Enanta Pharmaceuticals, Inc.
Q3 2022 Earnings Call Transcript

Published: 8 Aug 2022

[Operator:]

Good afternoon, and welcome to Enanta Pharmaceuticals' Fiscal Third Quarter 2022 Financial Results Conference Call. . Please be advised that this call is being recorded. I would like now 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 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 take -- 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. Our vision at Enanta is to leverage our expertise in virology and liver disease to discover, develop and deliver groundbreaking medicines, as we've already done with and AbbVie's MAVIRET for hepatitis C virus. This quarter, we made important strides toward achieving another breakthrough medicine. Today, I will start by detailing our recent positive data from the Phase I trial of EDP-235 in healthy volunteers. As a reminder, EDP-235 is our oral antiviral inhibitor of the coronavirus 3CL protease, also known as the main protease or Mpro, which is in clinical development for the treatment of COVID-19. EDP-235 has fast track designation and is designed to be a once-daily oral treatment without the requirement for ritonavir boosting. Our first-in-human, randomized, double-blind, placebo-controlled, Phase I study enrolled healthy volunteers to evaluate the safety, tolerability and pharmacokinetics of oral EDP-235 in single and multiple ascending doses for 7 days along with the effect of food. A total of 72 subjects received at least 1 dose of EDP-235 or placebo. There were 40 subjects in the single ascending dose phase and 32 in the multiple ascending dose phase. All SAD and MAD cohorts enrolled 8 participants, who were randomized to receive EDP-235 or placebo in a 3

[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 third quarter ended June 30, 2022. For the quarter, total revenue was $19.5 million and consisted of royalty revenue earned on AbbVie's global MAVYRET net product sales. This compares to total revenue of $21.6 million for the same period in 2021. Royalty revenue was calculated on 50% of MAVIRET sales at a royalty rate for the quarter of 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 3 months ended June 30, 2022, research and development expenses totaled $39.1 million compared to $47 million for the same period in 2021. The decrease was primarily due to timing of our clinical trials year-over-year. General and administrative expense for the quarter was $12.9 million, compared to $8.4 million for the same period in 2021. The increase was due to an increase in headcount and compensation expense. Enanta recorded an income tax benefit of $0.4 million for the 3 months ended June 30, 2022, due to the release of the state tax reserve during the period compared to a tax benefit of $9.4 million for the 3 months ended June 30, 2021, when we had the benefit of federal net loss carrybacks available under the CARES Act of 2020. Enanta is still due a refund of $28.7 million, the tax losses carried back in 2021 to offset taxable income in prior years. Net loss for the 3 months ended June 30, 2022, was $31.7 million or a loss of $1.53 per diluted common share, compared to a net loss of $24 million or a loss of $1.19 per diluted common share for the corresponding period in 2021. Enanta ended the quarter with approximately $292.7 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 for the next 2 years. 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?

[Operator:]

. Our first question comes with Akash Tewari with Jeffries. Please go ahead.

[Unidentified Analyst:]

This is quarter. First, we've seen the FDA-approved vaccine on preclinical and also on antibody of the market based on preclinical data. Could you talk about the potential for an accelerated path to with COVID antivirals? And secondly, can you go over your thoughts on design in terms of patient on points. Given the lower event rates we're seeing with on, how do you think about the size and accrual, when can we expect EDP-235 to enter the market? Yes. Can you hear me a little better?

[Operator:]

Yes. Sorry about that. Could you repeat the question?

[Unidentified Analyst:]

Yes, definitely. So this is Clarke on for Akash. First, we've seen the FDA approved vaccines on preclinical data and also pulled Regeneron monoclonal antibody off the market based on preclinical data. Could you talk about the potential for an accelerated path to approval with COVID antivirals? And secondly, can you go over your current thoughts on Phase II design in terms of patient population and endpoints? Given the lower event rates we're seeing with Omecron, how do you think about trial design or trial size and powering and accrual times? When can we expect EDP-235 to enter the market?

