Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q4 2022 Earnings Call Transcript

Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q4 2022 Earnings Call Transcript November 21, 2022

Enanta Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $-1.27, expectations were $-1.35.

Operator: Good afternoon, and welcome to Enanta Pharmaceuticals Fiscal Fourth Quarter and Full Year Ended September 30, 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session at the end of the prepared remarks. Please be advised that this call is being recorded. I’d now like to hand the call over to Jennifer Viera, Investor Relations. Please go ahead.

Jennifer Viera: Thank you, operator, and thanks to everyone for joining us this afternoon. The news release with our fiscal fourth quarter and full year 2022 financial results was issued this afternoon and is available on our website. On the call today are Dr. Jay Luly, President and Chief Executive Officer; Paul Mellett, our Chief Financial Officer; and other members of Enanta’s senior management team. Before we begin with our formal remarks, we want to remind you that we will be making forward-looking statements, which may include our plans and expectations with respect to our research and development pipeline and financial projections, all of which involve certain assumptions and risks beyond our control that could cause our actual developments and results to differ materially from those statements.

A description of these risks is in our most recent Form 10-Q and other periodic reports filed with the SEC. Enanta does not undertake any obligation to update any forward-looking statements made during this call. I’d now like to turn the call over to Dr. Jay Luly, President and CEO. Jay?

Jay Luly: Thank you, Jennifer, and good afternoon, everyone. At Enanta, we are leveraging our expertise in medicinal chemistry, virology and preclinical sciences to discover new compounds that can be developed into groundbreaking medicines. Our fiscal fourth quarter, as well as 2022 overall was a year of progress toward this effort. With multiple ongoing and planned clinical studies across our pipeline, we are poised to execute on our vision to transform the lives of patients with curative therapies, building on our prior success in hepatitis C. Today, I’ll start by detailing our recent advances in the development of EDP-235, our once-daily orally dosed inhibitor of coronavirus 3CL protease, which is in clinical development for the treatment of COVID-19.

I will then comment on our RSV and human metapneumovirus pipeline progress since our last call, as well as our work in hepatitis B. Starting with COVID-19, we are pleased with the recent advancement of EDP-235 into the next stage of clinical development with the initiation of SPRINT, a Phase 2 clinical trial in COVID-19 patients. This randomized double-blind, placebo-controlled study will enroll approximately 200 non-hospitalized symptomatic patients with mild to moderate COVID-19 who are not at increased risk for developing severe disease. Patients will receive 200 milligrams or 400 milligrams of EDP-235 or placebo orally once daily with food for five days and will be followed for 28 days thereafter. Patients will be eligible to participate if they have had symptoms for not more than five days and have not received a SARS-CoV-2 vaccine or been infected with SARS-CoV-2 within 90 days of enrollment.

Primary objective of the study is safety and tolerability and key secondary objectives include pharmacokinetics and multiple viralogic measures to guide our dose selection for subsequent trials. In other studies of protease inhibitors, the viral load decline has been similar between high and standard risk populations. Thus, we believe enrolling from a larger pool of standard risk patients will be a more efficient way to collect this information. We are aiming to report results from SPRINT in the first half of 2023. As previously reported data from the Phase I study of EDP-235 demonstrated it was generally safe and well tolerated up to 400 milligrams for seven days, with strong exposure multiples over the EC90, which is a measure of potency.

Specifically, it is a concentration of the drug that results in 90% inhibition of viral replication in vitro. Adverse events were generally mild and infrequent. 200 milligrams of EDP-235 taken once daily resulted in mean trough plasma levels at steady state that were threefold and sevenfold over the plasma protein adjusted EC90 for the Alpha variant and Omicron variant, respectively, while 400 milligrams resulted in levels that were 6-fold and 13-fold over the plasma protein adjusted EC90 for the respective variants. Importantly, these target exposure multiples were achieved without the need for ritonavir boosting and its associated drug-drug interactions. Based on preclinical studies, EDP-235 is projected to have four times higher drug levels in lung tissue compared to plasma, which would be expected to drive up to a 28-fold multiple for the Omicron variant at even the 200-milligram human dose.

As COVID-19 persists, a new variant arise that can circumvent immunity from vaccination, previous infection or monoclonal antibody treatments. We are committed to developing EDP-235 as a convenient and easily prescribed antiviral, which continues to show strong activity against all COVID-19 variants tested to date. Beyond the COVID-19, we are also encouraged by the progress we have made in our respiratory syncytial virus or RSV program. RSV is a virus that represents a significant unmet need as it can result in a severe respiratory infection and is associated with significant morbidity and mortality in children, the elderly and other high-risk populations. While RSV was mitigated for some time due to social distancing measures during the pandemic, RSV infections are now on the rise in the US and the need for a treatment remains high, as there are no targeted therapeutics currently available.

