Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q1 2024 Earnings Call Transcript

Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q1 2024 Earnings Call Transcript February 7, 2024

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Operator: Good afternoon and welcome to Enanta Pharmaceuticals’ Fiscal First Quarter Financial Results Conference Call. At this time, all participants are on 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 would now like to turn 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 first quarter financial results, was issued this afternoon and is available on our website. Making remarks on today’s call are Dr. Jay Luly, President and Chief Executive Officer; and Paul Mellett, our Chief Financial Officer. Dr. Scott Rottinghaus, our Chief Medical Officer; and Dr. Tara Kieffer, our Chief Product Strategy Officer, will be available during the Q&A portion of this call. 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 our other periodic reports filed with the SEC. Enanta does not undertake any obligation to update any forward-looking statements made during this call. With that, I’d like to turn the call over to Dr. Jay Luly, President and CEO. Jay?

Jay Luly: Thank you, Jennifer, and good afternoon, everyone. In the first quarter of 2024, Enanta began an important year, which has the potential to advance our programs, in both virology and immunology and drive value across the company. Through our recent expansion into immunology, our mission continues to center around the development of small molecule treatments for indications of high unmet need, and we are leveraging our drug discovery capabilities, to bolster our pipeline for near and long-term value creation. Today, I’ll provide an overview of our progress during the first quarter, beginning with our respiratory syncytial virus, or RSV, program, and then segue into our new immunology program, targeting chronic spontaneous urticaria, or CSU.

RSV is a severe respiratory infection associated with significant morbidity and mortality that, can cause serious disease in infants, children, and other high-risk populations, including the elderly and individuals with congestive heart failure, chronic obstructive pulmonary disease, or asthma. Despite the availability of vaccines and prophylactic monoclonal antibodies, the uptake has been low, and breakthrough infections will still occur. The current rate for adult RSV vaccine adoption, is estimated to be only 11% of the eligible population. Further, both strategies for pediatric prophylaxis, the maternal vaccine, and monoclonal antibodies, provide short-term passive immunity for infants, and only shift the infant’s first infection to the next season.

Because of this significant need for safe and effective treatments, our goal is to develop an oral, best-in-class treatment for RSV, through our broad development program, which includes zelicapavir, an N-protein inhibitor, formerly known as EDP-938, and EDP-323, an L-protein inhibitor. Both have fast-track designation from the FDA. Our conviction in our approach to RSV, is rooted in the core mechanism of our molecules, replication inhibition. We believe both zelicapavir and EDP-323 have robust potential as monotherapies, but we’re also excited by the opportunity, to combine them and potentially broaden the treatment window for addressable patient populations. Zelicapavir, the only N-protein inhibitor in clinical development, is currently being studied in two Phase 2 studies of high-risk patient populations, RSVPEDs and RSVHR.

RSVPEDs is a randomized, double-blind, placebo-controlled study in hospitalized and non-hospitalized pediatric RSV patients aged 28 days to 36 months. It is a two-part study of approximately 90 patients. The objective of the first part is to evaluate zelicapavir’s safety in pharmacokinetics in multiple ascending doses, to select the optimal dose for each age group. In the second part, the objective is to evaluate zelicapavir’s antiviral activity, at the selected optimal dose. Symptom scores will be assessed throughout the treatment duration. RSVPEDs was designed as a smaller study that, would allow us to demonstrate a trend toward improved virology metrics for zelicapavir and to also move forward expeditiously into registrational studies. RSVHR is a randomized, double-blind, placebo-controlled study in adults with RSV infection who are at high risk of complications, including the adults over 65 years of age, or individuals with asthma, congestive heart failure, or chronic obstructive pulmonary disease, known as COPD.

Approximately 180 patients will be treated with 800 milligrams of zelicapavir or placebo for five days and evaluated over a 28-day period thereafter. RSVHR’s primary endpoint is time to resolution of RSV lower respiratory tract disease symptoms, as assessed by the Respiratory Infection Intensity and Impact Questionnaire, or RIIQ, Symptom Score Scale. We will also be evaluating multiple secondary endpoints, including other clinical efficacy measures, and antiviral activity, as well as pharmacokinetics and safety. In RSVHR, we are primarily looking to see a clinically meaningful improvement in time to symptom resolution. The goal of this proof-of-concept study in high-risk patients with community-acquired RSV is to obtain directional efficacy data that, would give us the confidence to move into Phase 3 as efficiently as possible.

