Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q3 2023 Earnings Call Transcript

Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q3 2023 Earnings Call Transcript August 7, 2023

Enanta Pharmaceuticals, Inc. misses on earnings expectations. Reported EPS is $-1.86 EPS, expectations were $2.38.

Operator: Good afternoon, and welcome to Enanta Pharmaceuticals’ Fiscal Third Quarter 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 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 third quarter 2023 financial results was issued this afternoon and is available on our website. Making formal remarks on today’s call are Dr. Jay Luly, President and Chief Executive Officer and Paul Mellett, our Chief Financial Officer; and Dr. Scott Rottinghaus, our Chief Medical Officer and Dr. Tara Kieffer, our Senior Vice President of New Product Strategy and Development will be available during the Q&A portion of the 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-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 would 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 committed to our mission of being a leader in the development of groundbreaking therapeutics for viral infections, and this quarter we made important strides to bring us closer to impactful inflection points and ultimately our goals. I’m proud of the work our team has accomplished this quarter and throughout the year so far across our pipeline and business, most notably in our respiratory syncytial virus or RSV program and our COVID-19 program. We are in a strong position to continue to advance our pipeline, and I’m confident in our team’s efforts to progress antiviral small molecule medicines to treat life-threatening viral infections. Today, I will provide an overview of our progress during the third quarter, beginning with our RSV program, and then I will comment on our COVID-19 program in the rest of our pipeline.

RSV is a severe respiratory infection associated with significant morbidity and mortality that can cause serious disease in children, the elderly and the immune compromised. RSVs received a significant amount of attention recently with the approvals of new vaccines and monoclonal antibodies to help prevent severe infection. However, given the experience with COVID and flu vaccines, including limited adoption and breakthrough infections, we believe a safe and effective oral RSV antiviral medication can bring significant value to patients infected with RSV. Starting with our most current update, we recently announced positive data from the Phase 1 trial of EDP-323 in healthy volunteers. As a reminder, EDP-323 is our L-protein inhibitor in development as a once-daily oral treatment for RSV with fast track designation from the FDA.

This Phase 1 study enrolled healthy volunteers to evaluate the safety, tolerability and pharmacokinetics of Oral EDP-323 and single ascending doses and multiple ascending doses for seven-days along with the effect of food. The SAD Phase enrolled a total of six cohorts ranging in dose from 50 to 800 milligrams and the MAD Phase enrolled four cohorts with doses ranging from 200 to 800 milligrams. EDP-323 was found to be generally safe and well tolerated up to the highest dose tested of 800 milligrams over seven-days. Most adverse events were mild and there were no serious or severe adverse events. There was one study discontinuation due to syncope, which was deemed unlikely to be related to EDP-323. EDP-323 exposure increased with increasing single and multiple dosing up to 600 milligrams with a half-life ranging from 11 to 17 hours supporting once-daily dosing.

EDP-323 doses ranging from 200 to 800 milligrams once-daily, resulted in strong EC90 multiples against both RSV-A and -B strains and what administered for seven-days were found to result in C24 concentrations of steady state of 11 to 44 fold over protein adjusted EC90 of 0.3 nanomolar against both RSV-A and -B strain. Additionally, no food effect was observed with a high fat meal suggesting that EDP-323 can be administered without regard to food. We are pleased with this encouraging safety and pharmacokinetic data in virology when a potent antiviral such as EDP-323 achieves high multiples of EC90 safely. It is a very positive signal and an important de-risking step for the program. These data enhance our belief in EDP-323 as a potential therapeutic and give us the confidence to continue to progress the program.

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We believe EDP-323 could serve as a standalone treatment or be used in combination with other agents such as EDP-938 to broaden the treatment window or addressable patient population for RSV. We plan to initiate a Human RSV Challenge study evaluating EDP-323 early in the fourth quarter, and we anticipate having results in the second quarter of 2024. Our broad RSV program also includes EDP-938, the only N protein inhibitor in clinical development, which we are currently evaluating in multiple Phase 2 studies as a potential treatment in high risk patient populations. These studies include RSVPs, a Phase 2 randomized double-blind placebo controlled study in hospitalized and non-hospitalized pediatric RSV patients, RSVHR, a Phase 2b randomized double-blind placebo controlled study in adults with RSV infection, who are at high risk of complications including the elderly and individuals with congestive heart failure, chronic obstructive pulmonary disease or asthma and RSVTX, a Phase 2b randomized double-blind placebo controlled study in adult hematopoietic cell transplant recipients with RSV and symptoms of upper respiratory tract infection.