We are pursuing a robust RSV program, which includes EDP-938, the most advanced and protein inhibitor in clinical development today as well as EDP-323, a novel oral therapeutic targeting the RSV L-protein RNA polymerase. We are currently evaluating EDP-938 in high-risk populations, including pediatric patients, adult hematopoietic cell transplant recipients and other high-risk adults, all of which have a significant unmet need. Last month, we initiated RSV HR, a Phase IIb study in adults with acute RSV infection, who are at high risk of complications, including those over 65 years of age and/or those with congestive heart failure, COPD or asthma. The study is a randomized, double-blind, placebo-controlled multicenter global study designed to evaluate the effect of EDP-938 compared with placebo on the progression of RSV infection.

Approximately 180 patients will be treated with 800 milligrams of EDP-938 or placebo for five days and then evaluated over the next 28 days. The primary endpoint for the study is time to resolution of RSV, lower respiratory tract disease symptoms through Day 33. Our other studies of EDP-938, namely RSVPEDs, a Phase 2 study in pediatric RSV patients and RSVTx a Phase 2b study in adult hematopoietic cell transplant recipients with RSV are ongoing. We believe EDP-938 has the potential to deliver a potent oral antiviral treatment for all populations at high risk from RSV infection. We’ll continue to monitor the RSV trends during this Northern Hemisphere season to enable us to better evaluate timing for data. This quarter, we also began dosing in our Phase 1 randomized, double-blind, placebo-controlled study of EDP-323 in healthy adult subjects.

The study will evaluate the safety, tolerability and pharmacokinetics of orally-administered single and multiple doses of EDP-323, our novel oral therapeutic targeting the RSV L-protein RNA polymerase. EDP-323 is supported by promising preclinical data presented this quarter at the 12th International RSV Symposium, which showed that EDP-323 inhibited polymer activity in vitro and also inhibited the virus-induced cytopathic effect of both RSV-A and RSV-B strains. In a rodent RSV infection model, treatment with EDP-323 was associated with improved lung histopathology and dose-dependent reductions in pro-inflammatory cytokines. We believe EDP-323 could serve as a standalone treatment or may be used in combination with other agents such as EDP-938, potentially broadening the treatment window or addressable patient populations for RSV.

Moving on to our respiratory discovery program in Human Metapneumovirus, or hMPV, which is a virus that is similar to RSV and impact several vulnerable populations, including the elderly, adults with underlying pulmonary disease and those who are immune compromised. This quarter, we presented preclinical data at the 12th Annual RSV Symposium, highlighting advancements in hMPV detection, quantification and growth methods for the generation of an improved tool kit for the in vitro characterization of multiple hMPV strains. Our goal is to select a development candidate for hMPV next year. Turning to Hepatitis B. Our goal remains to develop a functional cure for chronic HBV patients. We continue to evaluate internal and external opportunities for additional candidates to develop in combination with EDP-514 as we believe the ultimate cure for this infection will involve combination therapy.

Our commitment is based on the continued high unmet need for this disease, which is a global public health threat and the world’s most common serious liver infection, making that the primary cause of liver cancer, also known as hepatocellular carcinoma, or HCC, the second leading cause of cancer deaths in the world. We believe that a core inhibitor such as EDP-514 could ultimately be an integral component of a successful combination regimen. Finally, I’d like to wrap up by highlighting our near-term clinical milestones for the first half of next year. We look to progress SPRINT as quickly as we can through Phase 2 and to report data in the first half of 2023. Further, we expect to have data from our Phase 1 study of EDP-323, our RSV L-inhibitor also in the first half of 2023.

With that, I’ll turn the call over to Paul to discuss the financials. Paul?

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Paul Mellett: Thank you, Jay. I’d like to remind everyone that Enanta reports on a September 30 fiscal year schedule. Today, we are reporting results for our fourth quarter and full year ended September 30, 2022. For the quarter, total revenue was $20.3 million and consisted of royalty revenue earned on AbbVie’s global MAVIRET net product sales. This compares to total revenue of $23.6 million for the same period in 2021. The decrease compared to the prior year was due to a decline in AbbVie sales of MAVIRET. Royalty revenue was calculated on 50% of MAVYRET sales at a royalty rate for the quarter of approximately 10% after adjustments for certain contractual discounts, rebates and set-offs, which are now approximately 2% of AbbVie’s total reported HCV product sales.

