Hello, everyone. I'm Maxwell Skor, biotech analyst with Morgan Stanley, and before we get started, I need to read an important disclosure. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear in the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. With that, I would like to welcome the Atea team, specifically Andrea Corcoran, CFO, Janet Hammond, CDO, Arantxa Horga, CMO, and John Vavricka, CCO. With that, I think it would be best if we, off the top, I guess, have a broader discussion on COVID overall, and then we can kind of dive into the pipeline. Can you provide your view on the current state of the pandemic?
So I think it's one of those ever-moving targets, isn't it? I think a couple of weeks ago, everybody thought that perhaps even it had gone away. But I think the last couple of weeks have really been fairly clear in showing that there has been a significant uptick in cases, not just here in the U.S., but actually interestingly, globally. And I think it really brings home the realization that COVID is here to stay, and that it's going to continue to be a serious endemic disease.
I think it's an important disease, and it's different from some of the things that we've been used to in the past in terms of the fact that it causes more serious disease, I think, than flu, but it's also a virus which is more prone to mutations, and so it keeps changing, and it changes faster than on an annual basis. The vaccines are good, but the immunity that you see from them is not durable, and what we are seeing is waning immunity to the vaccines, and also, I think because people haven't had an infection for some time, waning natural immunity, too. I think this creates a susceptible population to the next variant, and we've got a couple of new variants that are circulating at the moment, too.
I think people had hoped it had gone away, so I think monitoring is perhaps not at the level that we would like it to be. The CDC is doing some of the job in continuing to monitor wastewater, and that's really, I think, where we see the viruses, and you can also determine the viral load in different populations, and so you know what is happening there. But other than that, testing is not happening very much, but we can monitor hospitalizations and deaths, obviously.
Touching on those metrics, in regards to different geographies, what are you looking to as metrics to measure infection rates or variants in across the world?
So a number of countries do a very good job in monitoring for variants. I think some of that is done through wastewater, but some of that is just done through patient testing. And so the variant, I think, of particular concern at the moment is the XBB 2.86 variant, and we've seen reports of that variant emerging in South Africa, in Spain, in Denmark, in countries in the Far East, and then also, here in the U.S. So I think there is, there is ongoing surveillance, but, it's difficult, and I think testing, again, is not happening in many cases, and people had hoped that the virus had gone away. So I think, I think wastewater is possibly the best we can do. Here, perhaps a little better than some other places, actually, surprisingly.
If we can just drill down a bit on the circulating variants currently.
Yes.
I don't want to push you on looking too far ahead, but thoughts on 2.86, the mutational burden in that specific subvariant and where you see that going or other potential variants out there?
So, 2.86, I think, is the one which is causing people the most concern, as you said, because of all the mutations. I think there are about 30 new mutations in this virus, and many of them are in the spike protein. And this is really of particular concern because this is where the virus attaches. And also, I think, well we don't know yet about virulence. I mean, I think the concern is that the two might track together. It certainly seems that all of the Omicron variants are highly contagious, and so infections spread easily.
But we haven't yet seen and probably data for enough weeks to know what the hospitalization rate is, because there's generally a lag between, I think, the virus being detected, starting to see the infections, and then it's a few weeks until you see hospitalization rates, and then subsequently a few more weeks until you start to see a real impact on what the mortality might be. But it certainly does appear that the vaccines which were approved yesterday are going to be effective against this, at least from what we can tell today. So that's important. The other variant, which is circulating at the moment and which is dominant, is also a new variant, and that is called EG.5.1.
That's an important variant also because it's interesting, some of the mutations that it exhibits are seemingly directly related to the use of the first-generation monoclonal antibodies. I think that's important because I think it highlights the weakness of using monoclonal antibodies as the magic bullet. There are clearly patients for whom monoclonal antibodies have been life-saving, although we don't, at the moment, have any approved antibodies because the viruses outpace the speed in which we can generate those. I think that does serve to highlight the importance of direct-acting antivirals as a modality, because generally they maintain their activity against the variants as they emerge, and to date, we've seen consistent antiviral activity, and so they become a really critical form of therapy for patients as they become sick.
