Stock Analysis & Ideas

Atea Pharmaceuticals: Stumbling Over Rising Costs?

Atea Pharmaceuticals Inc. (AVIR) is a clinical-stage biopharmaceutical company engaged in discovering and developing therapies to address the unmet medical needs of patients with severe viral diseases. Its programs are focused on the development of orally- administered direct-acting antivirals for the treatment of patients with COVID-19, with chronic hepatitis C infection, with dengue, and with severe respiratory syncytial virus infection. The company was incorporated in 2012 and is headquartered in Boston, Massachusetts.

I am bearish on the clinical-stage biopharmaceutical company. The revenue relies heavily on the collaboration revenue from the Roche License Agreement, which is not stable. At the same time, there are increases in research and development expenses and general and administrative expenses, which in the latest quarter-turned previous profitability into a net loss.

Shares of Atea Pharmaceuticals have a 1-year return of more than minus 92%, having underperformed Nasdaq.

Atea Pharmaceuticals Business News

Atea Pharmaceuticals has announced its strategic clinical development priorities for 2022 with a focus on including Phase 2 programs across three severe viral diseases, COVID-19, hepatitis C (HCV), and treatment of dengue fever.

The firm stated it will be reporting progress during the year with each of these programs, which will be critical and material news for the stock price.

In Q3 2021 Atea Pharmaceuticals reported weak financial results. EPS normalized of -$0.34 was a miss by -$0.29, EPS GAAP of -$0.34 was a miss by -$0.17, and revenue of $32.81 million was a miss by -$20.65 million. AVIR stock earnings have been very volatile, which is a highly typical feature of biotech stocks.

The firm reported cash and cash equivalents of $839.7 million on September 30, 2021, compared to $850.1 million on December 31, 2020, and collaboration revenue for the quarter in the amount of $32.8 million versus $0 million for the quarter ended September 30, 2020.

Turning to costs, research and development expenses for Q3 2021 increased to $43.0 million versus $13.6 million in Q3 2020. General and administrative expenses increased to $11.9 compared to $4.0 million in the same quarter a year ago. The bottom-line figure showed that net loss for the quarter of $28.2 million increased by $10.6 million from a net loss of $17.6 million in Q3 2020.

Fundamentals – Risks

The biotech firm has no debt, which is very positive news. As a result of the collaboration revenue on a TTM basis, the company has turned profitable. A deeper analysis reveals that for the past two consecutive quarters, Q2 and Q3 of 2021, this revenue growth has been slowing. In Q3 2021 AVIR revenue declined 45.67% quarter-over-quarter.

I am skeptical about the sustainability of profitability as costs are rising, and the trend of collaboration revenue is unstable. Free cash flow remains volatile and for the first nine months of 2021, the cumulative figure was negative, -$11.59 million.


AVIR stock is relatively attractive based on its PE Ratio (20.41x) compared to the U.S. Pharmaceuticals industry average (28.53x) and based on its PB Ratio (0.88x) compared to the U.S. Pharmaceuticals industry average (3.18x).

Wall Street’s Take

Atea Pharmaceuticals has a Hold consensus based on one Buy, two Hold, and one Sell ratings. The average Atea Pharmaceuticals price target of $9.00 represents 41.29% upside potential.


Atea Pharmaceuticals is focusing on clinical trials of its pipeline products, and it has managed to turn profitable in the past twelve months. However, rising costs and collaboration revenue that is not stable make this biotech stock too risky until further progress in revenue is made. Valuation is also mixed.

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