Enanta Pharmaceuticals Inc (ENTA)

[DewDiligence]

What are your thoughts on ENTA opting-in vs. opting-out? Also, do you see any situation where ENTA is able to negotiate a higher proportion of value than your 35% estimate? Although these appear to be two separate topics the timing of both decisions are hitting at the same time and I wonder if there's any bundled negotiation.

The two issues are independent, as far as I know. The proportion of value ABT-450 lends to the 3-DAA regimen for royalty-calculation purposes is under negotiation right now, while the decision whether to opt-in for US profit sharing on the ABT-493/ABT-530 regimen is entirely up to ENTA.

Not opting in for US profit sharing on ABT-493/ABT-530 would significantly increase ENTA’s cash on hand in the short run; hence, I expect ENTA to opt in unless management plans to deploy a material amount of cash for an in-licensing transaction or acquisition.

Do you believe ENTA will publicly release (PR/Conference Call) the proportion of value percentage once finalized (or will we have to back-into the number after a quarter of revenue)?

If they don’t disclose the exact %, they will likely provide sufficient granularity for investment purposes.

Last, do you see a significant increase in the value of ENTA upon FDA approval? One would think the current share price reflects the majority of the value of approval since there's relatively low risk of non-approval, however, ENTA (net of cash) appears to be trading well below intrinsic value.

FDA approval of ABBV/ENTA’s 3-DAA regimen is a fait accompli; however, the pricing of ABBV/ENTA’s and GILD’s regimens will be market-moving events.

In particular, it remains to be seen which HCV subgroups will be approved for an 8-week regimen of Sovaldi + Ledipasvir. If the FDA label restricts the 8-week regimen to a greater degree than investors are expecting, it will provide ABBV/ENTA more leeway on pricing.