BUY rating issued by ROTH Capital Partners... some better news as of late...
Yasmeen Rahimi, Ph.D., yrahimi@roth.com
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COMPANY NOTE | EQUITY RESEARCH | January 21, 2020
Healthcare: Biotechnology For full report in pdf, please click here
Enanta Pharmaceuticals, Inc. | ENTA - $57.94 - NASDAQ | Buy
Company Update
Stock Data
52-Week Low - High $57.15 - $106.80
Shares Out. (mil) 19.76
Mkt. Cap.(mil) $1,145.11
3-Mo. Avg. Vol. 176,293
12-Mo.Price Target $130.00
Cash (mil) $400.0
Tot. Debt (mil) $0.0
EPS $
Yr Sep --2018-- --2019-- --2020E--
Curr Curr
1Q 0.59A 1.25A 0.76E
2Q 0.61A 0.20A (0.63)E
3Q 0.97A 0.33A (0.51)E
4Q 1.30A 0.44A (0.18)E
YEAR 3.48A 2.21A (0.55)E
P/E 16.6x 26.2x NM
Diluted EPS shown.
Revenue ($ millions)
Yr Sep --2018-- --2019-- --2020E--
Curr Curr
1Q 38.1A 69.9A 60.7E
2Q 44.0A 39.6A 33.9E
3Q 57.3A 44.4A 38.9E
4Q 67.2A 51.3A 48.3E
YEAR 206.6A 205.2A 181.8E
ENTA: Our JPM Takeaways Set the Tone for a Productive 2020
We came away from JPM impressed by our meeting with ENTA which highlighted key upcoming catalysts in four clinical programs (NASH, RSV, PBC, and HBV), with the most imminent being Ph1 PK/PD and safety readout for EDP-514 in 1Q20. We view ENTA's continued program updates as commitment to bringing each asset to the clinic, including a new, differented FXR agonist EDP-297, and expect 2020 to be rich with catalysts in each of ENTA's clinical programs.
ENTA has its sights set on HBV, with Ph1 PK/PD and safety data for EDP-514 as the most impending catalyst in 1Q20. Importantly, the Ph1a/1b trial comprises two parts, and Part 1 is evaluating the safety of a once daily dose of EDP-514 in healthy subjects (n=98) which will be tested in two phases: 1) A single ascending dose, placebo-controlled study will evaluate six doses of EDP-514 in healthy subjects for a total of eight days. A simultaneous study will determine the food effect of EDP-514, in two cohorts of healthy subjects in either a "fasted" or "fed" state; and 2) Three doses of EDP-514 will be evaluated in a multiple-ascending dose, placebo-controlled study for 14 days, and will have key endpoints of tolerability and safety, in addition to PK data, specifically AUC and Cmax, which we view as key for determining future dosing, as well as a clinical confirmation of the efficacy that EDP-514 has shown in preclincal studies. Following completion of Part 1, we highlight that Part 2 of ENTA's Ph1 trial will enroll HBV patients with Nuc suppression, and will be critical for determining the antiviral efficacy and safety of EDP-514, and this second part is expected to begin in 1Q20. We believe that anticipation is high for EDP-514's Ph1 readout on the heels of a compelling preclinical dataset that strongly supports EDP-514's role as a core inhibitor for the treatment of HBV. Specifically, EDP-514 exerts its effects upon multiple steps in HBV replication, compared to other therapies with narrower MOAs, including reverse transcriptase inhibitors and interferons. Continue to page 2 for preclinical data backing up EDP-514's efficacy against HBV.
Must read pp. 2-3 for additional key takeaways from JPM:
• Most significant stock-moving event is likely to be RSV readout for EDP-938 in 3Q20
• All eyes are on newcomer EDP-297, a targeted, differentiated FXR agonist with potential for minimized pruritus
• ENTA is taking strides to advance FXR agonists in NASH and PBC, with a stream of clinical updates expected in 2020.
Intraday Price: $57.40 of 10:57AM ET
Important Disclosures & Regulation AC Certification(s) are located on the last page of this report.
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VALUATION
Our $130/share price target is derived from a risk-adjusted net present value (rNPV) analysis, based on 1) $49.80 per share, driven by HCV royalty revenues from ABBV ($155.0M peak revenue by 2022); 2) $28.50 per share, driven by U.S. and EU sales of EDP-938 in RSV (2023 launch, 55% POS, $1.7B peak sales); 3) $29.00 per share, driven by U.S. and EU sales of EDP-305 in NASH (2024 launch, 50% POS, $2.2B peak sales); 4) $2.30 per share, driven by U.S. and EU sales of EDP-305 in PBC (2023/24 launch, 50% POS, $423.9M peak sales); and 5) $20 additional cash per share (as of September 30, 2019). We take our model out to 2028 and use a discount rate of 8.0%. Impediments to our price target include clinical, regulatory, and financial risks.