[Jay Luly:]

Thanks for the question. This is Jay Luly. And I apologize for the connection. The operator's line keeps dropping out on us. So we're coming in through a cell phone. I hope people can hear us here. I think the vaccines and the antibodies are very different than the antivirals. I think once you've demonstrated, you're basically looking for generation of a species that has reactivity against the virus and once you do that with a vaccine or an antibody, it's easy to kind of look at the neutralizing capabilities of that entity. Antiviral development is just different. So I don't expect there to be the same sort of correlative short path that would accelerate things. And with regards to the patient population, that's something that we're sorting out the whole -- I would say, the whole design thinking through the Phase II and III in this area. It is dynamic. It's changing, the vaccination state of people is changing, both being vaccinated and then suddenly having immunity wear off either because the vaccine has sort of been short-lived and/or the booster, or the variants have evaded the vaccine. So again, we're in the process of designing, having our interactions with the FDA, and plan to finalize those interactions and start a Phase I later this year in the fourth quarter. So stay tuned on the front of trial design in that. Once we've wrapped up those interactions as well as subsequent studies, but I think the plan would be to try to wrap up the Phase II and hopefully be in Phase III next year, and then we'll have to see what the environment of the virus looks like in terms of how we schedule and size that trial. Were you able -- hopefully, you were able to hear the answer to the question.

[Operator:]

The next question comes with Roy Buchanan with JMP Securities.

[Douglas Buchanan:]

I had a few for 235. The 4

[Jay Luly:]

Yes. So the question regarding the 4

[Douglas Buchanan:]

Poster from IS-IRV meeting the EC90...

[Jay Luly:]

Yes. It was not plasma adjusted. That was in -- I think it was in human airway epithelial cells, was that cell line at the time. Yes. So that was not adjusted in that.

[Douglas Buchanan:]

Okay. And then I had a couple on -- a question on the headache. I guess any characterization you can make? Does it onset early? Does it resolve or persist? Or does it come on later in the treatment course?

[Jay Luly:]

It resolved. I don't recall exactly when it came on, but any headaches that were observed resolved. So...

[Operator:]

The next question comes with Brian Skorney with Baird.

[Brian Skorney:]

I know it's reported as a low rate in trials, but it seems like the paxlovid rebound in practice is pretty common currently. Some estimates have seen to have that as much as 50% obviously we saw out and rebound on it. Just thoughts on what you think this is? Is it a paxlovid PK issue? Do you think they don't have enough 24-hour coverage? Do you think 5 days isn't enough? Could it be a potential resistance issue? And just how do you think the EDP-235 and sort of your program development could try to focus on -- ensuring that you mitigate in your program?

[Jay Luly:]

Sure. You cut out, at least at our end on the beginning of the question, but I think I've intuited what it was. So the -- it doesn't appear to be a resistance issue. There's no sign of resistance with regards to paxlovid treatment. So I assume -- well, this is just hypothesis right now. It could be that paxlovid could profit from longer dosing. That's 1 possibility. But I think the other has to do -- it does -- paxlovid does have a short half-life, even though there's a ritonavir boosting involved. And our clinical half-life is longer once a day. So that having good PK characteristics can only help you. The other characteristic of 235 is that it has good tissue partitioning and potentially into tissues that could be a reservoir of virus. And so we think that a molecule like EDP-235 with very good PK, once-daily dosing, nice long half-life, good exposure multiples and good tissue targeting, could help potentially find the virus where it might be hiding and help with that. So that's 1 of the things that we're hoping to find out in future studies. The duration of treatment of 5 days versus 7 or something longer, no one really knows the answer to that, other than 5 days with paxlovid isn't that bad. Can you do better with a better molecule that has different characteristics? That's the possibility that we'll be exploring in the future. Does that help?

[Brian Skorney:]

Yes, that's very helpful. And then if I could just sort of another quick question there on the ALT elevation you made. So I was just wondering if you've discussed the NOL for EDP-235 is the end organ tox liver here. And just I know in the protease experiences sort of uncommon ALT elevations that are mechanistically distinct from liver injury. I just wonder if you look -- if you have any idea.

[Jay Luly:]

No, we haven't -- yes, we typically don't describe our preclinical safety findings, if any, other than with the FDA.

[Operator:]

The next question comes with Eric Joseph with JPMorgan.

[Hannah Adeoye:]

This is Hannah on for Eric. Just a few from us. Just wanted to get a sense if there's any alternative mechanisms in the COVID-19 viral life cycle that you'd be looking to target like co-target with EDP-235 to have just more of a potency profile upfront? And then for the second question, just what are your current thoughts on the relationship between viral induction, COVID-19, has there been a consensus reached by the scientific community on this? And is there any utility in your view in using reduction in viral load as a registrational endpoint?