Currently, both RSVPEDs and RSVHR continue to enroll, and we have taken necessary steps to set up the trials, to achieve enrollment around the world as quickly as possible, with each study having a global footprint spanning at least 15 countries. We have been pleased to see a more normal RSV season in North America. Based on current enrollment trends, we anticipate reporting top-line data from RSVPEDs in the third quarter of 2024. As for RSVHR, we will provide additional guidance as the RSV season continues. Also ongoing in our RSV portfolio is the Phase 2a challenge study of EDP-323, a highly potent L-protein inhibitor, in development as a once-daily oral treatment for RSV. In this randomized, double-blind, placebo-controlled study, up to 114 adult subjects will be infected with RSV, and then randomized one-to-one-to-one to receive once-daily dosing of either 600 milligrams of EDP-323, 200 milligrams of 323 with a loading dose of 600 milligrams on the first day, or placebo for five days.

Primary and secondary outcome measures include safety, changes in viral load measurements, and changes in symptoms from baseline. We advanced EDP-323 into the challenge study based on positive Phase 1 results in, which the drug demonstrated favorable safety, tolerability, and pharmacokinetics in healthy volunteers, and we are on track to report data from the challenge study in the third quarter of 2024. Now I’ll turn to our work in immunology, where our pipeline expansion builds on our expertise in small molecule drug discovery and virology, a scientifically adjacent area. Our team is focusing on areas, where there is a strong understanding of the underlying disease pathology, allowing us to target the root cause of the disease. Moreover, we are concentrating on indications with high unmet medical need, and a clear clinical development path, including well-defined populations and biomarkers available for early signs of efficacy.

We believe that we are well-positioned to pursue immunologic indications, and are excited to advance our new program, in chronic spontaneous urticaria, or CSU, which is a severely debilitating chronic inflammatory skin disease. Clinical manifestations include hives, which is also called urticaria, or angioedema, which is characterized by pronounced deep tissue swelling, or both. Patients with CSU also experience symptoms beyond the skin manifestations, including sleep disturbances, fatigue, irritability, anxiety, and depression. The disease can be severely disabling, significantly impair quality of life, and affect performance at work or school. CSU is typically a self-limiting disorder persisting for two to five years, although some reports estimate that more than half of the patients suffer for more than five years.

It may also recur after months, or years of full remission. CSU is estimated to affect 0.5% to 1% of the global population at any given time, and there’s a substantial unmet need for an efficacious oral agent. The standard of care treatment for CSU is antihistamines. However, in approximately half the patients, symptom alleviation is not adequate. There’s a substantial unmet need for an efficacious oral agent, as only a minority of cases are treated with one indicated biologic. Given the high unmet need for CSU patients, the opportunity in urticaria is significant. Our goal is to develop a best-in-disease oral KIT inhibitor treatment, to reduce the number of mast cells, which are the primary driver of the disease. As mast cells are implicated in multiple allergic diseases, we have the potential to study our KIT inhibitor in additional indications.

This strategy is supported by anti-KIT monoclonal antibodies demonstrating potential best-in-disease efficacy in a Phase 2 clinical trial in CSU. Our prototype inhibitor exhibits potent inhibition of KIT in binding and cellular functional assays, and is highly selective for KIT versus other kinases. We’ve observed favorable in vitro and in vivo ADME properties in our prototype, including a low potential for off-target tissue penetration, a long half-life, and low drug-drug interaction potential. We plan to announce a development candidate for CSU this year. We are very excited about our pipeline growth in immunology and are pursuing additional targets, with plans to introduce a second immunology program this year. With that, I’d like to conclude by highlighting our upcoming milestones.

We look forward to reporting results from our Phase 2a challenge study of EDP-323 in the third quarter of 2024. And assuming the season continues to be a normal RSV season in the Northern Hemisphere. We anticipate reporting data from the RSVPEDs Phase 2 study of zelicapavir in the third quarter of 2024. Further, we plan to identify a clinical candidate for our CSU program this year. And finally, we plan to announce a second immunology program in 2024. Now, I’ll turn the call over to Paul to discuss our financials. Paul?

Paul Mellett: Thank you, Jay. I’d like to remind everyone that Enanta reports on the September 30 fiscal year schedule. Today, we are reporting results for our fiscal first quarter ended December 31, 2023. For the quarter, total revenue was $18 million and consisted of royalty revenue, earned on AbbVie’s global MAVYRET net product sales. This compares to total revenue of $23.6 million, for the same period in 2022. As a reminder, 54.5% of Enanta’s ongoing royalties from AbbVie’s net sales of MAVYRET that are included in our revenue are being paid over to OMERS, the royalty buyer, in our April 2023 royalty sale transaction. For financial reporting purposes, the sale transaction was treated as debt with the upfront purchase payment to us of $200 million recorded as a liability.

