Enanta Pharmaceuticals Inc (ENTA) 2017 Q2 法說會逐字稿

Hello and welcome to the Enanta Pharmaceuticals second-quarter financial results conference call. (Operator Instructions).

I would now like to turn today's conference ever to Ms. Carol Miceli, director of Investor Relations. Please go ahead.

Thank you, and welcome to Enanta Pharmaceuticals' fiscal second-quarter financial results conference call. The news release with our financial results was issued this afternoon and is available on our website at www.Enanta.com. You can also listen to the webcast or the replay by going to the investors section of our website.

On the call today is Dr. Jay Luly, President and CEO; Paul Mellett, our Chief Financial Officer; and other members of Enanta's senior management team.

But before we begin with our formal remarks, we want to remind you that we will be making forward-looking statements, including plans and expectations with respect to our licensed products and our product candidates and financial projections, all of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause our actual developments and results to differ materially from these statements. A description of these risks and uncertainties is in our most recent Form 10-K and other periodic reports filed with the SEC.

In addition, Enanta does not undertake any obligation to update any forward-looking statements made during this call.

I'd now like to turn the call over to Dr. Jay Luly, President and CEO.

Thank you, Carol. Good afternoon, everyone, and thank you for joining us today. Enanta's business strategy continues as planned, and we remain in a strong financial position. At the end of our second fiscal quarter we had approximately $241 million in cash and securities. In addition, we continue to earn royalties on AbbVie's net sales of our HCV collaboration products.

For the first six months of our fiscal year, we earned approximately $19 million in royalty revenue on those products. We are using those royalties to fund our drug discovery efforts and clinical development programs in several high-value disease areas within our core expertise of virology and liver disease -- specifically, non-alcoholic steatohepatitis, known as NASH; primary biliary cholangitis, known as PBC; respiratory syncytial virus, known as RSV; and HBV.

Our strategy of diversifying our portfolio has produced several programs that are advancing this year. Our NASH candidate, EDP-305, is a highly selective and potent FXR agonist currently in Phase 1 clinical development. At the International Liver Congress last month, three posters were presented. Enanta made a presentation that showed efficacy data for EDP-305 in an animal model of NASH. Additional presentations from two independent researchers, Dr. Bryan Fuchs from the Massachusetts General Hospital; and Dr. Yury Popov from the Beth Israel Deaconess hospital, demonstrated that EDP-305 reduced fibrosis progression in animal models of PBC and primary sclerosing cholangitis, also known as PSC.

These results are highly encouraging because fibrosis has also been shown to be the key predictor of clinical outcomes in NASH patients.

The EDP-305 Phase 1 study is advancing as we dose the MAD portion in healthy volunteers in presumed NAFLD subjects. We are aiming to announce the data from this study, including pharmacodynamic biomarker data, at AASLD in October.

Additionally, we plan to conduct NASH-enabling clinical studies in the second half of this year to begin Phase 2 studies in NASH in early 2018. Before that, in PBC, we expect to start a Phase 2 study in PBC in the fourth quarter of this year.

Our long-term commitment to NASH therapies has led us to conduct additional discovery and preclinical activities and we have identified several new follow-on FXR leads which we will continue to characterize this year.

In addition, we have discovery work ongoing in non-XFR mechanism for NASH and we hope to have more information to share on that effort later in 2017.

In addition to NASH, we are very excited about our RSV program, which is progressing as planned. RSV is a virus that infects the respiratory system and represents a serious unmet medical need in infants and children as well as in immune-compromised individuals and the elderly. It is estimated that each year between 75,000 and 125,000 children in the US are hospitalized due to RSV infection.

EDP-938 is our first candidate from our non-fusion inhibitor approach to targeting RSV. Compared to fusion inhibitors currently in development by others, our non-fusion inhibitors are targeted at the viral replication machinery of RSV, and have demonstrated high barriers to resistance against the virus, in vitro.

EDP-938 has demonstrated a rapid reduction in viral load in RSV infected animals. This data further builds on previous in vitro data demonstrating that EDP-938 is a potent inhibitor of both RSV-A and RSV-B activity.

On June 25 in Berlin, Germany, at the XIX International Symposium on Respiratory Viral Infections, Enanta will present additional data on its RSV candidate, EDP-938, in an oral presentation. We are planning to begin a Phase 1 clinical study of EDP-938 in the fourth quarter of calendar 2017, and will share additional information later in the year.

