manufacture, have manufactured, use, import, export, sell, offer for sale, and otherwise commercialize ruzasvir or products containing ruzasvir (each a "Product") for all therapeutic or prophylactic uses in humans.

In addition to a non-refundable upfront payment that we made in February 2022, we will be required to pay Merck milestone payments upon our achievement of certain development, regulatory and sales-based milestones. Additionally, we will pay Merck tiered royalties based on annual net sales of Products ranging from high single digits to mid-teens percentages. Our royalty payment obligations will continue until the later of (i) the expiration of the last to expire valid claim of a licensed Merck patent claiming such Product and (ii) a period of years after the first commercial sale of such Product in such country. We may terminate the Merck License Agreement for convenience upon prior written notice. The first potential milestone, in the amount of $5.0 million, would be payable upon the commencement of a Phase 3 clinical trial.

Financial Operations Overview

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $541.5 million. Net cash used in operating activities was $39.9 million for the three months ended March 31, 2024.

We expect that our net cash used in operating activities will remain significant as we advance our product candidates through preclinical and clinical development, seek regulatory approval, and prepare for and, if approved, manufacture such products at commercial scale and otherwise pursue commercialization activities; 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 into 2027. We have based this estimate on assumptions that may prove to be wrong and we could exhaust our available capital resources sooner than we expect.

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 third parties, 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

16


 

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 clinical research organizations ("CROs") to carry out our preclinical and clinical development, and contract manufacturing organizations ("CMOs") to manufacture and supply the materials used during the development of our product candidates. Additionally, we expect to rely on CMOs for the manufacture of commercial supply of any product candidate we may successfully develop.

As we continue to advance our programs, we expect to incur significant expenses over the next several years, as we:

complete the Phase 3 clinical development of bemnifosbuvir as a monotherapy for the treatment of COVID-19;
advance the clinical development of the combination of bemnifosbuvir and ruzasvir for the treatment of HCV which is expected to include later stage Phase 3 development if the Phase 2 clinical trial we are currently conducting is successful;
continue discovery and IND-enabling activities in anticipation of nominating a protease inhibitor product candidate for the treatment of COVID-19;
initiate clinical development of a protease inhibitor for the treatment of COVID-19;
manufacture increasing quantities of bemnifosbuvir drug substance and drug product in anticipation of potential commercialization;
manufacture the combination of bemnifosbuvir and ruzasvir in a fixed dose tablet for use in potential Phase 3 development and for potential commercialization, if approved, of the combination for the treatment of HCV;
seek market approval and prepare for potential commercialization of product candidates we may successfully develop;
acquire or in-license clinical stage drug candidates, form strategic alliances or establish collaborations with third parties;
maintain, expand, protect and enforce our intellectual property portfolio;
hire additional research, development and administrative personnel; and
establish commercialization capabilities if we are successful in developing our product candidates.

Components of Results of Operations

Revenue

We do not have any products approved for sale and we have not generated any revenue in the periods presented.

If our development efforts for our product candidates are successful and result in commercialization, we may generate revenue in the future from product sales. Additionally, we may generate revenue 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 discovery and development of our product candidates. These expenses include external costs consisting of fees paid to third parties, including CROs and CMOs, to conduct certain research and development activities on our behalf and consulting costs, as well as internal costs consisting of 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 our research and development personnel. We expense both internal and external research and development expenses as they are incurred. In circumstances where

17


 

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. 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 were recorded in research and development expenses. During the three months ended March 31, 2024 and 2023, we recorded a net reduction to research and development expenses of $1.3 million and $1.0 million, respectively, related to credits received from Roche. These credits were the result, following the termination of the Roche License Agreement, of changes and adjustments by Roche in estimated amounts of expenses reported by Roche during the period in which we and Roche shared costs associated with the development of bemnifosbuvir. We do not anticipate to receive any additional credits from Roche or record any related additional net reductions to research and development expenses.

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

COVID-19 external costs

 

$

39,252

 

 

$

8,949

 

HCV external costs

 

 

5,953

 

 

 

3,373

 

Dengue external costs

 

 

 

 

 

3,293

 

Internal research and development costs

 

 

12,370

 

 

 

13,339

 

Total research and development costs

 

$

57,575

 

 

$

28,954

 

We are focusing substantially all of our resources on the development of our product candidates, particularly bemnifosbuvir for the treatment of COVID-19 and the combination of bemnifosbuvir and ruzasvir for the treatment of HCV. We expect our research and development expenses to vary quarter over quarter as we complete our SUNRISE-3 Phase 3 clinical trial, advance our HCV clinical program which we expect will include Phase 3 clinical development if our Phase 2 clinical trial is successful, 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, validate our commercial manufacturing and supply processes and manufacture of product at commercial scale 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 or the time to complete planned clinical trials is extended due to delays in enrollment or otherwise, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict with any certainty when our product candidates, if ever, will receive regulatory approval.

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, including in connection with any future expansion of our organization for potential commercialization of our product candidates, as a result of increased personnel costs, expanded infrastructure, increased consulting, legal and accounting services costs associated with complying with Nasdaq and SEC requirements and increased investor relations costs.

Interest Income and Other, Net

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

Income Taxes

Income taxes consists primarily of federal and state current income taxes.

18


 

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

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

 

 

Three Months Ended
March 31,