UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
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(Registrants telephone number, including area code:) (
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on which registered |
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.
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).
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.
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Emerging growth company |
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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
As of January 31, 2024, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1A. |
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Item 5. |
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Item 6. |
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
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. 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” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and as updated in Item 1A herein.
2
PART I—UNAUDITED FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ENANTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share data)
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December 31, |
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September 30, |
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2023 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term marketable securities |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Income tax receivable |
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Total current assets |
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Property and equipment, net |
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Operating lease, right-of-use assets |
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Restricted cash |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Liability related to the sale of future royalties |
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Operating lease liabilities |
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Total current liabilities |
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Liability related to the sale of future royalties, net of current portion |
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Operating lease liabilities, net of current portion |
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Series 1 nonconvertible preferred stock |
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Other long-term liabilities |
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Total liabilities |
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Stockholders' equity: |
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Common stock; $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ENANTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
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Three Months Ended December 31, |
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2023 |
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2022 |
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Revenue |
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Royalty revenue |
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$ |
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$ |
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License revenue |
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Total revenue |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest expense |
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Interest and investment income, net |
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Total other income, net |
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Loss before income taxes |
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Income tax benefit |
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Net loss |
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$ |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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Weighted average common shares outstanding, basic and |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ENANTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
(in thousands)
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Three Months Ended December 31, |
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2023 |
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2022 |
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Net loss |
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$ |
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$ |
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Other comprehensive income: |
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Net unrealized gains on marketable securities |
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Total other comprehensive income |
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Comprehensive loss |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ENANTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Comprehensive |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances, September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Vesting of restricted stock units, net of |
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( |
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— |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances, December 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Comprehensive |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances, September 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Exercise of stock options |
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— |
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— |
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Vesting of restricted stock units, net of |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances, December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
ENANTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
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Three Months Ended December 31, |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation expense |
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Depreciation and amortization expense |
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Non-cash interest expense associated with the sale of future royalties |
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Non-cash royalty revenue |
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Amortization (accretion) of premiums (discounts) on marketable securities |
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Change in operating assets and liabilities: |
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Accounts receivable |
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( |
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Prepaid expenses and other current assets |
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( |
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Income tax receivable |
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( |
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Operating lease, right-of-use assets |
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Other long-term assets |
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( |
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Accounts payable |
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( |
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Accrued expenses |
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( |
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( |
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Operating lease liabilities |
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( |
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( |
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Other long-term liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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Cash flows from investing activities |
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Purchase of marketable securities |
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( |
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Proceeds from maturities and sale of marketable securities |
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Purchase of property and equipment |
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( |
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( |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities |
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Payments on royalty sale liability, net of imputed interest |
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( |
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Payments for settlement of share-based awards |
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( |
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( |
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Proceeds from the exercise of stock options |
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Net cash provided by (used in) financing activities |
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( |
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Net decrease in cash, cash equivalents and restricted cash |
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( |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental disclosure of noncash information: |
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Purchases of fixed assets included in accounts payable and |
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$ |
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$ |
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Operating lease liabilities arising from obtaining right-of-use assets |
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$ |
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$ |
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Supplemental disclosure of cash flow information |
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Cash paid for interest |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ENANTA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(amounts in thousands, except per share data)
1. Nature of the Business and Basis of Presentation
Enanta Pharmaceuticals, Inc. (collectively with its subsidiary, the “Company”), incorporated in Delaware in
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.
Unaudited Interim Financial Information
The condensed consolidated balance sheet as of September 30, 2023 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 condensed consolidated financial statements as of December 31, 2023 and for the three months ended December 31, 2023 and 2022 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 condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
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 December 31, 2023 and results of operations for the three months ended December 31, 2023 and 2022 and cash flows for the three months ended December 31, 2023 and 2022 have been made. The results of operations for the three months ended December 31, 2023 are not necessarily indicative of the results of operations that may be expected for subsequent quarters or the year ending September 30, 2024.
The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP. All amounts in the condensed consolidated financial statements and in the notes to the condensed consolidated financial statements, except per share amounts, are in thousands unless otherwise indicated.