Okay, great. I think on that note, we can transition to your lead program, AT-527 or bemnifosbuvir. If you could please introduce this molecule, highlight initial COVID data that you've generated so far, and any key takeaways.
So, bemnifosbuvir is a nucleoside polymerase inhibitor, and that's important because the polymerase is one of the most highly conserved parts of the virus. We believe that susceptibility is going to be retained across different variants as they emerge. We have continued to show that, ever since the Wuhan variant, we have shown consistent potency against each variant as it's emerged. We had a study, the Morning Sky study, which involved 216 patients and then was interrupted. And in that study, in an all-comer population, so vaccinated, unvaccinated, high-risk, and low-risk patients, we saw an overall efficacy of 71%. When you looked at the patients who were 40 years and above, we saw a hospitalization reduction of 82%.
So very much in the same ballpark as what has been seen with the approved antivirals today. We're in the process of enrolling our phase III SUNRISE-3 trial, and this is a study where we're studying patients who are at particular risk for hospitalization. Hospitalization is the primary endpoint for this study, and we're looking at high-risk patients, so patients 70 years and above without risk factors, patients 55 and above with at least one risk factor for hospitalization, and patients 50 and above who have at least two risk factors for hospitalization, and then anyone 18 and above who's immunocompromised.
We think hospitalization is a particularly important endpoint in this, at this time, because the market, particularly in the U.S., is turning to being a private payer market, and hospitalization is obviously an endpoint which is good for reimbursement. That is important. It's also interesting to note that we have achieved fast track status from the FDA with this study, and I think they continue to see the high unmet medical needs in this patient population.
Okay, that's great. I guess we can get into more of the details around the SUNRISE-3 trial. It's kind of a unique design. You have two arms. Could you outline the patients in each arm, what the treatment dynamic looks like, and what you're hoping to learn?
Yes. So, it's a unique study in that it is a placebo-controlled trial, and we have authorization from the FDA to enroll it in the United States. We have sites in over 30 countries around the world, and we have over 330 sites in our study. The reason that we're allowed to run a placebo-controlled trial in the U.S. in an era when there are approved antivirals available in the U.S. is that patients who are eligible to receive other antivirals are frequently not receiving them in the U.S. because of the profile of the currently available drugs. And I think what bemnifosbuvir offers, and I should have mentioned this earlier, 'cause it's really one of the highlights, I think, of the drug, is that it is so safe and well-tolerated, and it has such a pristine preclinical profile.
We think this is what differentiates it from these other antivirals. Moving to the patient population that we're studying in the U.S., it's interesting to note during the pandemic that less than 30% of patients in nursing homes were prescribed Paxlovid when they had COVID. I think this really highlights the fact that the drug interaction profile is a real problem, and a real problem for physicians, because the list of potential drug interactions is so extensive and that it frightens people from using the drug, which is an effective antiviral. It's also not a particularly well-tolerated drug. It leaves a nasty taste in the mouth and has quite a bad GI profile, so people who've taken it are reluctant to take it again.
But all of these things mean that, we're able to randomize patients in the U.S. to our monotherapy arm, which is bemnifosbuvir, or to receiving bemnifosbuvir on top of standard of care, which could be Paxlovid, or it could be molnupiravir. And then we will end up with two populations, the patient population who received monotherapy, and that is the primary endpoint for the study. And then we will have a patient population that received combination therapy, bemnifosbuvir plus Paxlovid or molnupiravir. And then we'll be able to assess the efficacy of combination therapy, which is an interesting and probably the first trial which is being conducted, which systematically assesses that patient population.
We have a protease inhibitor in the pipeline in preclinical development at the moment, and these data are really going to be important in informing us in how to take that program forward, too.
Great. So just to reiterate, the monotherapy arm, that's going to drive your primary analysis?
Correct.
And, o kay. And if I can just get you to comment, I guess there's some anecdotal evidence of a potential bounce back with.
Mm-hmm.
C ompeting antivirals. Is there any evidence, or do you have any thoughts on the virus coming back or symptoms coming back after the antiviral regimen?
