Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q1 2023 Earnings Call Transcript

Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q1 2023 Earnings Call Transcript February 7, 2023

Operator: Good afternoon, and welcome to Enanta Pharmaceuticals Fiscal First Quarter Ended December 31, 2022 Financial Results Conference Call. At this time all participants are in a listen only mode. Please be advised that today’s conference is being recorded. I’d now like to hand the conference 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 first quarter 2023 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-K 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, our mission continues to be to leverage our expertise in small molecule drugs to discover and develop groundbreaking medicines. Our fiscal first quarter of 2023 set up a strong data-rich year, positioning us to potentially drive value for our company as we advance our expanding pipeline. Today, I will start by detailing recent advances in our COVID-19 program and then comment on our broad respiratory syncytial virus, or RSV, program as well as touch base on the rest of our pipeline. Beginning with our COVID-19 program, our lead asset is EDP-235, the clinical stage, once-daily, orally dosed inhibitor of the coronavirus 3CL protease, which is currently being evaluated in an ongoing Phase 2 study known as SPRINT.

We are pleased to announce that the study has completed enrollment beyond the initial target. As a reminder, SPRINT is a randomized, double-blind, placebo-controlled Phase 2 clinical trial of EDP-235, and approximately, 200 non-hospitalized symptomatic adults with mild or moderate COVID-19, who were treated orally with 200 milligrams or 400 milligrams or placebo once daily for five days. SPRINT was designed to select a dose to move forward in development by evaluating the primary endpoint of safety and tolerability and key secondary objectives, including virologic endpoints and pharmacokinetics. Clinical symptoms and other clinical outcomes such as rebound will also be evaluated in more of an exploratory manner. We anticipate reporting top-line data from this study in May.

Based on the study design and previous clinical data demonstrated in our Phase 1 study for EDP-235, we aim to achieve good safety, tolerability and pharmacokinetics to support once-daily dosing. While this study is not powered on any virologic measurement, we will be looking for trends in antiviral activity as well. As COVID-19 persists and variants that circumvent immunity continue to arise globally, we are encouraged that EDP-235 has demonstrated potent antiviral activity across all SARS-CoV-2 variants tested in vitro to date. We believe EDP-235 has potential to be conveniently prescribed and to treat a broader patient population as EDP-235 does not require ritonavir boosting with its associated drug-drug interactions. If supported by Phase 2 results, we plan to advance EDP-235 to a Phase 3 trial in the second half of this year.

Beyond the positive Phase 1 results of EDP-235, we are also encouraged by the new positive preclinical in vivo data in a ferret model that we presented last month, which continues to add to the strong body of evidence supporting the potential of EDP-235. Findings of the study highlighted the robust antiviral treatment effect as the animals treated with EDP-235 at a rapid and sustained decline in viral load. Further results showed the ability of EDP-235 to prevent the transmission of COVID-19. When healthy animals were moved into housing with infected animals that were treated with EDP-235, they did not contract COVID-19. In contrast, when healthy animals were moved into housing with infected animals treated only with vehicle, they did become infected with COVID-19.

We look forward to presenting the detailed findings of our Phase 1 study for EDP-235, the results of our ferret model study and two other preclinical posters at the International Conference on Antiviral Research, or ICAR, in March, along with preclinical data at the European Congress of Clinical Microbiology and Infectious Disease, or ECCMID, in April. Beyond EDP-235, we announced a new research program to develop inhibitors for SARS-CoV-2 papain-like protease or PLpro. We believe the addition of this program gives us multiple opportunities to combat COVID-19 that potentially these programs may work together. PLpro is another essential enzyme, which plays an important role in viral replication and in addition, acts to blunt the innate immune response.

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Inhibition of PLpro blocks viral replication and has the potential to alleviate the suppression of the immune response to SARS-CoV-2 infection. As this mechanism is distinct from 3CL protease inhibition, it has the potential to be used alone or in combination with 3CL protease inhibitors, such as EDP-235 or other compounds to provide a range of treatment regimens for different patient populations suffering from COVID-19. Our prototype inhibitors demonstrate nanomolar potency against the Omicron variant in both biochemical and cellular assays, and we continue to optimize inhibitors as we progress this program forward toward development candidate selection. Continuing with our industry-leading respiratory virology treatment portfolio, we are progressing our broad RSV program, which includes EDP-938, the most advanced and protein inhibitor in clinical development as well as EDP-323, our novel oral therapeutic targeting RSV L-protein RNA polymerase.

