Atriva: The mechanics of a COVID drug financing

In late October, the EIB provided a €24 million financing to German biopharmaceutical company Atriva Therapeutics to support the firm’s development of a novel therapy treating severe respiratory infections with RNA viruses – RNA viruses cause diseases such as influenza, SARS and COVID-19.

Atriva’s ATR-002, an oral small molecule, has been proven to block the viral spread of the SARS-CoV-2 coronavirus in pre-clinical trials, providing a therapeutic treatment for hospitalised COVID-19 patients with moderate to severe symptoms. “While one needs to be careful when comparing COVID-19 to the flu, it might be helpful that both diseases have overlaps in their mechanisms of infection,” says Ambroise Fayolle, EIB Vice-President in charge of innovation and transactions in Germany. “If, as Atriva’s research indicates, one small molecule can work to treat both diseases, this would be excellent news not only for the millions of people who fall ill from the flu every year but also for the many more who are affected by the coronavirus lately. An effective treatment would also lift a huge burden from our health systems and help mitigate the impact these diseases have on our daily lives and the economy.”

Flexible finance

The venture debt loan comes with a six-year maturity and a bullet repayment. Although the parties declined to reveal the pricing, the loan has a “low single-digit fixed-interest rate, combined with a royalty,” according to Henri-François Boedt, senior loan officer in the EIB’s Growth Capital and Innovation Finance division.

“With this kind of company, if the trials fail then the IP and patents are worth nothing,” Boedt explains. “Although our debt is senior to equity, our return is lower to an equity investor’s. It’s not like a real estate loan where there’s clear collateral that’s worth something in case of problems. So the pricing resembles that risk but is lower than what a venture capitalist would typically expect.”

The development bank decided to dilute some of the fixed interest with royalties in order to provide Atriva with a more variable type of remuneration. “If the company is highly successful, it would be a low burden to repay the loan from royalties. Had we reflected the full risk of the project in fixed interest, it would’ve been a very high burden for the company; our solution makes that burden a manageable one.”

Atriva will receive the EIB loan in three tranches, upon the completion of pre-defined milestones. The funds will support the company’s R&D for ATR-002, including clinical trial expenses, the technical transfer and manufacturing ramp-up needed to reach a commercial scale, as well as regulatory, intellectual property, pharmacovigilance and market-access activities.

“The company is in clinical trials so it’s pre-revenue and cashflow negative, hence it really doesn’t make sense to have a heavy fixed interest that starts right away with the amortisation of the loan,” says Boedt. “The facility has a long availability period with different disbursements; meaning the drawdown and repayment of the loan match the cash flow profile of the company.

"The three tranches are part of the risk mitigation. The first disbursement presents a higher risk than the second or third, where the risk of failure of the drug becomes less severe.”

A weapon against future pandemics

Atriva has developed ATR-002 specifically to treat respiratory viral infections by inhibiting MEK, a host cell factor required for the replication of various RNA viruses, including influenza and SARS-CoV-2.

Atriva’s pre-clinical studies, performed at the Universities of Tübingen and Münster, also showed a second beneficial effect: the MEK-inhibitor was able to significantly decrease pro-inflammatory cytokine and chemokine expression in cells. Cytokines and chemokines are proteins that coordinate the immune response throughout the body. In patients with COVID-19, ATR-002 could prevent the ‘cytokine storm’ that progresses the disease to a life-threatening condition.

This dual benefit, antiviral activity and immunomodulation, positions ATR-002 as a promising therapeutic candidate, and Atriva has filed the respective patents with the European Patent Office.

The drug successfully completed a Phase I clinical trial in 2019, where it proved safe and tolerable in healthy volunteers. Atriva will now start a Phase II study to determine ATR-002’s efficacy in hospitalised COVID-19 patients, while a Phase II study in influenza is planned for early 2021. The first results are expected in the second quarter of 2021, and the second in mid-2022.

“Our ultimate goal is to develop a broad-spectrum antiviral drug that will also be effective against future viral outbreaks,” says Dr Rainer Lichtenberger, co-founder and CEO of Atriva, said. “Beyond this pandemic, it'll be a key weapon against severe respiratory viruses; effective against all the flus – the typical seasonal one, bird, swine, and so on – as well as viruses like yellow fever, dengue fever, and hantavirus."

Drug support “here to stay”

The loan is backed by the InnovFin Infectious Diseases Finance Facility (IDFF), a collaboration between the European Commission and the EIB. The IDFF enables the EIB to provide between €7.5 million and €75 million of funding to innovative players active in developing vaccines, drugs, medical and diagnostic devices and research infrastructure for combating infectious diseases. Through this facility, the EIB has so far provided €400 million of support to European companies drugs for various infectious diseases, most prominently the coronavirus.

“Compared to the US, the national funding in Europe for COVID vaccines and treatments has been very small. So we’ve been trying to do as much as possible,” says Boedt. “The severity of this crisis has shown very plainly that the areas of drug R&D, vaccines, anti-virals, and antimicrobial resistance are in high need of support. Going forward, I think the support for those areas is here to stay.”