[Jay Luly:]

Yes. I'm sorry, you broke up on parts of both questions, but I think the first question was, are there other mechanisms that we're thinking of in COVID other than protease. Did I -- was that the question?

[Hannah Adeoye:]

Yes. Just any other mechanisms you're interested in. And would you look to maybe look at combination pathway or combination approach upfront just so you have that...

[Jay Luly:]

Okay. You cut out right there. But the -- so the short answer is, there are other mechanisms. We're looking at a couple of other ones in-house. Again, not lacking any confidence in 235 against the COVID world as we know it now, but just sort of doubling down with our strengths in protease, thinking about the future and if the virus were to take any twists and turns, maybe there would be the need for combinations in the future. Again, no sign of that offering benefit now, but we're in long term here. So since the beginning of the pandemic, we've been working on multiple different mechanisms in-house. The second one, I heard the tail end of the question. I thought it was asking, did -- was it possible to have a virologic endpoint in registration. Was that the question?

[Hannah Adeoye:]

Yes. Just what is the utility of biologic endpoint in COVID currently?

[Jay Luly:]

Well, it's a little confusing in part, because remdesivir seems to have good data in terms of prevention of hospitalization and death in patient populations, but yet it hasn't demonstrated an effect on viral load reduction, yet other mechanisms such as protease inhibitor has demonstrated viral load reduction. So it's a little bit -- it's not the only thing that you can measure that matters. And in fact, the viral load reductions that you sometimes see in COVID when you do see them are fairly modest. I think that's in part based on the area that you can readily sample, which is through a nasal pharyngeal swab. So where that goes in terms of endpoints, I think you want to -- certainly, if you can demonstrate an antiviral effect or a trend wherever you can look for it. But beyond that, that doesn't always appear to be necessary, and I would put nukes in that category or at least remdesivir. Is that helpful?

[Hannah Adeoye:]

Very helpful. Yes. And just thinking about outside of Covid and outside of respiratory viruses, just wondering if there's any potential for antiviral acute treatment approach in something like monkey box, considering it does seem to hang around a little bit longer than respiratory infections? Is this something of interest for you guys?

[Jay Luly:]

I'm not sure. I don't know. Hopefully, vaccines will be ultimately very helpful there. But to the extent they're not, we have our eyes on any viruses where vaccines we avoid. So if there's a need, we would be thinking about it.

[Operator:]

The next question comes with Brian Abrahams with RBC Capital Markets. Please go ahead.

[Unidentified Analyst:]

This is Steve on for Brian. You shared EC90 multiples for the Alpha and Delta strains. And with some difference between those strains, can you comment on your expectation for multiples with the Omicron variant? And maybe whether you expect time to steady state or other PK parameters would be important for current or future strains that might be faster replicating to assess efficacy or predict efficacy there?

[Jay Luly:]

Yes. Sorry, I hate to do this to you, but part of the first part of the question broke up and part of the back end of it did. I'll ask you to repeat the beginning, but I think the Omicron, I heard was the tail end. We have -- we have Omicron studies in process right now. We don't have the data. We'll get it later this year. But what -- just speaking about it in general, when you're talking about protease, the protease mutations across all the different variants and even sub-variants, all the different variants of concern like Omicron and then you drill down and look at whether it's BA.2 or 212 or 4 or 4.6 or 5, the protease itself is highly conserved. And any mutations, if they do occur are distal. They're far away from the active site of the enzymatic activity where our drug works. And so that's important actually for the virus's own survival is to not radically mutate that site. So what we've observed is up and down the line with every variant that we've tested, first thing we do is look at biochemical test for enzymatic inhibition. And very, very tight data. You can see some of that data in our slide deck. So we believe that for all the variants of concern, the sub-variants have followed and very likely future variants, that by targeting the protease mechanism, 235 will continue to have very, very strong activity. And I apologize, I missed the beginning of the question.

[Unidentified Analyst:]

I think you covered it there. That was pretty comprehensive.

[Operator:]

The next question comes with Roanna Ruiz from SVB Securities.

[Roanna Ruiz:]

So I was curious if you have any thoughts on whether an EUA filing for EDP-235 is still on the table for the FDA? Or at some point, do you think it will be more strategic to go for a full NDA approval for the product?

