10-Q

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 27, 2022, the registrant had 20,712,691,shares of common stock, $0.01 par value per share, outstanding.

This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. For example, statements in this Quarterly Report regarding the potential future impact of the COVID-19 pandemic on our business and results of operations are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will” or the negative of these terms or other similar expressions. We caution you that the foregoing list may not encompass all of the forward-looking statements made in this Quarterly Report.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Quarterly Report.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements

The accompanying notes are an integral part of these consolidated financial statements.

1. Nature of the Business and Basis of Presentation

Enanta Pharmaceuticals, Inc. (the “Company”), incorporated in Delaware in 1995, is a biotechnology company that uses its robust, chemistry-driven approach and drug discovery capabilities to become a leader in the discovery and development of small molecule drugs for the treatment of viral infections and liver diseases. The Company discovered glecaprevir, the second of two protease inhibitors discovered and developed through its collaboration with AbbVie for the treatment of chronic hepatitis C virus, or HCV. Glecaprevir is co-formulated as part of AbbVie’s leading direct-acting antiviral, or DAA, combination treatment for HCV, which is marketed under the tradenames MAVYRET® (U.S.) and MAVIRET®(ex-U.S.) (glecaprevir/pibrentasvir). Royalties from the Company’s AbbVie collaboration and its existing financial resources provide funding to support the Company’s wholly-owned research and development programs, which are primarily focused on the following disease targets: respiratory syncytial virus (“RSV”), hepatitis B virus (“HBV”), SARS-CoV-2, and human metapneumovirus (“hMPV”).

The Company is subject to many of the risks common to companies in the biotechnology industry, including but not limited to, the uncertainties of research and development, competition from technological innovations of others, dependence on collaborative arrangements, protection of proprietary technology, dependence on key personnel and compliance with government regulation. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approvals, prior to commercialization. These efforts require significant amounts of capital, adequate personnel and infrastructure, and extensive compliance reporting capabilities.

COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic and countries worldwide implemented various measures to contain the spread of the SARS-CoV-2 virus. National, state and local governments in affected regions have implemented and may continue to implement varying safety precautions, including quarantines, border closures, increased border controls, travel restrictions, shelter-in-place orders and shutdowns, business closures, cancellations of public gatherings and other measures. The extent and severity of the impact on the Company’s business and clinical trials will be determined largely by the extent to which there are disruptions in the supply chains for its research and product candidates, delays in the conduct of ongoing and future clinical trials, or reductions in the number of patients accessing AbbVie’s HCV regimens, or any combination of those events. During the second half of fiscal 2021 and through March 31, 2022, AbbVie experienced a decline in HCV sales compared to prior years as a result of a reduction in patients accessing AbbVie’s HCV regimens due to the COVID-19 pandemic.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and its variants and public health actions taken to contain it, as well as the cumulative economic impact of both of those factors.

Unaudited Interim Financial Information

The consolidated balance sheet at September 30, 2021 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited consolidated financial statements as of March 31, 2022 and for the three and six months ended March 31, 2022 and 2021 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021.

In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2022 and results of operations for the three and six months ended March 31, 2022 and 2021 and cash flows for the six months ended March 31, 2022 and 2021 have been made. The results of operations for the three and six months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for subsequent quarters or the year ending September 30, 2022.

The accompanying consolidated financial statements have been prepared in conformity with GAAP. All amounts in the consolidated financial statements and in the notes to the consolidated financial statements, except per share amounts, are in thousands unless otherwise indicated.

2. Summary of Significant Accounting Policies

For the Company’s Significant Accounting Policies, please refer to its Annual Report on Form 10-K for the fiscal year ended September 30, 2021. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, management’s judgments with respect to its revenue arrangements; valuation of stock-based awards and the accrual of research and development expenses. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. The future developments of the COVID-19 pandemic also may directly or indirectly impact the Company’s business. The Company has made estimates of the impact of COVID-19 in the Company’s consolidated financial statements as of March 31, 2022. Actual results could differ from the Company’s estimates.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 – Income Taxes and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU became effective for the Company beginning October 1, 2021 and interim periods within that year. The adoption of the standard did not have a material impact on the Company's financial position or results of operations.

Recently Issued Accounting Pronouncements

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities that were subject to fair value measurement on a recurring basis as of March 31, 2022 and September 30, 2021, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:

Fair Value Measurements at March 31, 2022 Using:

Level 1

Level 2

Level 3

Total

(in thousands)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ENTA	NASDAQ


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Loss	5
	Consolidated Statements of Stockholders' Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	26
Item 6.	Exhibits	53
Signatures		54