As such, we continue to record 100% of the royalties earned as revenue, and will then amortize the debt liability proportionately as 54.5% of the cash royalty payments are paid to OMERS until a cap of 1.42 times the purchase payment is met, after which point 100% of the cash royalty payments will be retained by Enanta. Non-cash interest expense of the debt will be recorded in Enanta’s consolidated statement of operations, based on an imputed interest rate. Interest expense was $3.4 million for the three months ended December 31, 2023. Moving on to our other expenses, the three months ended December 31, 2023. Research and development expenses totaled $36.4 million, compared to $40.9 million for the same period in 2022. The decrease was primarily due to a decrease in costs associated, with our COVID-19 program, as we previously announced that our plans, to pursue any future COVID-19 efforts, would be in the context of a collaboration.

General and administrative expense for the quarter was $16.5 million, compared to $12.7 million for the same period in 2022. This increase was primarily due to an increase in stock compensation expense and an increase in legal expenses related to the company’s patent infringement suit against Pfizer. Other income net totaled $0.9 million. Enanta recorded an income tax benefit of $0.6 million for the three months ended December 31, 2023 for interest earned on a pending $28 million federal income tax refund, compared to an income tax benefit of less than $0.1 million for the three months ended December 31, 2022. Net loss for the three months ended December 31, 2023 was $33.4 million, or a loss of $1.58 per diluted common share, compared to a net loss of $29 million, or a loss of $1.39 per diluted common share for the corresponding period in 2022.

Enanta ended the quarter with approximately $337 million in cash and marketable securities. We expect that our current cash, cash equivalents and short-term marketable securities, as well as our ongoing retained portion of royalties, will continue to be sufficient to meet the anticipated cash requirements of our existing business and development programs, through fiscal 2027. Further financial details are included in our press release and will be available in our 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: And thank you. [Operator Instructions] And one moment for our first question. And our first question comes from Roy Buchanan from JMP. Your line is now open.

Roy Buchanan: Hi, thanks for taking the questions. I just had a few on zelicapavir. First one on the RSVPEDs readout, presumably in 3Q. I guess under the negative scenario where you don’t see any virological effects, is it conceivable that you just wind down the program, stop RSVHR, or would you still see RSVHR readout? And then in that same scenario, and if the challenge file for 323 is highly positive, would you potentially look to immediately combine the two agents? Then I have a follow-up? Thanks.

Jay Luly: Thanks, Roy. This is Jay. So starting with the challenge study, 323 is also on track for Q3. It’s a very potent L-inhibitors. As you know, I know you know a lot about the data. And given the potency, given the PK, given the huge multiples we drive over the protein-adjusted EC90, we’re very hopeful that it should show, efficacy, comparable to zelicapavir. The question of getting into combination studies right away is an interesting one. But I think, we’ll probably be most interested in fully characterizing single-agent efficacy for both zelicapavir and 323 in real world and then contemplate combinations. Of course, in parallel, you could be scouting out, some of the combinations in challenge studies, foreshadowing that.

But I think we wouldn’t want to slow down single-agent characterization of 323. The PEDs study, again, we’re on track for Q3. You’re asking an interesting question. If PEDs didn’t show anything, what would you do with HR? Different patient populations, I think you’ve got to look at the facts and circumstances, around any clinical trial result in one patient population, done under one set of conditions. And then, make good judgments as to how it might, or might not relate to a different clinical trial in a different patient population, under a different set of circumstances. So, we just need to look at data. So that’s my thought on that.

Roy Buchanan: Okay. Great. Presumably, HR is not too far behind. Just a follow-up, I wondered for zelicapavir, if you can put a dollar value on the two markets, the PEDs and the HR, just in your view. What do you think is a rough dollar value? Thank you.

Jay Luly: Well, there are no established therapeutics in this market. So, I think there’s a great opportunity to build, the first opportunity for an RSV treatment ever in each of those patient populations and yet other high-risk patient populations. I’m not going to be able to give you an exact dollar amount, but – it’s got to be $1 billion market opportunity. It has $1 billion on it, let’s just say that. And PEDs directionally, is probably the bigger piece of that, although I think, there’s more data and information on RSV in PEDs, than there is in adults. And so, we’re also not going to underestimate what that adult market could ultimately look like. Clearly, there’s been a lot of interest in that space, in promoting vaccine opportunities for elderly.