The accompanying condensed consolidated financial statements have been prepared based on continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company began reporting a net loss in fiscal 2020 and reported a net loss of $
8
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, 2023. 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 condensed 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 condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, management’s judgments with respect to its revenue arrangements; liability related to the sale of future royalties; 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.
Net Loss per Share
Basic net loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. In periods in which the Company has reported a net loss, diluted net loss per common share is the same as basic net loss per common share since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
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As of December 31, |
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2023 |
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2022 |
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(in thousands) |
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Options to purchase common stock |
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Unvested rTSRUs |
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Unvested PSUs |
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Unvested restricted stock units |
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Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. This amendment is effective for the Company in the fiscal year beginning October 1, 2024, with early adoption permitted. The Company is currently evaluating the potential impact that ASU 2023-07 may have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company in the fiscal year beginning October 1, 2025, with early adoption permitted. The Company is currently evaluating the potential impact that ASU 2023-09 may have on its financial statement disclosures.
9
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 December 31, 2023 and September 30, 2023, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:
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Fair Value Measurements as of December 31, 2023 Using: |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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(in thousands) |
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Assets: |
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Cash equivalents: |
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Money market funds |
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$ |
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$ |
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$ |
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$ |
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Marketable securities: |
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U.S. Treasury notes |
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||||
Corporate bonds |
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Commercial paper |
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|
|
|
||||
|
|
$ |
|
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$ |
|
|
$ |
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|
$ |
|
||||
Liabilities: |
|
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|
|
|
|
|
|
|
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|
||||
Series 1 nonconvertible preferred stock |
|
$ |
|
|
$ |
|
|
$ |
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|
$ |
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
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|
$ |
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||||
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|
Fair Value Measurements as of September 30, 2023 Using: |
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|||||||||||||
|
|
Level 1 |
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|
Level 2 |
|
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Level 3 |
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Total |
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||||
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|
(in thousands) |
|
|||||||||||||
Assets: |
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|
||||
Cash equivalents: |
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||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
U.S. Treasury notes |
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|
||||
Marketable securities: |
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||||
U.S. Treasury notes |
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||||
Corporate bonds |
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|
||||
Commercial paper |
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|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series 1 nonconvertible preferred stock |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During the three months ended December 31, 2023 and 2022, there were
The fair value of Level 2 instruments classified as marketable securities were determined through third-party pricing services. The pricing services use many observable market inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, and current spot rates.
The outstanding shares of Series 1 nonconvertible preferred stock as of December 31, 2023 and September 30, 2023 are measured at fair value. These outstanding shares are financial instruments that might require a transfer of assets because of the liquidation features in the contract and are therefore recorded as liabilities and measured at fair value. The fair value of the outstanding shares is based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company utilizes a probability-weighted valuation model which takes into consideration various outcomes that may require the Company to transfer assets upon liquidation. Changes in the fair values of the Series 1 nonconvertible preferred stock are recognized in other income (expense) in the condensed consolidated statements of operations.
