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“Enanta: Slow Drip
May 17, 2022 6:06 PM ETEnanta Pharmaceuticals, Inc. (ENTA)1 Comment
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Summary
Enanta's pipeline is stuffed with mid-stage RSV therapies and other earlier-stage programs.
Enanta is one of many little biotechs which has a cash cow that can't keep up.
Enanta has a solid balance sheet and a strong albeit recently stressed share price.
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I last checked in on Enanta (NASDAQ:ENTA) in 2016's "Parsing Liver Therapy Perspectives: Gilead And Enanta". At the time I contrasted the two, with Gilead a major player and Enanta a mere small-time character actor.
This article evaluates Enanta on its own with particular attention to its 05/09/2022 fiscal Q2, 2022 earnings call (the "Call").
With the exception of its lead marketed therapy, Enanta's pipeline is a yawn
Enanta's pipeline below is devoid of late-stage molecules likely to bring it near-term cash. As shown by its pipeline slide below it has no phase 3 candidates. It has one molecule, its N-Protein Inhibitor EDP-938, which is in three phase 2 trials in treatment of RSV for differing patient groups:
Enanta Q2, 2022 Earnings Presentation
Enanta Q2, 2022 Earnings Presentation (ir.enanta.com)
During the Call, CEO Luly described its EDP-938 program at considerable length. He characterizes the study molecule as the "most advanced N-protein inhibitor in development". In the phase 2 challenge study, it was safe and well-tolerated. In terms of effect, it reduced viral load and symptoms of infection.
This 179 participant challenge study (NCT03691623) was written up in an 02/2022 article in the New England Journal of Medicine supporting its effects. It concluded, in addition to its favorable safety profile, all four dosing regimens were superior to placebo in terms of their effect as noted and in lowering mucus weight.
During the Call, Luly characterized the RSVP study as:
...a Phase 2b trial in otherwise healthy adults with community-acquired RSV infection... designed to confirm in a community-acquired setting the positive results of our Phase IIa challenge study and to further characterize efficacy by measuring symptom alleviation and viral load decline.
The good news for Enanta shareholders is that enrollment in the study is complete. The plan is to report topline data later this quarter.
Enanta's other two phase 2 studies are expected to see enrollment extending into 2023. They include:
RSVPEDs, a phase 2 study in pediatric patients with RSV (NCT04816721, estimated completion date of 12/2023) and
RSVPTx, a study in adult hematopoietic cell transplant recipients with RSV (NCT04633187, estimated completion date of 12/2022).
The cell transplant study is a larger study of 200 patients. Since enrollment is extending into 2023, its completion date will obviously extend beyond the date listed above from clinicaltrials.gov.
Enanta is going "all in", on its RSV trials. It plans to start yet another phase 2b trial in high-risk adult patients in the fourth quarter of 2022. Its strategy is to focus its RSV treatment on high-risk populations where it believes their suboptimal RSV immunity and greater RSV disease severity and mortality can best showcase EDP-938's full potential.
As an aside, Enanta has some 34 clinical trials listed on clinicaltrials.gov; the overwhelming majority of which (27) are shown as completed. That is a tremendous body of completed trials which have resulted in but two marketed therapies as discussed below.
Enanta's revenues help it with its expenses, but they are slowing
Enanta's main claim to fame is its highly successful research and development collaboration with AbbVie (ABBV) which resulted in two successful HCV therapies. First was its paritaprevir included in AbbVie's Viekira Pak (ombitasvir/paritaprevir/ritonavir tablets; dasabuvir tablets) in treatment of HCV.
Viekira Pak FDA approval generated a $75 million milestone for Enanta. Subsequently, AbbVie discontinued Viekira Pak after it was associated with rare cases of liver toxicity.
More recently Enanta discovered glecaprevir which it developed with AbbVie. Glecaprevir was co-formulated as part of AbbVie's direct-acting antiviral combination treatment for HCV, which is marketed under the tradenames MAVYRET (U.S.) and MAVIRET (ex-U.S.).
The FDA approved MAVYRET in 08/2017. Enanta earns royalties in accordance with the schedule below:
Enanta Q2, 2022 Earnings Presentation
Enanta Q2, 2022 Earnings Presentation (ir.enanta.com)
Since its 2017 approval, Glecaprevir generated royalties totaling $722 million per Enanta's fiscal year ending 09/2021 10-K. As of 03/31/2022, it generated an additional ~$46 million.
The pandemic has negatively impacted sales of MAVYRET, as have declining patient counts as more patients are cured. AbbVie's 10-K shows sequential MAVYRET revenue declines of ~37% from pre-pandemic year 2019 to year 2020. The decline moderated to a decline of ~7% from year 2020 to year 2021. AbbVie has guided to essentially flat MAVYRET revenues for 2022. Enanta's fiscal 2021 MAVYRET revenues were ~$97 million.
Enanta's liquidity is easily sufficient for its near to mid-term needs
Enanta offered no projections for future revenue during the Call. CFO Mellett did offer the following revenue observation:
..for our second fiscal quarter ended March 31, 2022...total revenue was $18.7 million and consisted entirely of royalty revenue earned on AbbVie's global HCV product sales of $380 million. This compares to total revenue of $20.1 million for the same period in 2021. This decrease is due to treated patient volumes continuing to remain suppressed compared to pre-COVID levels.
Additionally, Mellett noted:
Enanta ended the quarter with $322.5 million in cash and marketable securities. Enanta expects that its current cash, cash equivalents and marketable securities as well as its continuing royalty revenue will be sufficient to meet the anticipated cash requirements of its existing business and development programs for at least the next two years.
With so many little biotechs stretched for cash, Enanta situation appears enviable. Its cash flows are in good shape over the near term. Nonetheless as shown by its operating results below from its Q2, 2022 10-Q, it is slowly running through its liquidity:
Enanta Q2, 2022 10-Q excerpt
Enanta Q2, 2022 10-Q excerpt (seekingalpha.com)
Enanta's operations as shown above are leaking solvency; its pristine balance sheet below presents a much brighter picture:
Enanta Q2, 2022 10-Q excerpt, 1st column showing Q2, 2022, 2d column showing previous quarter
Enanta Q2, 2022 10-Q excerpt, 1st column showing Q2, 2022, 2d column showing previous quarter (seekingalpha.com)
Enanta's aggregate liabilities for its latest quarter are easily manageable and show no signs of operational stress.
As for Enanta's share price, it is likewise comforting, although it has popped and dropped over the last year as shown below:
Chart
Data by YCharts
Conclusion
Existing Enanta shareholders are likely kicking themselves for holding during its brief 11/05/2021 run to over $100 for no apparent compelling reason. Been there, done that.
As I write on 05/17/2022, Enanta shares trade at ~$50 with a market cap of ~$1 billion. By my thinking that is a fair price for a company with its finances and prospects as described. In this regard, I am mindful that Seeking Alpha's Quant Ratings and Wall Street Analysts both hold it in higher regard.”
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