Enrollment for RSVP, RSVHR and RSVTX is ongoing and we are utilizing sites in both the Northern and Southern Hemispheres to optimize our coverage of potential RSV surges. If there is a return to a normal pre-pandemic type of RSV season in the Northern Hemisphere, we expect to complete enrollment in one or more of these studies in the upcoming Northern Hemisphere season and to have data in fiscal year 2024. Turning to COVID-19, we announced additional analysis from the Phase 2 ARS-CoV-2 SPRINT study, which built upon our positive top-line results that we announced in May of this year. EDP-235 is our clinical stage once-daily orally dosed inhibitor of Corona virus 3CL protease that was evaluated in SPRINT. A randomized double-blind placebo controlled Phase 2 clinical trial in 231 adults with mild or moderate COVID-19 who did not have risk factors for progression to severe disease.

Patients received 200 or 400 milligrams of EDP-235 or placebo orally once-daily for five-days. In the Phase 2 study, EDP-235 was found to be generally safe and well tolerated. A statistically significant dose improvement in symptoms was observed in the 400 milligram cohort, starting as early as one day following the first dose. In a predefined subset of patients enrolled within three-days of symptom onset. A statistically significant dose dependent improvement in symptoms was observed at all time points and a two-day shorter time to improvement was observed in a subset of six symptoms and the 400 milligram cohort compared to placebo. Additional analysis announced in June demonstrated a virologic effect of EDP-235. In the subset of patients, who had not recently been infected, as measured by lack of antibodies to the SARS-CoV-2 nucleocapsid, whom we refer to as nucleocapsid negative patients.

Specifically in nucleocapsid negative patients, a 0.8 log decline and viral load was observed at day five with 400 milligrams of EDP-235, compared to placebo and a one log viral load decline at day five in the subset of nucleocapsid negative patients who were treated within three-days after symptom onset. Looking ahead, our current plan is to conduct all future COVID-19 work in the context of a collaboration. In particular, we continue to focus on progressing EDP-235 and to Phase 3 trials with a partner and gaining regulatory feedback to further enable a partnership. Moving on to our dual inhibitor research program targeting HMPV and RSV, we plan to select a clinical candidate in the fourth quarter of this year. In preclinical studies, our prototype dual inhibitor potently inhibited both HMPV and RSV replication in a dose dependent manner demonstrating a significant reduction in viral load of each virus and maintains nanomolar activity against multiple genotypes and strains of HMPV and RSV in a range of cell types.

Our dual inhibitor is broader spectrum antiviral that would allow respiratory infections diagnosed as either HMPV or RSV, both of which are significant causes of respiratory tract infections globally to be treated with a single agent aiding populations such as children and the elderly who are at greatest risk. In hepatitis B, we continue to monitor the field for compounds to develop in combination with EDP-514, our potent core inhibitor with FDA fast track designation and a nucleoside reverse transcriptase inhibitor. We believe a core inhibitor such as EDP-514 will ultimately be an important component of a successful combination regimen and that can potentially help us address the high level of unmet need in HPV. Finally, looking beyond virology, we are piloting new programs that leverage our course strengths and small molecule drug discovery and look forward to sharing more details on these growth areas with you in the coming months.

I would like to wrap up by highlighting our near-term milestones. Again, we are thrilled with the progress of EDP-323, and the positive results from our Phase 1 study, and we plan to advance EDP-323 into a human challenge study early in the fourth quarter. We anticipate having results in the second quarter of 2024. We plan to announce the selection of a dual inhibitor clinical candidate targeting both HMPV and RSV in the fourth quarter of this year. And if there is a return to a normal pre-pandemic type of RSV season in the Northern Hemisphere, we expect to complete enrollment in one or more of our Phase 2 studies of EDP-938 in the upcoming Northern Hemisphere season, and have data in fiscal year 2024. With that, I will turn the call over to Paul to discuss our financials.

Paul.

Paul Mellett: Thank you, Jay. For the quarter total revenue was $18.9 million and consisted of royalty revenue earned on AbbVie’s global MAVYRET net product sales. This compares to total revenue of $19.5 million for the same period in 2022. In April, 2023, we sold 54.5% of our ongoing MAVYRET royalties from AbbVie for an upfront payment of 200 million from OMERS, one of Canada’s largest defined benefit pension plans. For financial reporting purposes, the transaction will be treated as debt with the upfront purchase payment of 200 million paid to us being recorded as a liability. Enanta will continue to record 100% of future royalty payments as revenue and will then amortize the debt liability proportionately as royalties are paid to OMERS until a cap of 1.42 times the purchase payment is met.

