Enanta Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2022. The company is a clinical-stage biotechnology business funded primarily by royalties on AbbVie’s HCV treatment MAVYRET/MAVIRET and its financial reserves. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial results and liquidity
| Metric | Three months ended March 31, 2022 | Prior-year quarter | Six months ended March 31, 2022 | Prior-year six months |
|---|---|---|---|---|
| Royalty revenue | $18.7 | $20.1 | $46.4 | $51.9 |
| Research and development | $42.1 | $41.5 | $90.6 | $78.2 |
| General and administrative | $10.5 | $8.3 | $20.0 | $15.7 |
| Operating loss | $33.8 | $29.7 | $64.3 | $42.0 |
| Net loss | $33.6 | $22.0 | $63.7 | $30.4 |
| Net loss per share | $1.63 | $1.09 | $3.11 | $1.51 |
Operating expenses exceeded royalty revenue; the filing does not present a meaningful product gross margin because Enanta reports royalty revenue rather than product sales. The prior-year periods included income tax benefits of $7.1 million for the quarter and $10.4 million for the six months under the CARES Act; there was no tax benefit in 2022.
Cash, cash equivalents and marketable securities totaled $322.5 million at March 31, 2022, down from $352.4 million at September 30, 2021. Cash and cash equivalents were $41.0 million; marketable securities were $281.6 million. Six-month operating cash use was $39.6 million, compared with $19.5 million a year earlier. Investing activities provided $10.4 million and financing activities provided $13.0 million, principally reflecting stock-option exercises. Management said existing resources and expected royalties should fund operations for at least two years. The company reported no conventional borrowings; liabilities included operating lease obligations and $1.5 million of Series 1 nonconvertible preferred stock.
Total assets were $406.8 million and stockholders’ equity was $358.6 million at quarter-end. Accumulated deficit was $15.1 million. The company recorded $2.7 million of other comprehensive loss for the six months, principally unrealized marketable-security losses.
Changes versus prior periods
- Six-month royalties declined 10.6% year over year; quarterly royalties declined 7.0%. Enanta attributed the decrease to lower AbbVie HCV sales and patient volumes remaining below pre-pandemic levels.
- Six-month R&D expense increased 16.0%, mainly due to manufacturing costs supporting virology clinical studies; virology spending rose while non-viral liver-disease spending fell.
- Six-month G&A expense increased 27.3%, primarily from higher headcount and compensation supporting expanded R&D operations.
- Net loss widened, reflecting lower royalties, higher operating costs and the absence of the prior-year CARES Act tax benefit.
- Enanta extended its Watertown office and laboratory lease through September 1, 2027. The extension increased the right-of-use asset and lease liability by $15.0 million; remaining minimum lease payments were $20.3 million.
Outlook, programs and risks
Management expects fiscal 2022 expenses to exceed fiscal 2021 levels and anticipates continuing net losses absent a significant increase in AbbVie royalties or new revenue sources. The company has no revenue from its own product sales and does not expect such revenue for at least several years. AbbVie royalties and existing resources remain the principal funding sources.
- RSV: Three Phase 2 studies of EDP-938 were ongoing. Enanta expected RSVP topline data in the second quarter of calendar 2022. RSVPEDs evaluates pediatric patients, and RSVTx studies adult transplant recipients. Enrollment and trial timing remain exposed to unpredictable RSV incidence and COVID-related disruption. A Phase 1 study of the RSV candidate EDP-323 was planned for the second half of calendar 2022.
- SARS-CoV-2: Enanta began a first-in-human study of EDP-235 in February 2022 and expected preliminary data in the second quarter of calendar 2022. The filing describes encouraging preclinical findings but clinical safety and efficacy remained unestablished.
- HBV: The filing reports early clinical findings for EDP-514, including antiviral activity in short-duration studies; further development and combination approaches remain subject to clinical and regulatory risk.
- hMPV and NASH: The company was optimizing hMPV leads and aimed to select a clinical candidate later in the second half of 2022. It had stopped further development of its NASH FXR agonists and was pursuing an out-license strategy.
Key risks include dependence on AbbVie’s HCV sales, competition and pricing pressure, ongoing effects of COVID-19 on HCV treatment and clinical-trial recruitment, development and regulatory uncertainty, and reliance on third-party manufacturers and research organizations. Management reported no current litigation and effective disclosure controls. The CFO/PAO signed the report May 9, 2022.
Important facts for investors to verify
- Subsequent AbbVie HCV sales and royalty trends, including the effect of patient volumes, competition, pricing and annual royalty tiers.
- Whether the expected EDP-938 and EDP-235 data were delivered on schedule, and the results and implications for further trials.
- Actual R&D spending, cash burn and liquidity runway relative to management’s at-least-two-year estimate.
- Clinical enrollment and timing risks from RSV seasonality, COVID-19 and supply or trial-site disruptions.
- Progress on the NASH out-license effort and hMPV candidate selection, and any material changes to the pipeline or spending plans.