And they’re doing quite well, in prophylaxis, even though only a small portion of the eligible patient population is getting vaccinated and everybody else, which is the overwhelming majority of people, aren’t getting vaccinated, and would still be susceptible to infections. And even some of the vaccinated people, could be getting breakthrough infections. So, give us more time to see how that market evolves a little bit, work up final bits on a potential product profile. But we’re very encouraged by our position in the field, sort of the leadership position we have in RSV portfolio, and also the fact that there are no approved drugs on the market to each unmet need. So it’s a good opportunity.

Roy Buchanan: Okay. Thank you.

Jay Luly: You’re welcome.

Operator: And thank you. And one moment for our next question. And our next question comes from Roanna Ruiz from Leerink. Your line is now open.

Roanna Ruiz: Great. Afternoon, everyone. So a question on your CSU program. So could you walk us through some of the elements that excited you about, this indication over other similar immunology indications? And I was curious what additional optimization might you, try to be working on, to get to a final candidate that could be deemed, like best in disease? And I have a follow-up after that?

Jay Luly: Okay. Well, I’ll handle part of that question, and then I’ll let Tara Kieffer, Heads our Product Strategy, talk about the other part. So with regards to the optimization, I think we showed some data at JPMorgan on a prototype molecule, which we think is far along in terms of our optimization profile. We’re still making lots and lots of molecules, continuing to tweak bits and pieces. But obviously, among the things we’re looking at, is just really honing down potency, selectivity, making sure we’ve got good safety. And of course, our old friend pharmacokinetics, and hopefully once daily dosing, all of those kinds of things that we like to build in to every one of our molecules. CSU is attractive, and maybe I’m already answering some of the questions, but we’re not certainly limiting ourselves to that.

I think it happened to be the first program that we’ve announced in the area. But we’re working on a few other things. We’re piloting other programs, getting involved. So you can expect that there will be a broader footprint, certainly, as our slide deck anticipates in the field. And we go about it in the way that, we’ve done in a lot of our, well, in pretty much all of our programs. We get the biology figured out and sorted, really important to do that. Try to figure out chemical matter that, we can get into. Make sure we’ve got strong commercial rationale in terms of competitive landscape, potential product profiles, we set all that stuff. Start making molecules, get on the boards, start filing intellectual property. And we tend to do all of that, before we really announce a program.

So suffice it to say, that’s ongoing in other areas, and as the year rolls out, we’ll come out with more. Does that answer your question?

Roanna Ruiz: Yes, that helps. And I have a follow-up on RSVPEDs as well. So given the top line coming, what do you hope to see in terms of efficacy and safety results, and how might you use that data to inform a go or no-go decision for advancing to registrational trials?

Jay Luly: Yes, maybe since I didn’t give Tara the chance on the last question, I’ll let her take this one.

Tara Kieffer: Sure. Yes, of course. So, Roanna, as the RSVPEDs study, first in P, so doing some dose ranging, and then looking at that optimal dose at virology, so the primary endpoint in the second part of the study. We’ll certainly look at other endpoints, clinical endpoints like symptoms, but with the size of the study, we’ll primarily be looking at virology endpoints. And really what we’re hoping to see is some directional data and numerical trends in the virology endpoints that give us the confidence to take the program forward into a larger, more robust Phase 3 program as we move forward. So that’s really what we’re looking to achieve in this kind of initial team study.

Roanna Ruiz: Got it. Thanks.

Operator: And thank you. And one moment for our next question. And our next question comes from Akash Tewari from Jefferies. Your line is now open.

Amy Li: Hi, this is Amy on for Akash. Thank you for taking our question. It doesn’t seem like the Phase 2b RSVPEDs study is powered to hit on symptoms or viral load reduction. So what would be a strong enough signal for you to move it into Phase 3? And then additionally, how are you thinking about the oral from death severe failure for Gilead? Does that change strategic value for your protease inhibitor at all? Thank you.

Jay Luly: You want to take this one like.

Tara Kieffer: Yes, I can build on – for the RSVPEDs piece. Yes, we will again, primarily be looking at virology. And I think there’s not a lot of benchmarks in this area that, we could point to, or compare to. There is one data set out of a company called [ArcBio] where in a Phase 3 trial, they showed about a 0.6 log drop. And that did translate into an improvement, specifically significant improvement on symptoms. So that is the one sort of benchmark that we have. But again, numerical trends and directional data showing that zelicapavir is showing an improved trend in virology, compared to placebo, would give us the confidence to move forward into a Phase 3 study. Again, we’ll look at symptoms. And as you said, it is a small study and the likelihood of seeing something on that, certainly in a statistically significant way is probably not as high, but we’ll look at that and see what we get.