Atea Pharmaceuticals, Inc.

Atea Pharmaceuticals, Inc. (NASDAQ: AVIR) is a clinical-stage biopharmaceutical company focused on discovering, developing, and commercializing therapies for life-threatening viral diseases. The company has built a proprietary nucleotide prodrug platform to develop novel product candidates to treat single-stranded ribonucleic acid (ssRNA) viruses, which are a prevalent cause of severe viral diseases. AVIR is currently focused on the development of orally available, potent, and selective nucleotide prodrugs for difficult-to-treat, life-threatening viral infections, including severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). AVIR was listed on the NASDAQ on October 30, 2020. As of May 24, 2021, the company’s market capitalization stood at USD 1.86 billion.

Global Phase 3 MORNINGSKY Trial of AT-527: On April 29, 2021, the company announced that the first patient was dosed in the Phase 3 MORNINGSKY trial, a global multicenter trial evaluating AT-527 in mild or moderate COVID-19 patients in an outpatient setting. The trial is anticipated to enroll approx. 1,400 non-hospitalized adults and adolescents with mild to moderate COVID-19. MORNINGSKY is expected to have an extensive global footprint and will include a large number of clinical sites worldwide, including Japan. Under a strategic collaboration, F. Hoffmann-LaRoche Ltd. and Genentech, Inc. (collectively, Roche), and AVIR are jointly developing AT-527 for the treatment of COVID-19.

AVIR’s Deep Antiviral Pipeline (Source: Company Presentation, May 13, 2021)

Q1FY21 Results: The company reported total revenue of USD 65.98 million in Q1FY21 (ending March 31, 2021), compared to nil in Q1FY20. The revenue was derived from the license agreement signed with Roche in October 2020. R&D expenses for Q1FY21 were USD 26.57 million, 8.4x of USD 2.82 million in Q1FY20, primarily due to an increase in external expenses incurred in conjunction with the advancement of product candidates for the treatment of COVID-19 and dengue fever. The company reported a net income of USD 30.71 million in Q1FY21 compared to a net loss of USD 3.99 million in Q1FY20.

Key Risks: AVIR's business is highly dependent on the success of its most advanced product candidates, particularly AT-527, which will require significant additional clinical testing before seeking regulatory approval and launching commercial sales. If these products fail in clinical development, do not receive regulatory approval, or are not successfully commercialized, the company's business will be adversely affected.

AVIR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: AVIR has declined by 75.27% in the past 3 months and is currently leaning towards the lower band of the 52-week range of USD 18.72 to USD 94.17. Considering the attractive valuation of the newly listed company, growth potential, commencement of revenue generation, commercialization attempts, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 20.68, down by 7.8% as of May 24, 2021. The target price of USD 23.31 represents a Price/Sales multiple of 1.67x on FY21E sales per share of USD 13.9. On the technical chart, the next support level is USD 18.80.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.