Enanta Pharmaceuticals, Inc. — Form 10-Q
Business context and reporting period. The filing covers the fiscal quarter and nine months ended June 30, 2022. Enanta is a clinical-stage biotechnology company whose revenue is primarily royalties from AbbVie’s HCV medicines MAVYRET/MAVIRET; it is developing wholly owned antiviral programs in RSV, SARS-CoV-2, HBV and hMPV. Financial amounts below are in millions of dollars unless otherwise noted.
Financial results and liquidity
| Metric | Three months ended June 30, 2022 | Nine months ended June 30, 2022 | Prior comparable period |
|---|---|---|---|
| Royalty revenue | $19.5 | $65.8 | $21.6 and $73.5, respectively |
| Research and development expense | $39.1 | $129.7 | $47.0 and $125.2, respectively |
| General and administrative expense | $12.9 | $32.9 | $8.5 and $24.2, respectively |
| Operating loss | $32.5 | $96.8 | $33.8 and $75.8, respectively |
| Net loss | $31.7 | $95.4 | $24.0 and $54.4, respectively |
| Net loss per share | $1.53 | $4.64 | $1.19 and $2.70, respectively |
- Revenue and costs: Quarterly royalties fell $2.1 million year over year; nine-month royalties fell $7.7 million, attributed to lower AbbVie HCV sales and patient volumes below pre-pandemic levels. Nine-month R&D expense rose $4.6 million, mainly from clinical-program manufacturing costs, while quarterly R&D declined with study timing and the wind-down of the NASH FXR program. G&A increased in both periods, principally from headcount and compensation.
- Margins: The filing does not report gross margin. Operating expenses exceeded royalty revenue, resulting in operating losses in both periods.
- Cash flow: Operating activities used $69.2 million over nine months, versus $49.0 million used in the prior-year period. Investing activities provided $26.7 million, largely reflecting the timing of marketable-security purchases and maturities; financing activities provided $17.1 million, primarily from option exercises. Cash, cash equivalents and restricted cash decreased $25.5 million.
- Liquidity and debt: Cash, cash equivalents and marketable securities totaled $292.7 million at June 30, 2022, down from $352.4 million at September 30, 2021. Current assets were $313.0 million and current liabilities $23.0 million. The filing reports no borrowings; lease liabilities were $24.8 million, including current and long-term portions. Management believes existing resources and royalties can fund operations for the next two years.
- Other balance-sheet items: Total assets were $385.2 million and stockholders’ equity $338.0 million. Accumulated other comprehensive loss increased to $3.6 million, principally reflecting unrealized losses on marketable securities.
Material changes, outlook and risks
- Net loss increased year over year, particularly for the nine-month period, as royalties declined, R&D and G&A costs increased, and the prior-year periods included larger CARES Act tax benefits. The nine-month 2022 tax benefit was $0.4 million versus $19.8 million a year earlier.
- RSV: In May 2022, Enanta reported that EDP-938 did not meet the RSVP Phase 2 study’s primary symptom endpoint or secondary antiviral endpoints. More subjects on EDP-938 achieved undetectable RSV RNA at Day 5, a statistically significant finding; the company reported a favorable safety profile and plans further studies in higher-risk populations. RSVPEDs and RSVTx Phase 2 studies were underway; another high-risk-adult study was planned.
- COVID-19 candidate: After quarter-end, in July 2022, Enanta reported positive Phase 1 topline results for EDP-235, including tolerability and exposure data. It targeted a fourth-quarter 2022 Phase 2 start, subject to FDA review.
- Other programs: EDP-514 Phase 1b data were described as supporting further HBV development. Enanta planned a Phase 1 study of RSV candidate EDP-323 in the second half of calendar 2022 and aimed to select an hMPV clinical candidate in the first half of 2023.
- Outlook and risks: Management expected R&D spending generally to increase as programs advance and anticipated a net loss in fiscal 2022. Funding and prospects remain dependent on AbbVie royalty sales, clinical outcomes, trial enrollment, competition, regulatory decisions and access to third-party manufacturing. The COVID-19 pandemic had reduced HCV treatment volumes and disrupted or could continue to affect RSV enrollment and trial timelines.
- Litigation and commitments: In June 2022, Enanta sued Pfizer alleging infringement of its newly issued coronavirus-protease patent in connection with Paxlovid and seeking compensation; outcome and potential recovery are uncertain. New and amended laboratory/office leases include estimated future minimum lease payments of $113.9 million, including a planned 73,000-square-foot facility, subject to construction and occupancy timing.
- Management stated disclosure controls were effective. The company completed migration to an Oracle accounting platform during the quarter and updated related financial-reporting processes; it reported no other material control changes.
Most important facts for investors to verify
- AbbVie’s subsequent MAVYRET/MAVIRET sales, HCV patient volumes and resulting royalty trends.
- Progress, enrollment and results in EDP-938’s higher-risk RSV studies following the RSVP endpoint miss.
- FDA discussions and timing, dose selection, and subsequent efficacy and safety results for EDP-235.
- Actual operating cash burn and whether the stated two-year funding runway remains supportable as R&D spending changes.
- Construction and occupancy timing, total costs and lease obligations for the new Watertown facility.
- Developments, costs and potential outcomes of the Pfizer patent litigation; the filing does not quantify any likely recovery.