In HBV, we continue to make progress in discovering, characterizing, and securing patent production for new core inhibitors. We believe the estimated 250 million HBV patients worldwide represent a significant medical need that is still unmet.

Turning now to HCV, our partner AbbVie has made great progress with our second protease inhibitor, glecaprevir, and we continue to be excited about its therapeutic and commercial potential. In April, AbbVie presented new data from its investigational pan-genotypic ribavirin-free hepatitis C virus treatment consisting of glecaprevir/pibrentasvir combination known as G/P at the recent International Liver Congress.

In an oral presentation, data from the EXPEDITION 1 study of G/P demonstrated that 99% of chronic HCV infected patients with genotypes 1, 2, 4, 5, or 6 and compensated cirrhosis achieved sustained virologic response at 12 weeks post-treatment, which is considered a cure.

This high cure rate is -- in compensated cirrhotic patients was seen following 12 weeks of G/P treatment without ribavirin. Remember that in non-cirrhotic patients, AbbVie's studies have demonstrated high SVR12 rates across the major genotypes with only eight weeks of treatment.

Also presented at the ILC was data from the ENDURANCE-3 study. This study demonstrated that 95% of patients with challenging-to-treat genotype 3 chronic HCV infection without cirrhosis achieved SVR12 after only eight weeks of treatment with G/P.

The MAA for G/P has been granted accelerated assessment by the European Medicines Agency. And NDAs have received priority review designations by both the US Food and Drug Administration and the Japanese Ministry of Health, Labour and Welfare.

AbbVie has stated that G/P remains on track for regulatory approvals in the US, EU, and Japan later this year. And based on AbbVie's guidance, we anticipate earning a substantial portion of the $80 million in commercialization regulatory approval milestone payments for glecaprevir in calendar 2017.

If G/P is approved, then the portion of AbbVie's HCV net sales on which we currently earn most of our royalties would increase from 30% for the paritaprevir containing 3-DAA regimen to 50% for the 2-DAA G/P combination.

What this would mean for Enanta is that, for a given amount of AbbVie's HCV sales, Enanta's royalties on sales of G/P would increase at least 67% compared to royalties on sales of the existing 3-DAA paritaprevir containing regimens. We look forward to providing you further updates following the anticipated approvals for G/P, the first of which is anticipated in August.

Looking ahead to highlights for the next few quarters, we are targeting to announce clinical data from our lead NASH candidate, EDP-305, in both healthy volunteers and in presumed NAFLD subjects at the AASLD meeting in October. And we plan to initiate a Phase 2 study of EDP-305 in PBC in the fourth quarter of calendar 2017, and a Phase 2 study in NASH in early 2018.

We are also planning to advance our development candidate for RSV into the clinic in the fourth quarter, as well as aiming to identify our first candidate for our HBV program. We expect significant milestone revenue later this year from the commercialization and regulatory approvals of G/P. And there is also good potential for G/P royalty revenue to start in 2017 and to grow in 2018.

I will now turn the call over to Paul to discuss our financials for the quarter. Paul?

Thank you, Jay. I would like to remind everyone that Enanta reports on a fiscal year schedule. Our fiscal year ended September 30, and today we are reporting results for our second fiscal quarter ended March 31, 2017.

Enanta ended the quarter with approximately $241 million in cash and marketable securities as compared to $242 million at our September 30, 2016, fiscal year-end. We expect that these cash resources and our potential future milestones and royalty revenue stream from AbbVie will be sufficient to meet our anticipated cash requirements for the foreseeable future.

For the three months ended March 31, 2017, revenue was $9 million compared to revenue of $13 million for the same period in 2016. Revenue in the current quarter consisted exclusively of royalty income earned on AbbVie's net sales of its HCV regimens, which declined over the 2016 period. Milestone and royalty payments have varied significantly from period to period, and we expect that variability to continue in the future.

Moving on to our expenses, for the three months ended March 31, 2017, research and development expenses were $13 million compared to $9.1 million for the same period in 2016. The increase in research and development expense was primarily due to increased preclinical and clinical costs associated with the progression of our wholly owned R&D programs in NASH, PBC, HBV, and RSV.