[Jay Luly:]

Well, right now, we don't know that an EUA is not available. I think it's going to be, again, as we get closer to that time, it's going to be facts and circumstances on the ground with regards to what the virus is doing. But the FDA, I'm not aware that they've given indication yet that for new drug therapies in the antiviral category that it's not available.

[Roanna Ruiz:]

Got it. And a quick 1 on RSV as well. I was curious, have you heard anything on the ground about the RSV infection rates in the Northern and the Southern Hemisphere? And how are you monitoring enrollment for your ongoing studies there?

[Jay Luly:]

Yes. Well, we're kind of between sort of traditional seasons. I think next up would be, I don't want to say, hopefully, but the next season would be Northern Hemisphere starting later in the -- it's been very quiet in the Northern Hemisphere of late, which is not unexpected, generally speaking, at this time of the year. So as you get into late Q4, that's the traditional time when it would perk up again. And so that's currently what we're planning and expecting.

[Operator:]

The next question comes with Jay Olson with Openhimer.

[Unidentified Analyst:]

This is Cheng on the line for Jay. Congrats on the progress. Just maybe a follow-up on a question asked previously. Just can you share a little more color on the discovery programs on COVID-19? And is that more specific or more potent against some emerging variants? And where do you see the need to combine EDP-235 with another mechanism or with another molecule?

[Jay Luly:]

Sure. We see no reason to combine now. Again, there's no signs of resistance, as it relates to patients, who are treated with protease inhibitors. It's an acute treatment, acute infection. We're talking about 5 or so days. And so if you put lots of pressure on the drug, which we do or on the virus, which we do, a trough, we see great multiples of a very potent drug with a long half-life and good tissue uptake. So I don't see the need for it. But as I said before, if a more serious variant came along, someday, you may want to have as many weapons as you could possibly have. And this is no different, by the way, than any virus we've taken on. When we went after hep C, we went after multiple mechanisms, even though it looked like probably a couple would be enough, but you don't know at the -- until you're done, you're always wondering. Same with hep B, same with RSV, when we get into an area, we're going to mine as many different mechanisms until we know we don't need them. As long as we possibly might in the future, we want to be at the cutting edge with everything that we can. So I would say EDP-235 being sort of the cornerstone at Enanta. We'll continue to do research on this. And maybe someday combinations will be necessary. Hopefully, they won't. And hopefully, 235 is all we'll ever need or anyone will ever need.

[Operator:]

The next and final question comes with Akash Tewari with Jefferies.

[Unidentified Analyst:]

This is Clark again for Akash. First, could you comment on the potential cost for the trials for the EDP-235? And secondly, in your Phase I healthy volunteer study for EDP-235, what percentage of patients reached EC90? And can you comment on the PK variability across patients?

[Jay Luly:]

So you broke up on the tailend of the question, and it's quite frustrating at least at our end. I hope you can hear at your end. So the cost, I think at the end of the day, we'll need to wait and see how we've sized the trial. It's really hard to project on that until we see how big they are and that's going to be dependent on all kinds of design factors that we haven't finalized yet with the agency. So stay tuned on that. I think the -- generally speaking, the concept on the Phase II piece would be fairly small and then we would head in to the larger portion, which would be registrational, obviously. And ultimately, keeping in mind all of that, our ultimate plan is to be teaming up with a larger company that can more effectively help with the global launch and distribution of the drug. So stay tuned on that front. And then I missed the other part of your question, sorry.

[Unidentified Analyst:]

Sorry. The second part of the question was, in your Phase I healthy volunteer study for EDP-235, what percentage of patients reached EC90? And can you comment on the PK variability across patients?

[Jay Luly:]

I think I'll let Tara take that question.

[Tara Kieffer:]

Sure. No problem. Clark, this is Tara Kieffer speaking. So we actually saw pretty low variability in our Phase I study. It was about 15%. And so we would expect down the road, we would have the vast majority, greater than 95% of the patients above that EC90 value.

[Operator:]

This concludes our question-and-answer session. I would like now to turn the conference back over to Jennifer Viera for any closing remarks. Please go ahead.

[Jennifer Viera:]

Thank you, everyone, for joining us today. Serious apologies for the technical glitches. If you do have any follow-up questions, feel free to contact us by e-mail or call me at the office. Thanks again, and have a great evening. Goodbye.

[Operator:]

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.