The recurring Level 3 fair value measurements of the Company’s outstanding Series 1 nonconvertible preferred stock using probability-weighted discounted cash flow include the following significant unobservable inputs:
|
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Range |
|
||
|
|
December 31, |
|
September 30, |
|
Unobservable Input |
|
2023 |
|
2023 |
|
Probabilities of payout |
|
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|
||
Discount rate |
|
|
|
||
10
There were
In April 2023, the Company entered into a royalty sale agreement with an affiliate of OMERS, pursuant to which the Company was paid a $
4. Marketable Securities
As of December 31, 2023 and September 30, 2023, the fair value of available-for-sale marketable securities, by type of security, was as follows:
|
|
December 31, 2023 |
|
|||||||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Credit Losses |
|
|
Fair Value |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Corporate bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
U.S. Treasury notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|||
|
|
September 30, 2023 |
|
|||||||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Credit Losses |
|
|
Fair Value |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Corporate bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
U.S. Treasury notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|||
As of December 31, 2023 and September 30, 2023, marketable securities consisted of investments that mature within
5. Accrued Expenses
Accrued expenses and other current liabilities consisted of the following as of December 31, 2023 and September 30, 2023:
|
|
December 31, |
|
|
September 30, |
|
||
|
|
2023 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Accrued pharmaceutical drug manufacturing |
|
$ |
|
|
$ |
|
||
Accrued research and development expenses |
|
|
|
|
|
|
||
Accrued payroll and related expenses |
|
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
11
6. AbbVie Collaboration
The Company has a Collaborative Development and License Agreement (as amended, the “AbbVie Agreement”), with AbbVie to identify, develop and commercialize HCV NS3 and NS3/4A protease inhibitor compounds, including paritaprevir and glecaprevir, under which the Company has received license payments, proceeds from a sale of preferred stock, research funding payments, milestone payments and royalties totaling approximately $
The Company is receiving annually tiered royalties per Company protease product ranging
7. Liability Related to the Sale of Future Royalties
In April 2023, the Company entered into a royalty sale agreement with an affiliate of OMERS, pursuant to which the Company was paid a $
Because the royalty sale agreement will be paid back to OMERS up to a capped amount as well as the Company’s significant continuing involvement in the generation of future cash flows under its AbbVie Agreement, the Company recorded the proceeds from the transaction as a liability on its condensed consolidated balance sheets which will be amortized as interest expense in the condensed consolidated statements of operations under the effective interest rate method over the life of the royalty sale agreement. The Company will continue to record the full amount of royalties earned on MAVYRET/MAVIRET sales as royalty revenue in the condensed consolidated statements of operations.
The Company’s liability related to the sale of future royalties is estimated based on forecasted worldwide MAVYRET/MAVYRET royalties to be paid to OMERS over the course of the royalty sale agreement. This estimate requires significant judgment, including the amount and timing of royalty payments up until the end of the royalty sale agreement, which is estimated to be the stated term of June 30, 2032. As royalties are earned by OMERS, the liability is reduced on the Company’s condensed consolidated balance sheets.
At December 31, 2023, the estimated future cash flows resulted in an effective annual imputed interest rate of approximately
The following table summarizes the activity of the liability related to the sale of future royalties:
|
|
Liability related to the sale of future royalties |
|
|
|
|
(in thousands) |
|
|
Balance - September 30, 2023 |
|
$ |
|
|
Royalty payable to purchaser |
|
|
( |
) |
Interest expense |
|
|
|
|
Balance - December 31, 2023 |
|
$ |
|
|
8. Series 1 Nonconvertible Preferred Stock
9. Stock-Based Awards
The Company grants stock-based awards, including stock options, restricted stock units and other unit awards under its 2019 Equity Incentive Plan (the “2019 Plan”), which was approved by its stockholders on February 28, 2019 and amended in March 2021, March 2022 and March 2023. The Company also has outstanding stock option awards under its 2012 Equity Incentive Plan (the “2012 Plan”) but is no longer granting awards under this plan.
12
The following table summarizes stock option activity, including performance-based options, for the year-to-date period ending December 31, 2023:
|
|
Shares |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
|
|
(in thousands) |
|
|
|
|
|
(in years) |
|
|
(in thousands) |
|
||||
Outstanding as of September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding as of December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested and expected to vest as of |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable as of December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Market and Performance-Based Stock Unit Awards
The Company awards both performance share units, or PSUs, and relative total stockholder return units, or rTSRUs, to its executive officers. The number of units granted represents the target number of shares of common stock that may be earned; however, the actual number of shares that may be earned ranges from
|
|
PSUs |
|
|
rTSRUs |
|
||||||||||
|
|
Shares |
|
|
Weighted |
|
|
Shares |
|
|
Weighted |
|
||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||
Unvested as of September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested as of December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Restricted Stock Units
The following table summarizes the restricted stock unit activity for the year-to-date period ending December 31, 2023:
|
|
Restricted Stock |
|
|
Weighted |
|
||
|
|
(in thousands) |
|
|
|
|
||
Unvested as of September 30, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Cancelled |
|
|
( |
) |
|
|
|
|
Unvested as of December 31, 2023 |
|
|
|
|
$ |
|
||
Stock-Based Compensation Expense
During the three months ended December 31, 2023 and 2022 the Company recognized the following stock-based compensation expense:
|
|
|
|
|||||
|
|
Three Months Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Research and development |
|
$ |
|
|
$ |
|
||
General and administrative |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
13
|
|
|
|
|||||
|
|
Three Months Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Stock options |
|
$ |
|
|
$ |
|
||
rTSRUs |
|
|
|
|
|
|
||
Performance stock units |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
During the three months ended December 31, 2023 and 2022, the Company recognized stock-based compensation expense for performance-based stock units for which vesting became probable upon achievement of performance-based targets that occurred during the performance period.