General and administrative expense was $5.5 million for the quarter ended March 31, 2017, and $4.4 million for the comparable quarter in 2016. The increases in these expenses was primarily due to increases in stock-based compensation expense driven by increased headcount.

Enanta recorded an income tax benefit for the three months ended March 31, 2017, of $3.6 million compared to an income tax expense of $1.6 million for the same period in 2016. The Company's estimated annual effective tax rate for fiscal 2017 of approximately 33% reflects federal research and development tax credits which reduce the Company's annual effective tax rate slightly below the statutory rate of 35%.

For the quarter ended March 31, 2017, we incurred a net loss of $5.4 million or $0.28 loss per diluted common share. Further financial details will be available in our Form 10-Q for this fiscal quarter.

I'd now like to turn the call back to the operator and open up the lines for Q&A. Operator?

(Operator Instructions). Jessica Fye, JPMorgan.

Just curious with respect to the Phase 1 data coming at AASLD. Is there any chance of you top-lining that ahead of the conference, or are we going to be waiting for the medical meeting?

And then second, curious if you could give any broad strokes about how to think of R&D trends as we move towards 2018 when you are starting up those Phase 2 studies. Thank you.

Sure. So this is Jay; thank you for your questions. With regards to the data announcements around the Phase 1 study, we really are targeting AASLD. I think we're going to finish up dosing by mid-year. We'll move on to data cleaning, database lock, unblinding, analysis and so forth. And it's really going to put us on a trajectory toward AASLD. So I think right now that's what I would be pointing people to.

With regards to R&D trends, did you say for 2018 -- were you referring financially?

Yes, exactly. Financially, yes.

So, we have -- Paul, do you want to comment on our -- this year's guidance and then the trends probably going into next year?

Yes. The guidance for the fiscal 2017 was $55 million to $65 million. And we expect that spend rate to increase as the programs advance through the clinic and external spend increases proportionately.

So they will trend upward. We will have greater clarity around that as we start laying out the Phase 2 plans later in the year.

Okay. And at this point, based on what you are seeing so far in Phase 1, it sounds like you're still -- you keep reiterating these Phase 2 timelines. Should we take that to mean that you like what you're seeing so far in Phase 1?

I'd just take it to mean we are very much on track, and pushing the trial ahead as expected.

Okay. Thank you.

(Operator Instructions). Liisa Bayko, JMP Securities.

This is John on for Liisa. Just a couple quick ones. For the readout we're going to get at AASLD, can you give us a little bit of guidance on what kind of data we should expect? Is it going to be primarily safety, or is there going to be any outcomes data that we can look forward to?

And then my second question for the non-FXR mechanism you're studying: is this something that you're going to be pursuing in combination with an FXR agonist? Or is this going to be something that you'd pursue as a single agent?

Sure. So regarding AASLD, so we've actually got a few different data sets to pull together here. So we will have data for both healthy volunteers and in presumed NAFLD. That should be final data. And we will have data that relates obviously to safety and tolerability. We will have -- we should have full PK. We'll also be going in and having a component -- effectively a pharmacodynamic portion of the study, looking at a variety of different biomarkers.

We should be in a position to compare all of that data in the healthy population and make direct comparisons to the patient population who is presumed to have NAFLD.

So I think there will be a lot of information. It's, again, a little bit of a larger study. We're doing full dose ranging in both patient populations, or both populations, the healthies and the presumed NAFLD. So it makes this trial a little bit bigger than certainly your normal Phase 1. We will probably have about close to 150 subjects' data.

So I think it hopefully will be an interesting study where we've done some careful comparisons across populations.

The second question relating to combinations: yes, we're certainly looking forward to not only having EDP-305 moving ahead, looking at follow-on FXRs as they come along; but also as we -- as I think we mentioned last quarter, we've branched out into other non-FXR areas. So, we want to think about combinations, clearly, with FXR and/or with other agents.

Of course, before you move into combinations, you look at any mechanism individually first, so we will do that. But the anticipation would be, longer-term, we would be aiming toward combinations.

Perfect. Thank you very much.

(Operator Instructions). And there are no further questions at this time.

Thank you, everyone, for joining us. If you have any additional questions, feel free to give us a call in the office. Thank you.

Ladies and gentlemen, that does conclude today's conference call. You may now disconnect.