Biotech Values

[WorstLuck]

A few thoughts on ENTA post earnings

Since the earnings reaction was worse than anticipated, I wanted to look closer at the earnings call and related filings. The call transcript was useful to get a broad picture but there were a few places where it seemed best to listen to that portion on a replay. Doing so did make a difference in my understanding some of what seems to be going on and frankly was more bullish than just reading the transcript.

That said there were a few key takeaways for me. One is that the clock still hasn’t started on partnership for 235. Yes, there are things that can be done prior to the satisfactory completion of the current regulatory discussions but it is unreasonable to think that any kind of negotiation on partnership can get very far without both ENTA and partner having a clear idea of what regulatory needs to get the approval they seek, and how they can get it. That could happen within a few weeks or it could take longer, depending on all parties involved. Look for something from ENTA to have a better idea on that front:

With regards to registration, we are in communication with the regulators and this is not just in the U.S. but elsewhere. Really getting the latest thinking on pathways to approval and different kinds of trial designs. So, those discussions are in progress.

So I think right now we have the clinical data that we have, with regards to the SPRINT study. Again, we saw antiviral effect, we saw effect on symptom improvement. So those are the data that we have.
And as I mentioned the regulatory discussions are ongoing. When we will finish those, they will be done when, we are done with the exchanges. So, it is hard for me to put a time point on that right now. But we will have further updates as we progress.

A comment from a twitter account discussing a different stock with enough similarity in situation to merit including here:

When you have multiple parties in a licensing scenario with different geographic footprints, large bureaucracies etc..., these negotiations take a lot of time (more than an outright buyout, for example). Plus, my understanding is they only finalized the P3 trial design recently, which is crucial input to understanding terms and valuation,

So the Nov/Dec period might be a reasonable time frame for partnership expectation, or it might not. Could happen on either side or not at all. Cash will support price in the meantime but given that there is still spend beyond income price can still drift a bit lower in the meantime. That in combination with a very thin options market that has no strikes past Jan doesn’t make for much opportunity without a very strong conviction – and even then, it pays to wait at least another month or more to initiate that position IMO. There could be a bump from the forthcoming RSV challenge trial on excellent results and there are other random possibilities for price action that I’m willing to ignore at this time.