As of December 31, 2023, the Company had an aggregate of $
10. Income Taxes
For the three months ended December 31, 2023, the Company recorded an income tax benefit of $
11. Commitments and Contingencies
Litigation and Contingencies Related to Use of Intellectual Property
From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. Except as described below, the Company currently is not a party to any material threatened or pending litigation. However, third parties might allege that the Company or its collaborators are infringing their patent rights or that the Company is otherwise violating their intellectual property rights. Such third parties may resort to litigation against the Company or its collaborators, which the Company has agreed to indemnify. With respect to some of these patents, the Company expects that it will be required to obtain licenses and could be required to pay license fees or royalties, or both. These licenses may not be available on acceptable terms, or at all. A costly license, or inability to obtain a necessary license, would have a material adverse effect on the Company’s financial condition, results of operations or cash flows. The Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.
In June 2022, the Company announced that it filed suit in the United States District Court for the District of Massachusetts on June 21, 2022, against Pfizer, Inc. seeking damages for infringement of U.S. Patent No. 11,358,953 (the ’953 Patent) in the manufacture, use and sale of Pfizer’s COVID-19 antiviral, Paxlovid™ (nirmatrelvir tablets; ritonavir tablets). The United States Patent and Trademark Office awarded the '953 Patent to the Company in June 2022 based on the Company's July 2020 patent application describing coronavirus protease inhibitors invented by the Company. The Company is seeking fair compensation for Pfizer’s use of a coronavirus protease inhibitor claimed in the ‘953 patent. The Company records all legal expenses associated with the patent infringement suit as incurred in the condensed consolidated statements of operations.
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from services to be provided to the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. In addition, the Company maintains directors’ and officers’ insurance coverage. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of December 31, 2023.
14
Leases
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q, or Form 10-Q, and the audited consolidated financial statements and notes thereto for our fiscal year ended September 30, 2023 included in our Annual Report on Form 10-K for that fiscal year, which is referred to as our 2023 Form 10-K. Please refer to our note regarding forward-looking statements on page 2 of this Form 10-Q, which is incorporated herein by this reference.
The Enanta name and logo are our trademarks. This Form 10-Q also includes trademarks, trade names and service marks of other persons. All other trademarks, trade names and service marks appearing in this Form 10-Q are the property of their respective owners.
Overview
We are a biotechnology company that uses our robust, chemistry-driven approach and drug discovery capabilities to discover and develop small molecule drugs with an emphasis on virology and immunology indications. We discovered glecaprevir, the second of two protease inhibitors discovered and developed through our collaboration with AbbVie for the treatment of chronic infection with hepatitis C virus, or HCV. Glecaprevir is co-formulated as part of AbbVie’s leading brand of 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). The ongoing royalties from our AbbVie collaboration, combined with the proceeds from our April 2023 royalty sale transaction, have provided us funding to support our wholly-owned research and development programs primarily focused on the following disease targets:
Virology:
Immunology:
As of December 31, 2023, we had $337.2 million in cash, cash equivalents and short-term marketable securities. We expect that our existing cash, cash equivalents, short-term marketable securities and our retained portion of future HCV royalties, will enable us to fund our operating expenses and capital expenditure requirements through fiscal 2027.
16
Our Wholly-Owned Programs
Our primary wholly-owned research and development programs are in virology and immunology. Our virology programs have been focused on RSV, SARS-CoV-2 and HBV and our immunology program is focused on oral inhibitors of the receptor tyrosine kinase known as KIT for the treatment of CSU, and potentially other mast-cell-driven diseases.
