Replies to post #2098 on Enanta Pharmaceuticals Inc (ENTA)

[DewDiligence]

On yesterday’s CC Jay Luly was asked if ENTA would consider monetizing the Mavyret royalty stream. He replied that now would not be a good time to do such a deal insofar as Mavyret sales can be expected to rise as the COVID pandemic fades and new-patient starts return to pre-pandemic levels.

I’m not sure I agree with Luly. Why not let a third party gamble on when—and whether—Mavyret sales will rebound to pre-pandemic levels?

Moreover, the royalty stream will be worth less if real (adjusted for inflation) interest rates rise.

[DewDiligence]

ENTA FY1Q22* financials—royalty_revenue=$27.6M—12/31/21_cash=$347.7M—(down_from_$352.4M_@9/30/21):

https://www.sec.gov/Archives/edgar/data/0001177648/000095017022000875/enta-ex99_1.htm

FY1Q22 R&D expenses were $48.5M, slightly high relative to prior guidance of $150-170M for the full FY2022; FY1Q22 SG&A expenses were $9.5M, inline with prior guidance of $35-41M for full fiscal FY2022 (#msg-166871344).

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How ENTA’s Mavyret royalty is calculated

ENTA’s royalty rate on Mavyret sales from ABBV is tiered, as shown in the table in #msg-142808661. The royalty rate is applied to the 50% Glecaprevir component of Mavyret (a 2-drug combination). The royalty tiers reset at the start of each calendar year (like tax brackets), so ENTA’s royalty rate is highest in the fourth calendar quarter (ENTA’s fiscal* Q1) and is lowest during the first calendar quarter (ENTA’s fiscal* Q2).

During calendar 4Q21 (ENTA’s FY1Q22*), ABBV sold $427M of Mavyret (#msg-167727290), noting that HCV new-patient starts were still below pre-pandemic levels. ABBV issued calendar-2022 guidance for Mavyret sales of $1.7B, unchanged from the calendar-2021 number (#msg-167728327).

*ENTA’s fiscal year ends on September 30.