So I think it's a phenomenon of the virus, probably, rather than of the treatment, from what we are understanding now. It's certainly something that we will monitor for in our study, and I think others are being asked to do the same. But, the most recent literature that I read on the subject suggests that at least 25% of people who've had COVID have a rebound subsequent to their initial infection.
Is there any patient profile specifically? Are they older patients, immune-compromised, or because.
It doesn't seem to be the case, no.
Interesting. Okay, so moving on to what we should look out for over the next six-12 months. You have two planned interim analyses for the monotherapy arm. Can you describe how these analyses will be conducted and how we should look at them?
So we have a data safety monitoring board, and they will conduct a blinded analysis, and the primary objectives of these analyses are for futility and safety. So really, we're hoping, obviously, that the trial will continue, but we plan to have an interim analysis at 650 patients, and then a subsequent analysis when we achieve 1,350 patients in the trial. Hopefully, these will continue to support the ongoing clinical trial. But we're looking for hospitalization rates, and obviously, we need a certain amount of hospitalizations in order for the trial to be able to be interpreted at the end.
So we can expect basically an announcement that you've passed futility. The trial continues on.
Exactly.
Is there anything else or safety, of course?
No, I think that's going to be pretty much what we will know.
The first interim, you're projecting to be by the end of the year?
Around the end of the year, end of this year, early next year. That's, that's the timeframe that we're anticipating. And then we have said that we will provide final data in the middle of next year, and we anticipate filing the NDA at the end of next year.
At the end of next year. So how is enrollment going overall? Are you seeing a increase, unfortunately, in COVID?
So enrollment is progressing well, but it's interesting because to your point, yes, we've seen a considerable uptick in enrollment in the past couple of weeks, and not just in the United States, but actually globally.
And also, I just wanted to circle back to a few announcements from your 2Q earnings call, where you stated that you made several protocol amendments.
Yes.
Could you provide some highlights on what drove those?
Sure. So, the study was designed about a year ago, and, at that point, hospitalization rates seemed to be a little higher than they are now. And so, and also frankly, I think, you know, there was more COVID circulating, and so there was a higher level of immunity in the population than there is presently. So what we've done is we've changed the study design, and from an adaptive study design to a static design, and this allows us to have increased power for the final analysis of the study. We've also increased patient sample population size. We initially had planned to have approximately 1,300 patients in the primary endpoint analysis, with the opportunity at an interim analysis, which we had been planning to upsize that to about 1,800.
So overall, we've increased the sample size now from 1,800, approximately, if that was where we needed to go, which we thought was quite likely, probably, to now 2,200 patients, and that is a fixed, sample size for the study. The other adaptations that we've made are to broaden the population to people that we believe are susceptible to hospitalization should they get COVID. And so we have a slightly broader population than our initially, more strict criteria, but we believe it's appropriate, really, in order to achieve a hospitalization rate, which has fallen, gratifyingly for everybody. You know, I think initially the hospitalization rates were in excess of 6% or 7%, but we're now looking at hospitalization rates, in an at-risk patient population, probably around 2%, thereabout.
So, we.
So you're powering the study according . Yeah, according to a 2%-3% hospitalization rate.
Yes
Okay, that's great. And so, when we eventually see top-line data, could you frame expectations around that? What are you benchmarking it against? How should investors view that?
So I think, again, the profile we believe is going to be highly competitive, and on a number of fronts. I think firstly, the benign profile of the drug, the absence of drug interactions, the fact that it is such a safe and well-tolerated drug, I think immediately differentiates it and actually creates an opportunity for it. But in terms of efficacy, we expect a highly competitive profile. We believe that our data benchmark with the best of what we've seen to date. But I think also to bear in mind that with Omicron and Paxlovid, we saw efficacy in the 58%-78% range. So we anticipate it's going to be very independent, but we anticipate seeing something in the same order of magnitude as that.
Okay, great. And then expectations around regulatory plans outside the United States.