	March 31,			September 30,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	40,989		$	57,206
Short-term marketable securities		239,338			186,796
Accounts receivable		18,716			23,576
Prepaid expenses and other current assets		14,078			14,188
Income tax receivable		28,748			37,255
Total current assets		341,869			319,021
Long-term marketable securities		42,218			108,416
Property and equipment, net		4,815			5,943
Operating lease, right-of-use assets		17,216			4,711
Restricted cash		608			608
Other long-term assets		92			92
Total assets	$	406,818		$	438,791
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	5,985		$	9,540
Accrued expenses and other current liabilities		21,740			22,429
Operating lease liabilities		3,013			4,203
Total current liabilities		30,738			36,172
Operating lease liabilities, net of current portion		15,115			1,126
Series 1 nonconvertible preferred stock		1,506			1,506
Other long-term liabilities		876			558
Total liabilities		48,235			39,362
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock; $0.01 par value per share, 100,000 shares authorized; 20,618 and 20,238 shares issued and outstanding at March 31, 2022 and September 30, 2021, respectively		206			202
Additional paid-in capital		376,545			351,033
Accumulated other comprehensive loss		(3,037	)		(382	)
(Accumulated deficit) retained earnings		(15,131	)		48,576
Total stockholders' equity		358,583			399,429
Total liabilities and stockholders' equity	$	406,818		$	438,791


	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2022			2021			2022			2021

Royalty revenue	$	18,716		$	20,132		$	46,364		$	51,875
Operating expenses:
Research and development		42,087			41,506			90,636			78,171
General and administrative		10,476			8,326			19,984			15,703
Total operating expenses		52,563			49,832			110,620			93,874
Loss from operations		(33,847	)		(29,700	)		(64,256	)		(41,999	)
Other income:
Other income, net		255			545			549			1,222
Total other income, net		255			545			549			1,222
Loss before income taxes		(33,592	)		(29,155	)		(63,707	)		(40,777	)
Income tax benefit		—			7,110			—			10,404
Net loss	$	(33,592	)	$	(22,045	)	$	(63,707	)	$	(30,373	)

Net loss per share:
Basic	$	(1.63	)	$	(1.09	)	$	(3.11	)	$	(1.51	)
Diluted	$	(1.63	)	$	(1.09	)	$	(3.11	)	$	(1.51	)

Weighted average shares outstanding:
Basic		20,551			20,171			20,473			20,131
Diluted		20,551			20,171			20,473			20,131


	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2022			2021			2022			2021
Net loss	$	(33,592	)	$	(22,045	)	$	(63,707	)	$	(30,373	)
Other comprehensive loss:
Net unrealized losses on marketable securities		(2,031	)		(350	)		(2,655	)		(789	)
Total other comprehensive loss		(2,031	)		(350	)		(2,655	)		(789	)
Comprehensive loss	$	(35,623	)	$	(22,395	)	$	(66,362	)	$	(31,162	)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


								Accumulated
					Additional			Other						Total
	Common Stock				Paid-In			Comprehensive			Retained			Stockholders'
	Shares		Amount		Capital			Income (Loss)			Earnings			Equity
Balances at September 30, 2020		20,077	$	201	$	326,963		$	844		$	127,572		$	455,580
Exercise of stock options		33		—		833			—			—			833
Vesting of restricted stock units, net of withholding		32		—		(534	)		—			—			(534	)
Stock-based compensation expense		—		—		4,883			—			—			4,883
Other comprehensive loss		—		—		—			(439	)		—			(439	)
Net loss		—		—		—			—			(8,328	)		(8,328	)
Balances at December 31, 2020		20,142	$	201	$	332,145		$	405		$	119,244		$	451,995

Exercise of stock options		43		1		1,151			—			—			1,152
Stock-based compensation expense		—		—		5,280			—			—			5,280
Other comprehensive loss		—		—		—			(350	)		—			(350	)
Net loss		—		—		—			—			(22,045	)		(22,045	)
Balances at March 31, 2021		20,185	$	202	$	338,576		$	55		$	97,199		$	436,032


								Accumulated			(Accumulated
					Additional			Other			Deficit)			Total
	Common Stock				Paid-In			Comprehensive			Retained			Stockholders'
	Shares		Amount		Capital			Loss			Earnings			Equity
Balances at September 30, 2021		20,238	$	202	$	351,033		$	(382	)	$	48,576		$	399,429
Exercise of stock options		248		2		10,407			—			—			10,409
Vesting of restricted stock units, net of withholding		20		1		(778	)		—			—			(777	)
Stock-based compensation expense		—		—		6,062			—			—			6,062
Other comprehensive loss		—		—		—			(624	)		—			(624	)
Net loss		—		—		—			—			(30,115	)		(30,115	)
Balances at December 31, 2021		20,506	$	205	$	366,724		$	(1,006	)	$	18,461		$	384,384
Exercise of stock options		97		1		3,801			—						3,802
Vesting of restricted stock units, net of withholding		15		—		(451	)		—			—			(451	)
Stock-based compensation expense		—		—		6,471			—			—			6,471
Other comprehensive loss		—		—		—			(2,031	)		—			(2,031	)
Net loss		—		—		—			—			(33,592	)		(33,592	)
Balances at March 31, 2022		20,618		206		376,545			(3,037	)		(15,131	)		358,583