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Why Atea Pharmaceuticals Is Imploding Today

What happened

Shares of Atea Pharmaceuticals (NASDAQ: AVIR), a clinical-stage biopharmaceutical company, are falling hard after the company shared disappointing clinical-trial data. Investors are worried about what will become of AT-527, an oral COVID-19 treatment, after failing a phase 2 study. The stock was down 61.9% as of 11:26 a.m. EDT on Tuesday.

So what

Atea Pharmaceuticals and its big pharma partner Roche (OTC: RHHBY) are developing AT-527 as an easy-to-swallow antiviral for COVID-19. Unfortunately, treatment with the antiviral didn't lower the amount of circulating SARS-CoV-2 virus for mild or moderate patients when measured against patients who received a placebo.

Image source: Getty Images.

Since AT-527 was developed using Atea Pharmaceuticals' proprietary platform, this failure makes it far more difficult to cheer for antivirals the company has in earlier stages of development.

There was a glimmer of hope in the failed phase 2 study. A closer look at results from high-risk patients with underlying health conditions suggests AT-527 works as intended. Viral loads for this patient group fell by around two-thirds. This might be enough to improve outcomes, but it's hardly remarkable.

Now what

In collaboration with Roche, Atea Pharmaceuticals is running a phase 3 study with around 1,400 mild-to-moderate COVID-19 patients. Atea Pharmaceuticals will try to modify the phase 3 trial to include more high-risk patients.

While there's a chance for success in the ongoing phase 3 study with AT-527, if the company can modify it to include more high-risk patients, this biotech stock probably isn't worth the risk right now. Another oral COVID-19 treatment candidate from Merck called molnupiravir is miles ahead and it's going to be tough to beat. Earlier this month, Merck stopped a phase 3 trial after an interim assessment showed it reduced the risk of hospitalization or death by about half.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Atea Pharmaceuticals, Inc. The Motley Fool has a disclosure policy.


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