The big news circulating this week was of Atea Pharmaceuticals’ (NASDAQ: AVIR) COVID-19 antiviral clinical trial failure, which instantly plummeted the stock by about 65% as investors reevaluated whether the company had any special sauce at all. AT-527, the company’s COVID-19 oral antiviral, was by far its lead asset and now the company will have to scramble to figure out a path forward for the drug. They are talking about changing the endpoints and looking at high-risk patients, but no matter how you sugarcoat it with a subgroup analysis of 14, they failed. The best bet for AVIR shareholders is to double down in another name.
This failure was a surprise to many investors because they bought into the notion that big pharma knows best and Roche (OTCMKTS: RHHBY), their partner, would never run a trial that theoretically should not work. This was a real wakeup call for investors who have to realize that viral inhibitors work in the viral stage of the disease, not the inflammatory stage. There is one notable exception, Todos Medical (OTCMKTS: TOMDF) is essentially the final, late stage, oral antiviral poised to read out. Expected Phase 2 interim results should be announced by November 30th before Merck’s (NYSE: MRK) Adcom meeting for molnupiravir. This means MRK investors might want to take out an insurance policy by investing in TOMDF to hedge their bet.
Atea Pharmaceuticals Plummets
One of the leading antiviral companies was Atea Pharmaceuticals, but its data released today showed that it had a hard time separating from placebo by measuring viral titers. That’s right, the antiviral didn’t statistically significantly reduce the viral loads. Not to mention, the real important endpoint is clinical outcomes (hospitalizations, mortality, symptoms, etcetera). There are other reasons other than the drug not working that could have caused this failure including varying vaccination rates, pooled placebo data, and variants with varying overall viral loads. But this is not a good look for Atea, and it’s no surprise the stock lost about $2 billion in market capitalization today.
Setting the Stage
This week news emerged that former FDA commissioner, Dr. Scott Gottlieb, warned of a super-strain, that might be causing the recent uptick in COVID-19 cases in the U.K. This strain has developed from the delta variant and now researchers are questioning whether it can avoid the immune system or existing vaccine immunity or whether it is more transmissible. With vaccinations reaching all-time highs and COVID coming back with a vengeance, it is clear the mass vaccinations strategy did not pan out as everyone hoped. Waning immunity, viral variants that evade vaccine immunity, and other factors mean that vaccines won’t deliver the knockout blow to COVID-19.
In recent days the focus on fighting the COVID-19 pandemic has shifted from the primary strategy of mass vaccinations to a more balanced view that therapeutics will be critical to controlling the pandemic’s damage. Therapeutics analogous to Roche’s (OTCMKTS: RHHBY) Tamiflu for influenza could be used to reduce the damage the COVID-19 virus, SARS-CoV-2, is causing throughout the population, and even now to some extent in vaccinated individuals.
The two most important classes of therapeutics are 1) oral antivirals and 2) immunomodulators. Oral antivirals would be like better versions of Gilead’s remdesivir but they could be administered way before someone gets sick but preventing the virus from replicating further. Immune modulators would be for taking care of the inflammation resulting from infection so that people can have their symptoms reversed and not fall into critical condition. But since nobody wants to have symptoms in the first place and have to go to the hospital, oral antivirals are the primary focus of the two.
The real question is: which company will succeed in the antiviral setting and reach a multibillion-dollar valuation? The best bets are still antivirals that are tested in the hospitalized setting since there is a dire lack of testing and people will only go to get a prescription once they have significant symptoms. Therefore, the antivirals that have succeeded in the outpatient setting, like Merck’s molnupiravir, by preventing hospitalization in those patients that hardly have symptoms and aren’t expected to need to go to the hospital are not going to be the best bets. The ones given to people who are entering the hospital but can also be given in an outpatient setting are the promising ones. This poses a great problem—that an antiviral mechanism alone isn’t enough to help hospitalized patients. This is why Merck halted the development of molnupiravir for hospitalized patients. Therefore, drugs with antiviral and immune modulation activity will be the best candidates for these hospitalized patients
Oral Antivirals Take Center Stage
Vaccine makers slumped after Merck announced their oral antiviral was able to reduce hospitalizations by 50% and reduce deaths by 100%. Molnupiravir, Merck’s drug, was administered to people with mild-to-moderate COVID-19 with little risk of going into the hospital within the next few days. The trial was extremely well designed to meet its carefully chosen endpoints. At the time of the interim analysis only 377 evaluable patients had taken the drug yet Merck’s stock soared $15 billion dollars in market capitalization. The company is seeking an EUA from the FDA for molnupiravir, but there are drugs like CytoDyn’s (OTCMKTS: CYDY) leronlimab which had an 82% reduction in mortality in a cohort of critically ill patients. They were asked for more data even though they had 265 evaluable patients versus Merck’s 377. So it’s unclear if an extra 112 people is enough for MRK to make the cut with respect to sample size and safety. A few significant issues with Merck’s drug are making people question whether they’d ever want to take it.
Molnupiravir works by promoting mutations, inhibiting the same biological target as does remdesivir. Without getting into the weeds too much, this means there is the risk of cancer or birth defects (so no unprotected sex allowed), as well as the promotion of viral variants in those patients who can’t snuff out the virus. The irony is that the immunocompromised are the ones who need antivirals most in the first place! As such, investors are looking for a better antiviral with trial readouts, no theoretical safety concerns, and more commercial promise.
COVID-19 Antiviral Commercial Hurdles
The real world problem that therapeutic drug makers are facing is easily distributing their drugs to the right patients, at the right time. The initial promise of Regneron (NASDAQ: REGN) and Eli Lilly’s (NYSE: LLY) monoclonal antibodies gave way to supply and logistical challenges to safely infuse people. The crux of the problem was quickly identifying the right patient population in time for the treatment to make a difference. Should molnupiravir or any other oral antiviral like Pfizer’s (NYSE: PFE) PF-07321332 receive approval, how are they going to identify patients within 5 days of symptom onset? The rapid antigen tests are best used 9 to 14 days after exposure. According to MIT Medical, delta patients on average are symptomatic in 3 to 5 days with peak viral load at 3.71 days. The math doesn’t work if patients are symptomatic in 4 days.Real world reality is that people tend to go to the hospital when their symptoms get worse which would put them over the threshold of even getting molnupiravir which wanes over time.