You can review our royalty tier schedule in our 2021 Form 10-K. Moving on to our expenses. For the three months ended September 30, 2022, research and development expenses totaled $34.8 million compared to $48.9 million for the same period in 2021. The decrease was primarily due to the timing and scope of the company’s clinical trials. General and administrative expense for the quarter was $12.6 million compared to $8.4 million for the same period in 2021. The increase was due to additional headcount and stock compensation expense. Enanta recorded an income tax expense of $0.01 million for the three months ended September 30, 2022, and an income tax benefit of $0.4 million for the 12 months ended September 30, 2022, which are due primarily to the release of state tax reserves.

Enanta recorded an income tax benefit of $8.8 million and $28.6 million for the three and 12 months ended September 30, 2021, respectively, due primarily to a federal net loss carryback available in fiscal 2021 under the CARES Act of 2020. Enanta is still to a refund of $28.7 million for the tax losses carried back in 2021 to offset taxable income in prior years. Net loss for the three months ended September 30, 2022, was $26.3 million or a loss of $1.27 per diluted common share compared to a net loss of $24.6 million or a loss of $1.22 per diluted common share for the corresponding period in 2021. Enanta ended the quarter with approximately $278.5 million in cash and marketable securities. We expect that our current cash, cash equivalents and short-term and long-term marketable securities as well as our ongoing royalty revenue will continue to be sufficient to meet the anticipated cash requirements of our existing business and development programs into the fourth quarter of our fiscal 2024.

Regarding guidance for fiscal 2023, we expect our research and development expense to be between $210 million to $230 million and our general and administrative expense to be between $46 million to $52 million. Further financial details are included in our press release and will be available in our annual report on Form 10-K when filed. I’d now like to turn the call back to the operator and open up the lines for questions. Operator?

Q&A Session

Operator: Thank you, sir. And I show — our first question comes from the line of Brian Abrahams from RBC Capital Markets. Please go ahead.

Brian Abrahams: Hey, good afternoon and thanks so much for taking my questions. congrats on the continued progress across all the programs. Maybe just starting on the COVID — on the 235 study, the SPRINT program. I’m wondering if you could maybe talk a little bit more about some of the key virological measures that you’re going to be looking at in order to help guide dose selection going forward? And I guess, how much are you going to be also looking at symptoms as well? And is there — I guess, how might you account for the potential for patient-to-patient variability just based on intrinsic immune differences, vaccinations data as prior exposure status in terms of elimination of virus in order to make sure you have kind of a standardized look at the different doses relative to placebo?

Jay Luly: Sure. So thanks, Brian, for the question. So, in terms of looking at the ‘standardized’ population, I think we’re trying to control at least for some of the variables that we can. One of them is vaccination status. By now, so many people are vaccinated, but we’re asking for people to be enrolled have had a vaccine in the last three months. And the same is true with COVID within the last 90 days. So, that’s when immunity tends to wane and you’re not taking fresh COVID patients or people that have been freshly vaccinated. So, that’s one of the factors. And then going back to the study design. We’re focusing primarily for safety and tolerability as a primary endpoint and then in a — gather enough information as possible in the shortest smallest possible study that we could conduct that would be Phase 3 enabling.

We’re going to look at other parameters, virologically, the things that you can measure are going to predominantly be viral load. Again, as you know, COVID drugs in general, don’t show hugely profound changes on viral loads. In fact, remdesivir doesn’t show any change on viral load. So, the protease inhibitors though, have shown small sort of modest changes in viral load reduction. So, we’ll certainly be looking at that. We’ll look at time to undetectable things like that. Regarding clinical symptoms and outcomes, again, in a small study like this, they’re more exploratory than anything, I think, in a small study that size in this way you’re not really — and in this patient population, in particular, you’re not really going to be expecting to see too much in the way of that, but we’ll be looking for — we’ll be definitely be looking for trends and things that can possibly measure and focus on as it relates to later stage studies.

So, hopefully, putting all that together in a small study. We’ll have enough information from there to select our dose between the 200-milligram dose and the 400-milligram dose and then go forward on to next steps.

Brian Abrahams : Got it. No, that makes a lot of sense. And then we’ve obviously seen a wave of RSV across the country and the globe of late. To what extent have you been able to, I guess, take advantage of that with regards to patient enrollment in the ongoing 938 studies? And — or are there any changes or adjustments you might make to this site onboarding a number of sites, overall protocols to be able to optimize enrollment in light of the spike we’re seeing?