Our goal is to develop an effective therapeutic for RSV that provides secure for the populations that are severely affected by this virus. EDP-938 is being evaluated in multiple Phase 2 clinical studies, including RSVHR, a Phase 2b study in adults with acute RSV infection who are at high risk of complications, including the elderly and/or those with congestive heart failure, COPD or asthma. RSVP it’s a Phase 2 study in hospitalized and non-hospitalized pediatric RSV patients and RSVTx, a Phase 2b study in adult hematopoietic cell transplant recipients with acute RSV infection and symptoms of upper respiratory tract infection. These three studies are expected to continue through 2023, and we’ll continue to monitor the RSV epidemiology to evaluate the impact on trial enrollment and timing for these data readouts.

Also in RSV, last quarter, we announced the dosing of the first subject in the Phase 1 study of our L-protein inhibitor, EDP-323. This ongoing double-blind, placebo-controlled, first-in-human study is designed to enroll approximately 80 healthy subjects to evaluate the safety, tolerability and pharmacokinetics of orally administered single and multiple doses of EDP-323. We believe both EDP-938 and EDP-323 could serve as stand-alone treatments or be used in combination regimens to broaden the treatment window or addressable patient populations for RSV. We look forward to presenting preclinical pharmacokinetic data on EDP-323 at ECCMID and expect to report top-line Phase 1 data next quarter. Moving on to our respiratory discovery program. We’re excited to recently announce our novel broader spectrum antiviral research program targeting both RSV and human metapneumovirus, or hMPV, with a single agent.

hMPV and RSV are similar viruses. Both are important causes of respiratory tract infections and are endemic globally, impacting several vulnerable populations, including children, the elderly, adults with underlying cardiopulmonary disease and those who are immune compromised. We are encouraged by preclinical findings in which our prototype dual inhibitor demonstrated potent nanomolar activity against multiple genotypes and strains of both viruses and a range of cell types. Further, our prototype dual inhibitor potently inhibited replication of both hMPV and RSV in a dose-dependent manner in respective mouse models demonstrated a significant reduction in viral load of both viruses. A dual inhibitor provides the potential for a broader spectrum antiviral that would allow respiratory infections diagnosed as either hMPV or RSV to be treated with a single agent.

We continue to optimize our potent tool inhibitor and aim to select a clinical candidate in the fourth quarter of this year. Turning to hepatitis B. We are cognizant of the continued high unmet need for this disease as it is a global public health threat and the world’s most common serious liver infection, making it the primary cause of liver cancer. We are focused on identifying different mechanisms of action and alternative compounds to develop in combination with EDP-514, our potent core inhibitor, and an existing nucleoside reverse transcriptase inhibitor, which we believe can ultimately be important components of a successful combination regimen. Finally, I’d like to wrap up by highlighting our near-term milestones. Again, we are thrilled with the progress of EDP-235 for the treatment of COVID-19 and plan to announce top-line data from our Phase 2b study, SPRINT, in May and pending results initiate a Phase 3 study in the second half of this year.

We plan to report top-line data from our Phase 1 study of EDP-323, our RSVL inhibitor, next quarter. And we look forward to presenting data on our RSV and COVID programs at the ICAR in March and ECCMID in April. With that, I’ll turn the call over to Paul to discuss our financials. Paul?

Paul Mellett: Thank you, Jay. For the quarter, total revenue was $23.6 million and consisted primarily of $22.6 million of royalty revenue earned on AbbVie’s global MAVYRET net product sales. This compares to total revenue of $27.6 million for the same period in 2021. The decline is primarily a result of continued lower treated patient volumes due to the COVID pandemic. Royalty revenue was calculated on 50% of MAVYRET sales at a royalty rate for the quarter of 12% after adjustments for certain contractual discounts, which are now approximately 2% of AbbVie’s total reported HCV product sales. You can review our royalty schedule in our 2022 Form 10-K. Moving on to our expenses. For the three months ended December 31, 2022, research and development expenses totaled $40.9 million compared to $48.5 million for the same period in 2021.