So, I think the first goal is to get it across the finishing line here in the U.S., but we have clear alignment with regulators around the world, and EMA in Japan in particular, I mean, have been very anxious to see this study coming forward. And I think there is a deep recognition by the regulators of the unmet needs that continues to persist for good treatments for COVID.
I guess two additional questions to kind of round out the discussion on the lead program here. Manufacturing being one, and then preclinical testing. Are you testing activity against emerging variants, or how can we expect any, let's say, updates in regards to publications or information around that?
So, yes, I mean, there are publications coming out, several publications that I'm aware of that are in the pipeline, and we have ongoing testing against all emerging variants. And we've shown consistent potency against variant after variant as they have emerged, and we have good activity against XBB, so we know that. And then in regards to manufacturing, we have a manufacturing organization that is taking care of all of that for us, and so that's progressing well.
Do you think the opportunity to file for Emergency Use Authorization is available?
We've been told that it is available. I think it's going to happen on a case-by-case basis, and obviously, the best-case scenario for us would be that we show amazing efficacy in this trial and can apply for it either at the end or with one of these interim analyses, should we see something truly spectacular.
Okay.
So we're good with that.
That's great to know. Then additional programs. You commented on a protease inhibitor that is in the pipeline. Can you provide any details or any updates we should expect?
We're working on a highly differentiated profile, protease inhibitor. It's preclinical at the moment, and we plan to have data by the end of the year to update people with.
Okay, that's great. And then let's pivot to hepatitis C, that program, and any updates around that. I guess, it's a compelling approach. Could you outline clinical trial design and thoughts around that program?
Yes. So we are right now executing our phase II program, phase II study, where we're putting together both molecules, ruzasvir and bemnifosbuvir.
The treatment in the study is eight weeks, which is a differentiator for other trials that have been done before and other treatments. It's a pangenotypic regimen with a low potential for drug interactions. There is no food effect, and it's a protease inhibitor-free ribavirin-free regimen. So all all of it makes it a very compelling best-in-class regimen moving forward. And we are executing right now. We are expecting data in the lead-in cohort of 60 patients at the end of this year. And once we have data from that lead-in cohort, which is eight weeks, so we decided to do a lead-in cohort first.
Based on that data, we'll open the remaining of the phase II trial, which is, total is 280 patients, and then we'll move on, based on that data, hopefully, to phase III. We have plans to start at the end of next year. It's a program that's moving very fast, and there is quite a lot of enthusiasm around the world with investigators enrolling the trial pretty quickly. We're very pleased with that and how it's been received.
That's great. Can you comment at all on the market opportunity?
I'm gonna pass that to John.
For HCV or?
For hepatitis.
The market for HCV, the global market remains quite large. The sales for last year were in excess of $3.5 billion, and that was net sales, I want to emphasize it's net sales. The incidence for HCV is growing globally, including in the United States. You have over 75% of those who are identified in the United States are not treated, and most importantly is that the number of new cases of HCV in the United States are exceeding that of those who are treated with the current antivirals. So when you look at a market of that magnitude, a multibillion-dollar magnitude, there is definitely room for a third drug to treat HCV.
The competitive landscape, is there? Do you have a view on that and how potentially your approach could fit in?
Well, I mean, I'll let Janet comment on the profile that's under discovery, but that's under development. But we see it being very, very competitive, being protease free, ribavirin free, an eight-week therapy that I think the market will welcome, particularly one that doesn't have a food effect. And so far, talking to various stakeholders, they're very excited about the opportunity.
Yeah, I think what maybe just to add, that each molecule is best in class for their class of drugs. And when you put them together, like John said, that profile with the efficacy that we're expecting, it's gonna be very compelling. This is a population that is difficult to bring to the clinic and to treat. They tend to have difficulty following up, and so if you can shorten the treatment we're here to eight weeks, it really will make a big difference.
To eight- weeks. So, what would be a clinically meaningful response, if you can comment on that overall?
We're expecting in eight- weeks sustained virologic rates, which is really the endpoint, SVR, competitive with what's out there. So it's, you know, north of 95% is what these regimens are delivering, and we're expecting that pangenotypically in patients with cirrhosis, without cirrhosis, all across.