Interest expense will be recorded in our consolidated statement of operations as other expense based on an imputed interest rate. Moving on to our expenses, for the three-months ended June 30, 2023, research and development expense totaled $43 million compared to $39.1 million for the same period in 2022. The increase was due to the timing of clinical trial expenses in our virology programs. General and administrative expense for the quarter was $12.6 million compared to $12.9 million for the same period in 2022. Enanta recorded income tax expense of $4.2 million for the three-months ended June 30, 2023, driven by the receipt of the $200 million from the royalty sale agreement, which is taxable for Federal and State purposes. Enanta was able to utilize federal net operating loss and research and development tax credit carry forwards, as well as the deduction for foreign derived intangible income to substantially offset the taxable effect of the royalty sale agreement.

For the three-months ended June 30, 2022 Enanta recorded an income tax benefit of $0.4 million, which was due to the release of the state tax reserve during the period. Net loss for the three-months into June 30, 2023 was 39.1 million, or a loss of a $1.86 per diluted common share compared to a net loss of 31.7 million, or a loss of a $1.53 per diluted common share for the corresponding period in 2022. Enanta ended the quarter with approximately 392.5 million in cash and marketable securities. We expect that our current cash, cash equivalence in short-term and long-term marketable securities, as well as our ongoing royalty revenue should be sufficient to meet the anticipated cash requirements of our existing business and development programs into the second half of fiscal 2027.

Driven by changes to our COVID clinical development plans, we are reducing external spending. To that end, we have updated our guidance for fiscal 2023. We now expect our research and development expense to be between 165 million and 175 million and our general and administrative expense to be between 50 million and 55 million. Further financial details are available in our press release and will be available in our quarterly report on Form 10-Q, when filed. I would now like to turn the call back to the operator and open the lines up for questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question will come from Brian Abrahams with RBC Capital Markets.

Brian Abrahams: Just a couple of questions from me. First off on the RSV program and 323, given the PK data that you and – the safety data that you saw with 323 and healthy volunteers. I’m curious if you could maybe elaborate a little bit more on your latest views on the combinability and complementarity between 323 and 938 and then had a follow-up. Thanks.

Jay Luly: The 323 and 938, we have studied them pre-clinically to look at their combinability and pre-clinically they behave very well together. Ones an N-inhibitor, that is 938, ones an L-inhibitor, that is 323. So we don’t expect any issues with combinability from an interaction standpoint. I think the real question is, will we need to combine them or will we ultimately want to combine them in certain patient populations? And those are kinds of things that are going to take a little bit longer to sort out. Number one, we believe that 938 as a standalone could well have all the horsepower we need in garden variety RSV. 323 could also perform very well as a single agent. We will get more insights into that as we get data from the upcoming human challenge study.

But I guess the question is mightn’t you want or need to combine them in a certain, very difficult to treat patient population, and that is something that we can certainly explore down the road or might you want to combine them to see if you could open up a treatment window that would be wider than either agent alone. Again, that is something that we can look at down the line is where optimizing the category. So, those are the initial thoughts, right now.

Brian Abrahams: And then, on the COVID program, can you help us understand the implications of the data you recently reported showing those, viral load reductions in the nucleocapsid negative patients. Should we think about that as potentially speaking to a subpopulation that could down the line be uniquely targetable or just more as in further evidence or biological evidence of the mechanism here? And I guess, where do you stand in terms of the regulatory path forward, can you maybe speak to some of the paths you are exploring. Is it, might this still involve, an additional Phase 2 work, or moving right into Phase 3, perhaps exploring long COVID as well? Thanks. I will hop back in the queue.

Jay Luly: Yes, so the patient population that you are referring to, I think it is the nucleocapsid negative patient population. These are people who haven’t had a recent COVID infection or haven’t had one at all. That is a sort of a unique antigen that you can look at to determine whether or not someone’s again had the virus somewhat recently. I think one of the takeaways that we gleaned from our further analysis of the data is, it is hard to measure viral load changes in the nose of people who have more recently been infected. And when you look at the patient population who hadn’t been most recently affected, you could measure viral load changes in the nose. As time goes on, probably everybody who hasn’t been infected is going to be infected.

And, so variously that is going to sort of challenge the ability to look at that measurement of viral load change in the nose, but that doesn’t tell you anything close to the whole story, because what really matters is the viral load changes that are happening elsewhere in the body where sites of infection can set up shock and the respiratory tract and other tissues. So, we feel that that is the more important thing overall. This is why FDA has not, sort of embraced using viral load endpoints as a path to approval, but rather to focus on symptoms and outcomes as it relates to COVID infection. So looking at symptoms where, as you know, in the SPRINT data, we had very nice data set on symptoms and then ultimately that endpoint probably changes to hospitalization and death and certain patient populations that are at high risk.