As of September 30, 2019, ENTA reports cash, cash equivalents, and short-term and long-term marketable securities of $400M, sufficient to fund business and development programs for the forseeable future.
Impediments to our price target include clinical, regulatory, and financial risks.
RISKS
Company-related risks. ENTA’s financial prospects for the next several years are most heavily dependent upon its partnership with ABBV for the treatment of HCV. Should ABBV act in its own best interest, there would be adverse material effects on ENTA’s business. Similarly, ABBV has priced MAVYRET/MAVIRET well below the price of its first HCV regimen and its primary competitor, and therefore, maintenance and growth of royalty revenues ENTA will receive will be dependent upon ABBV’s ability to capture a significant market portion. Additionally, ENTA faces heavy competition in HCV, NASH, PBC, and RSV, and competitors could achieve greater success in clinical and regulatory development, and future commercialization and sales.
Clinical risks. Clinical success in previous clinical trials or in other indications do not necessarily guarantee success for current and future products. The regulatory path for RSV, in particular, and endpoints to be utilized for clinical trials are still under investigation and debate, which can hinder ENTA’s prospects and can result in potential delays as ENTA navigates this regulatory landscape. Similarly, the RSV regulatory path as it relates to the infant and elderly population will have to be carefully navigated by ENTA and trials will likely need to consider the differences in drug exposure, formulations, and endpoints between the two distinct populations.
Commercialization risks. ENTA has not commercialized a product on its own, which makes it difficult to assess the company’s ability to do so for additional pipeline products. ENTA plans to either commercialize on its own future product candidates or will look for partnership opportunities, which may or may not be obtained.
COMPANY DESCRIPTION
Enanta Pharmaceuticals, Inc. is clinical-stage biotechnology company focused on developing small molecule drugs for viral infections and liver diseases, such as Hepatitis B Virus (HBV), NASH, PBC, and Respiratory Syncytial Virus (RSV). WIth partner ABBV, ENTA discovered, developed, and achieved approval on two direct-acting anti-viral (DAA) regimens. They are marketed in the U.S. as Mavyret (glecaprevir/pibrentasvir) and Viekira Park (paritaprevir/ritonavir/ombiasvir/dasabuvir) for the treatment of hepatitis C virus (HCV) infection. A reason for ENTA's successful development of two blockbuster HCV drugs is due to the company's strength in medicinal chemistry, molecular virology, and pharmacology, with highly developed sets of skills in compound generation, target selection, screening, pharmacology, and lead optimization. Continuing with its track record in viral and liver diseases, ENTA generated the following enriched pipeline 1) EDP-938, a novel, small molecule N-protein inhibitor in Phase 1 testing in 82 healthy volunteers; 2) EDP-027367 (plus several back-up compounds), a core inhibitor for HBV; 3) EDP-305, a non-steroidal, non-carboxylic FXR agonist in Phase 2 testing in PBC patients (INTREPID, n=119) and NASH (ARGON-1, n=125) with top-line results expected in mid-2019; and 4) Several FXR agonist follow-on in pre-clinical evaluation and undisclosed targets in NASH in discovery. ENTA is located in Watertown, Massachusetts.
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures:
ROTH makes a market in shares of Enanta Pharmaceuticals, Inc. and as such, buys and sells from customers on a principal basis.
Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target, except for the first box, which may only represent the first note written during the past three years. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month.
Distribution of IB Services Firmwide
IB Serv./Past 12 Mos.
as of 01/21/20
Rating Count Percent Count Percent
Buy [B] 282 80.34 159 56.38
Neutral [N] 46 13.11 18 39.13
Sell [S] 5 1.42 2 40.00
Under Review [UR] 18 5.13 13 72.22
Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at any given point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12-month price target.
Ratings System Definitions - ROTH employs a rating system based on the following:
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Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return between negative 10% and 10% over the next 12 months.
Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciate by more than 10% over the next 12 months.
Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of the prior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be relied upon for UR-rated securities.
Not Covered [NC]: ROTH does not publish research or have an opinion about this security.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2020. Member: FINRA/SIPC.
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