Okay. And then moving on, I guess let's talk about strategy broadly, because, as you reported in your second quarter earnings announcement, you have a large cash position, $608 million, providing a runway well into 2026. Could you talk a bit about capital allocation?
Sure. Thanks, Max, and we are fortunate to have that cash resource to invest in the programs that Janet and Arantxa have just described. As John noted, there are multibillion-dollar opportunities, and we're clearly focused on the development of those programs. For the near term, and the remainder of 2023 and 2024, we'll be focused on COVID-19, moving that forward through the phase III NDA preparation and then preparation for commercial launch. For hep C, as Arantxa has described, we'll be moving forward with the phase II program, as well as in the preparation for phase III.
A lion's share of operating expenses are dedicated to COVID at this point, but it is spread across both programs?
Both programs, but as a phase III obviously is a more expensive program to advance, but clearly very laser focused on making good investments in both programs.
Is there any expectation of increasing head count going into 2024, or how should we think about that?
No, we're just in the process of doing our budgeting for 2024, but we have 72 employees at this point, and the commercial organization may grow as we move closer to the end of 2024 and look for the commercial launch. But other than that, we don't really have expectations for a substantive increase in headcount, so we want to maintain an efficient and effective group of employees.
Okay, that's great. I guess in the last several minutes or so, talk about partnership opportunities, your view overall on collaborations. I know you own the rights to this molecule globally, but how you view opportunities outside?
Yes, and we do own the rights to bemnifosbuvir, but we did in-license ruzasvir. We had identified that as probably the most important NS5A that would be suitable for combination with our product. It has a very good profile, as Arantxa has described, and so we focused on that, and we're successful in in-licensing that from Merck. That was in 2021 we did that. So our in-licensing criteria are very high. We will expend funds if we find an asset that meets those high thresholds, but we will not do it unless we find that type of asset. For clinical development, we expect to do this independently. But for commercialization, we will look for a partner in the U.S., where for COVID-19, we'll look for a partner that has strong primary and managed care capabilities.
And then for hep C in the U.S., we're still evaluating the opportunities, with regard to partnership. But for ex-U.S., for both programs, we would anticipate to, engage a global partner to expand our reach.
Okay, that's great. And then, overall, what should investors look for over the next six-12 months? We could talk about the blue sky scenario. I know we touched on the EUA opportunity if the potential interim reads out, but if you could just comment a bit on investors' focus and your view on the path forward.
Sure. Well, I think as you've heard, right, we have really key inflection points coming in the COVID program, both the two interim analyses and then obviously the data card that will flip in mid-2024. And we're quite excited about the HCV program, and so that, as Arantxa mentioned, at the end of this year, beginning of next, we'll be delivering information around that program for the 60-patient lead-in cohort, and then moving forward. The enrollment in hep C is going spectacularly well, and so we'll look to deliver that information as well, and then hopefully move to phase III in late 2024.
Okay. Then anything for the third quarter earnings announcement that we should watch out for or focus on?
Not that we know of.
Maybe, maybe updates around enrollment for COVID-19, just because of course, it's a moving target in regards to infection rates.
Yeah. So I think, as we said, Janet has indicated that that's the first interim analysis will be done at 650 patients. And we would expect that at year-end, so it will probably be closer to the end of the year, rather than Q3. But we will continue to update the market on the continued growth of our infrastructure for our clinical program. As we have indicated in the past, we're in 30 countries, and upwards to 350 sites, and we continue to make progress in establishing and opening those and activating those sites.
Okay, great. And with that, I would appreciate very much that you attended the conference. I think we had a great conversation, and thank you very much.
Thank you, Max.
Thank you.
Appreciate being here.
I think, just, just to wrap up from our side, I think we're making solid progress with our clinical and operational execution of both our HCV and COVID programs. We know clinical data are key, and we're planning to provide several updates in the course of the next year. And we thank you for your continued interest and support of Atea as we strive to make a difference, for patients with serious viral infections and unmet medical needs. Thank you.
Great. Thank you.