Enanta Pharmaceuticals, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended September 30, 2021. This is an annual report, not a standalone fourth-quarter report; the filing does not provide a clear standalone Q4 financial result.
Business context
Enanta is a clinical-stage biotechnology company developing small-molecule treatments for viral infections and liver diseases. Its revenue came entirely from royalties on AbbVie’s HCV regimens, principally MAVYRET/MAVIRET, which contains Enanta-discovered glecaprevir. Enanta’s wholly owned programs focus on RSV, HBV, SARS-CoV-2 and hMPV. It has no internally commercialized products.
Financial performance and liquidity
| Metric ($ millions, except per-share data) | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue, all royalties | 97.1 | 122.5 | Down 20.7% |
| Research and development expense | 174.1 | 136.8 | Up 27.3% |
| General and administrative expense | 32.5 | 27.4 | Up 18.9% |
| Operating loss | (109.6) | (41.6) | Loss widened |
| Net loss | (79.0) | (36.2) | Loss widened |
| Basic and diluted loss per share | $(3.92) | $(1.81) | — |
| Cash used in operating activities | 70.0 | — | FY2020 provided $7.1 |
At September 30, 2021, cash, cash equivalents and marketable securities totaled $352.4 million, versus $419.3 million a year earlier. Current assets were $319.0 million and current liabilities were $36.2 million. The company reported no debt. Total liabilities were $39.4 million and stockholders’ equity was $399.4 million.
FY2021 included a $28.6 million income tax benefit, primarily from a federal net operating loss carryback under the CARES Act. The company continued to maintain a valuation allowance against its deferred tax assets. The reported net loss was therefore materially smaller than the $107.6 million pretax loss.
Changes versus the prior year
- Royalty revenue fell $25.4 million, reflecting fewer HCV patients treated during the COVID-19 pandemic and lower royalty tiers as sales declined. The weighted-average royalty rate on allocated sales was approximately 11%, versus 13% in FY2020.
- R&D expense rose $37.4 million, driven mainly by expanded virology development, including multiple Phase 2 RSV studies and HBV studies; liver-disease clinical-trial expense decreased.
- Operating cash flow shifted from $7.1 million provided in FY2020 to $70.0 million used in FY2021, primarily due to lower royalty receipts and higher R&D spending.
Outlook, commentary and key risks
- Management expected FY2022 R&D expense to exceed FY2021 levels and anticipated continuing net losses, absent a significant recovery in AbbVie HCV sales or other revenue sources.
- Management stated that existing financial resources and expected continuing HCV royalties would support the programs for at least two years. The financial-statement going-concern assessment separately says resources on hand were sufficient for at least 12 months beyond issuance; both assessments depend on spending and future royalties.
- Enanta expected enrollment in its RSVP Phase 2b RSV study to complete during the Northern Hemisphere winter, if social-distancing measures did not increase significantly, with data expected in the first half of 2022. RSV re-emergence and enrollment timing remained uncertain.
- After completing IND-enabling work, Enanta planned to begin first-in-human testing of its oral SARS-CoV-2 protease inhibitor EDP-235 in early calendar 2022. Its activity and projected dosing were based on preclinical findings; it had not been tested in humans.
- EDP-514 Phase 1b studies showed antiviral activity and tolerability over 28 days, but the candidate remained early-stage. EDP-938 had positive Phase 2a challenge-study results and three Phase 2 studies underway; neither program had established late-stage efficacy.
- Enanta stopped internal development of its NASH FXR agonists EDP-305 and EDP-297 and was seeking out-licensing partners. It also discontinued HBV candidate EDP-721 after safety observations; the filing reports this discontinuation in November 2021, after fiscal year-end.
- Principal risks include dependence on AbbVie royalties, continued HCV market and pricing pressure, COVID-19-related effects on diagnoses and clinical trials, clinical and regulatory uncertainty, competition, and reliance on third-party manufacturers and research organizations, including suppliers in China.
Important facts for investors to verify
- Subsequent AbbVie royalty reports and HCV treatment volumes, pricing, reimbursement and market share, which determine Enanta’s principal revenue source.
- Enrollment and timing of RSVP, RSVTx and RSVPEDs, and the reported results and safety profile of EDP-938.
- Whether EDP-235 entered human testing as planned, and how its clinical and regulatory path developed amid competing COVID-19 treatments.
- Actual FY2022 R&D spending, operating cash use and cash runway compared with management’s estimates.
- Progress in out-licensing EDP-305 or EDP-297 and any material consequences of EDP-721’s post-year-end discontinuation.