Enanta Pharmaceuticals, Inc. — Q2 FY2024 Form 10-Q
Reporting period: Three and six months ended March 31, 2024. Financial amounts below are in U.S. dollars; unless stated otherwise, amounts are in millions. Enanta is a biotechnology company whose principal revenue is royalties from AbbVie’s HCV treatment MAVYRET/MAVIRET. It is funding research programs focused primarily on RSV and immunology.
Financial performance and position
| Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Six months ended March 31, 2024 | Six months ended March 31, 2023 |
|---|---|---|---|---|
| Revenue | $17.1 | $17.8 | $35.1 | $41.4 |
| Operating expenses | $49.8 | $57.2 | $102.7 | $110.8 |
| Loss from operations | $(32.8) | $(39.5) | $(67.7) | $(69.5) |
| Net loss | $(31.2) | $(37.7) | $(64.6) | $(66.6) |
| Net loss per share, basic and diluted | $(1.47) | $(1.79) | $(3.06) | $(3.19) |
- Quarterly royalty revenue was $17.1 million, down $0.7 million year over year, primarily reflecting lower AbbVie HCV sales. Six-month revenue fell $6.3 million; the prior-year period also included $1.0 million of license revenue.
- Quarterly R&D expense declined $7.9 million to $35.6 million, mainly as COVID-19 and HBV spending wound down, partly offset by higher RSV and new CSU program spending. Six-month R&D expense declined $12.4 million to $72.0 million.
- G&A increased $0.5 million in the quarter and $4.3 million for six months, primarily due to legal expenses related to the Pfizer patent suit. Net loss improved versus the comparable periods.
- Interest expense was $2.6 million for the quarter and $6.0 million for six months, related to the OMERS royalty sale agreement. Higher interest and investment income partly offset this expense. No gross margin is presented; the filing reports operating expenses and operating losses.
Cash flow, liquidity and obligations
- At March 31, 2024, cash and cash equivalents were $63.5 million and short-term marketable securities were $236.8 million, totaling $300.3 million. Cash, cash equivalents and restricted cash were $67.5 million.
- For the six months, operating cash use was $53.6 million, versus $49.4 million in the prior-year period; investing activities provided $45.5 million and financing activities used $13.8 million. Cash, cash equivalents and restricted cash decreased $21.8 million.
- The royalty-sale liability to OMERS was $181.4 million, including $33.7 million current and $147.8 million long-term. The 2023 agreement provided $200 million upfront in exchange for 54.5% of future MAVYRET/MAVIRET royalty payments through June 30, 2032, subject to a payment cap of 1.42 times the purchase price. This is recorded as a liability, not presented as conventional borrowings.
- Total liabilities were $247.4 million. The company also recorded operating lease liabilities, including following commencement of its 10-year 4 Kingsbury Avenue lease; estimated payments under that lease total $76.5 million before the tenant improvement allowance.
Material changes and operating developments
- Revenue depends heavily on AbbVie’s HCV sales and royalty tiers reset to the lowest tier each calendar year. Enanta retains 45.5% of cash royalties covered by the OMERS agreement, although it continues to report 100% of earned royalties as revenue.
- Spending shifted toward RSV and CSU while internal COVID-19, HBV and NASH development was reduced or wound down. EDP-235 will not advance to Phase 3 without a collaboration; HBV advancement depends on access to another compound for a combination regimen.
- Enanta began construction of tenant improvements at its new 4 Kingsbury Avenue facility and shortened the term of its 500 Arsenal Street lease, with occupancy of the new space expected by the end of November 2024.
Outlook, risks and notable items
- Management expects existing cash, cash equivalents, short-term securities and retained future HCV royalties to fund operating expenses and capital needs through the third quarter of fiscal 2027. The financial statements also state that available resources are expected to cover at least 12 months from issuance. These are forward-looking estimates and may change.
- Management expects external R&D expenses generally to decrease over the next 12 months, including because Enanta will not advance EDP-235 into Phase 3 on its own. Losses are expected to continue as wholly owned programs advance.
- Management anticipated topline data from the RSVPEDs Phase 2 study in the second half of calendar 2024 and from the EDP-323 Phase 2 challenge study in the third quarter of calendar 2024. Enrollment was ongoing in RSVPEDs and RSVHR.
- Enanta is pursuing a patent-infringement suit against Pfizer concerning use of its coronavirus protease inhibitor patent in Paxlovid. Legal expenses are recorded as incurred; the filing does not provide a clear estimate of any potential recovery or liability.
- Key risks include clinical and regulatory uncertainty, dependence on AbbVie royalties, ability to secure collaborations or additional financing, intellectual-property disputes, and the possibility that actual cash needs differ from management’s runway estimate.
Important facts for investors to verify
- Subsequent AbbVie HCV sales, Enanta’s royalty receipts, and payments to OMERS under the royalty-sale terms.
- Clinical progress and announced data for zelicapavir, EDP-323 and the CSU KIT-inhibitor program, including whether EDP-235 obtains a development partner.
- Quarterly operating cash use, R&D spending trends, and whether the stated runway through Q3 FY2027 remains supportable.
- Developments in the Pfizer patent litigation and related legal costs, as well as costs and timing for the new laboratory facility.