Virology Programs:
17
Immunology Program:
We have utilized our internal chemistry and drug discovery capabilities to generate all of our development-stage programs. We continue to invest substantial resources in research programs to discover compounds targeting new disease areas.
18
The following table summarizes our product development pipeline in our virology programs:
*Fixed-dose antiviral combination contains glecaprevir and AbbVie’s NS5A inhibitor, pibrentasvir. Marketed by AbbVie as MAVYRET® (U.S.) and MAVIRET® (ex-U.S.).
Our Royalty Revenue Collaboration and Royalty Sale Agreement
Our royalty revenue is generated through our Collaborative Development and License Agreement with AbbVie, under which we have discovered and out-licensed to AbbVie two protease inhibitor compounds that have been clinically tested, manufactured, and commercialized by AbbVie as part of its combination regimens for HCV.
Glecaprevir is the HCV protease inhibitor we discovered that was developed by AbbVie in a fixed-dose combination with its NS5A inhibitor, pibrentasvir, for the treatment of chronic HCV. This patented combination, currently marketed under the brand names MAVYRET® (U.S.) and MAVIRET® (ex-U.S.), is referred to in this report as MAVYRET/MAVIRET. The first protease inhibitor developed through this collaboration, paritaprevir, is part of Abbvie’s initial HCV regimens, which have been almost entirely replaced by MAVYRET/MAVIRET. Since August 2017, substantially all of our royalty revenue has been derived from AbbVie’s net sales of MAVYRET/MAVIRET. Our ongoing royalty revenues from this regimen consist of annually tiered, double-digit, per-product royalties on 50% of the calendar year net sales of the 2-DAA glecaprevir/pibrentasvir combination in MAVYRET/MAVIRET. The annual royalty tiers return to the lowest tier for sales on and after each January 1.
In April 2023, we entered into a royalty sale agreement with an affiliate of OMERS, a Canadian public employee pension fund, pursuant to which we were paid a $200.0 million cash purchase price in exchange for 54.5% of our future quarterly royalty payments on net sales of MAVYRET/MAVIRET, after June 30, 2023, through June 30, 2032, subject to a cap on aggregate payments to OMERS equal to 1.42 times the purchase price.
For accounting purposes, we continue to record 100% of HCV royalties earned under the AbbVie agreement as royalty revenue in our condensed consolidated statements of operations. The $200.0 million received in April 2023 was recognized on our condensed consolidated balance sheets as a liability, which will be reduced by the payments made to OMERS over the term of the Agreement. We recognize imputed interest expense over the life of the royalty sale agreement based on our estimated future MAVYRET/MAVIRET royalties.
Financial Operations Overview
We are currently funding all research and development for our wholly-owned programs, which are targeted toward the discovery and development of novel compounds. As of the date of this report, we are conducting two Phase 2 studies for zelicapavir and a Phase 2 challenge study of EDP-323. We are also conducting preclinical discovery research efforts in other disease areas.
19
As a result of the timing of our clinical and preclinical development programs, we expect our research and development expenses will fluctuate from period to period. However, in the next 12 months, we expect our external research and development expenses generally to decrease since we will not conduct any further development of EDP-235 into Phase 3 studies and we have made important adjustments to reduce our spending significantly in 2024.
To date, we have funded our operations primarily through royalty payments received under our collaboration agreement with AbbVie, a $200.0 million payment from our royalty sale agreement, and our existing cash, cash equivalents, and short-term and long-term marketable securities. We believe that our existing cash, cash equivalents and short-term marketable securities, as well as our retained portion of future HCV royalties, will enable us to fund our operating expenses and capital expenditure requirements through fiscal 2027.
Revenue
Our revenue is primarily derived from our collaboration agreement with AbbVie and AbbVie’s sales of MAVYRET/MAVIRET, an 8-week treatment regimen for chronic HCV. During the first quarter of fiscal 2023, we also generated $1.0 million of license revenue from an upfront payment related to a license agreement for one of the antibacterial compounds we are no longer developing.
The following table is a summary of revenue recognized for the three months ended December 31, 2023 and 2022:
|
|
Three Months Ended December 31, |
|
|
|||||
|
|
2023 |
|
|
2022 |
|
|
||