The decrease was primarily due to the timing of drug supply manufacturing and preclinical studies in the company’s virology program year-over-year. General and administrative expense for the quarter was $12.7 million compared to $9.5 million for the same period in 2021. This increase was primarily due to an increase in headcount and related stock-based compensation expense. Net loss for the three months ended December 31, 2022, was $29 million or a loss of $1.39 per diluted common share compared to a net loss of $30.1 million or a loss of $1.48 per diluted common share for the corresponding period of 2021. Enanta ended the quarter with approximately $241.4 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 fiscal quarter of 2024.

Further financial details are available in our press release and will be available in our quarterly report on Form 10-Q when filed. I’d now like to turn the call back to the operator and open up the lines for questions. Operator?

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Q&A Session

Operator: Thank you sir. I show our first question comes from the line of Joe Kim from RBC. Please go ahead.

Joe Kim: Hi. This is Joe on for Brian. Thank you for taking my question. I just wanted to quickly ask you on your latest view on the COVID outlook? And what sort of evolving market opportunity you’re seeing in COVID? Yes, that’s my question. Thank you.

Jay Luly: Sure. Thank you. This is Jay. So regarding the outlook, it’s been certainly a rough few years in terms of the pandemic. And I think there’s a migration to the endemic phase of this. But we see it as a tremendous opportunity that will probably ultimately settle down to be something more than flu. And obviously, there’s several different angles you can think about playing with a product like EDP-235 over the longer term. You can think about high risk patient populations. You can think about standard risk patient populations. You can also think about possibilities and long COVID and also from a post-exposure prophylaxis perspective. And so all of these are potential avenues to build over time and to grow. But we don’t see this virus going away anytime soon if ever, and that it’s likely to persist in a very meaningful way in a public health perspective. So

Joe Kim: Thank you.

Jay Luly: You’re welcome.

Operator: And I show our next question comes from the line of Yasmeen Rahimi from Piper Sandler.

Unidentified Analyst: Hi, this is Emma on for Yas. Thanks for taking our questions. We are wondering that based on your market research, how cumbersome is the return of your boost for paxlovid and what is the appetite among physicians for EDP-235 adoption? Thank you.

Jay Luly: Well, I think, ritonavir is definitely not a desirable, ultimately it adds complexity. You’re trying to treat a respiratory virus with a respiratory viral drug, a protease inhibitor, and you’re adding an HIV protease inhibitor just to boost the drug levels in the case of paxlovid. So it’s really the boosting agent that leads to many drug-drug interactions as it relates to ritonavir. Ritonavir also has a taste problem and we €“ paxlovid as it’s currently being administered is three pills in the morning, three pills in the later part of the day, and then four or five days. So it’s a 30 pills in total. The doses that we’re selecting in our SPRINT study for evaluation either of those we believe can ultimately be formulated into single tablet, which could be one pill once a day based on the pharmacokinetics that we’ve observed in Phase 1 healthy clinical trials.

So, if we can achieve one pill once a day with a very potent and effective drug and not have a boosting agent that leads to lots of drug-drug interactions and complexities for physicians that’s an attractive product profile everywhere we’ve checked.

Operator: Yes. We compile our next question. And I show next question comes from the line of Brian Skorney from Baird. Please go ahead.

Luke Herrmann: Hi, this is Luke on for Brian. Since SPRINT excludes elevated risk patients, would you have to do any additional safety work before going into a pivotal in a higher risk setting?

Jay Luly: Not necessarily. I think, certainly Pfizer went from Phase 1 healthies into high risk. I recognize that was at an earlier time. But we’re currently in discussions with regulatory agencies. But at this time, there’s no reason to suspect a different safety profile of the drug in that patient population.

Jennifer Viera: Next question?