Enanta Pharmaceuticals Inc (ENTA) 2017 Q3 法說會逐字稿

Good afternoon. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Enanta Pharmaceuticals Third Quarter Financial Results Conference Call. (Operator Instructions)

Ms. Miceli, you may begin your conference.

Thank you, Brandy, and welcome everyone to Enanta Pharmaceuticals Fiscal Third 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'll 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 is in an exciting period in its development, with many milestones and achievements expected in the next several months, and we are in a strong financial position to pursue our ambitious R&D goals. At the end of our June 30 fiscal quarter, we had approximately $235 million in cash and marketable securities.

In addition, we earned a total of $65 million in milestone payments following the approvals of MAVIRET in the EU in July and in the U.S. last week. MAVIRET is AbbVie's new HCV therapy consisting of the combination of glecaprevir and pibrentasvir or G/P. We anticipate G/P will achieve commercial regulatory approval in Japan next quarter which would earn some additional $15 million milestone payment. We will also to continue to earn royalties on AbbVie's net sales of all our collaboration's HCV products. With this funding, we are advancing our wholly owned programs on non-alcoholic steatohepatitis, known as NASH; primary biliary cholangitis, known as PBC; respiratory syncytial virus, known as RSV; and HBV.

Our NASH and PBC candidate, EDP-305, is a highly selective and potent FXR agonist currently completing a Phase I study. We are aiming to announce data from the study, including pharmacodynamic biomarker data, at AASLD in October.

Meanwhile, we are conducting NASH- and PBC-enabling clinical studies during the second half of this year. We expect to start a Phase II study in PBC next quarter, and we plan to begin a Phase II study in NASH in early 2018.

NASH is a complicated disease for which we believe a treatment will likely require a drug regimen using a combination of mechanisms. Our long-term commitment to NASH therapies has led us to conduct additional discovery and preclinical activities, which we hope will provide us a broadening pipeline for NASH and PBC. At Enanta, we are identifying new follow-on FXR agonist leads which we will continue to characterize this year, and we will also continue our ongoing discovery work in a non-FXR mechanism for NASH.

In addition to NASH, we are very excited about our RSV program and our first clinical candidate for RSV, EDP-938. 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's estimated that each year between 75,000 and 125,000 children in the U.S. are hospitalized due to RSV infection. There's currently no treatment for this infection.

EDP-938, our lead non-fusion inhibitor candidate for RSV, works by blocking the replication of the virus and also has the potential of being effective at later stages of infection. In June, at the 19th International Symposium on Respiratory Viral Infections in Berlin, Enanta presented promising in vitro and in vivo data on EDP-938 in an oral presentation. In vitro data demonstrated that EDP-938 is a potent inhibitor of both RSV A and RSV B activity, maintaining antiviral activity post-infection while presenting a high barrier to resistance. Further, EDP-938 maintained antiviral potency across all clinical isolates tested as well as against virus that was resistant to fusion inhibitors. The compound inhibited RSV at a post-entry replication step involving the N protein and maintained its activity in vitro when given 24 hours post infection. In addition, combination studies of EDP-938 with other types of RSV inhibitors showed synergistic antiviral effects. New in vivo data, consistent with potent inhibition of RSV, were also presented. EDP-938 demonstrated a greater than 4-log reduction in viral load in an animal model challenged with RSV.

RSV data is very exciting, and we are planning to begin a Phase I clinical study of EDP-938 next quarter. Upon completion of the study, we plan to move directly to a proof-of-concept challenge study in RSV-infected humans in 2018.

In HBV, we continue our efforts to discover, characterize and secure patent protection for new core inhibitors. The estimated 250 million HBV patients worldwide represent a significant medical need that we believe is still largely unmet. In our HCV collaboration, our partner AbbVie has made great progress with its new combination therapy known as MAVIRET, which includes our second protease inhibitor product, glecaprevir. In addition to the milestone payments earned for the recent approvals in the U.S. and in the EU, the economics of MAVIRET are significant to Enanta as the portion of AbbVie's HCV net sales, on which we currently earn most of our royalties, would increase from 30% for paritaprevir containing 3 DAA regimen to 50% for the 2 DAA MAVIRET combination.

What this would mean for Enanta is that for a given amount of AbbVie's net HCV sales, Enanta's royalties on sales of MAVIRET would increase at least 67% compared to royalties on sales of the existing 3 DAA paritaprevir-containing regimens. We continue to be excited about MAVIRET and its therapeutic and commercial potential. MAVIRET is the only once-a-day pan-genotypic treatment that works only in 8 weeks for 80% of the HCV patients in the United States.

To sum up, Enanta is well positioned from a financial and pipeline perspective with several near-term milestones. With $65 million already earned, we expect to earn the entire $80 million in approval milestone payments for MAVIRET in the coming months once it is approved and commercialized in Japan, which will mean that Enanta will have successfully earned every milestone payment in our AbbVie collaboration agreement not only for our first product, but for our second product as well.

We are targeting to announce clinical data from our lead NASH candidate, EDP-305, in healthy volunteers and presumed NAFLD subjects at the AASLD meeting in October. We plan to initiate a Phase II study of EDP-305 in PBC next quarter and Phase II study in NASH in early '18. We are also planning to advance EDP-938, our clinical candidate for RSV, into a Phase I trial next quarter.

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

Thank you, Jay. I'd like to remind everyone that Enanta reports on a fiscal year schedule. Our fiscal year end is September 30, and today, we are reporting results for our third fiscal quarter ended June 30, 2017.

As Jay just mentioned, Enanta earned -- ended the quarter with approximately $235 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 royalty revenue stream from AbbVie will be sufficient to meet our anticipated cash requirements for the foreseeable future. The $65 million in milestone payments we have already earned this quarter for MAVIRET approvals in the EU and U.S. will be reflected in our cash resources at our fiscal year-end at September 30.

Through the 3 months ended June 30, 2017, revenue was $7.5 million compared to revenue of $14 million for the same period in 2016. Revenue in both the current and prior 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 3 months ended June 30, 2017. Research and development expenses were $15.4 million compared to $10.8 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, RSV and HBV.

General and administrative expense was $5.2 million for the quarter ended June 30, 2017, and $4.3 million for the comparable quarter in 2016. The increase in these expenses was primarily due to increases in compensation expense driven by increased headcount.

Enanta recorded an income tax benefit for the 3 months ended June 30, 2017, of $4.1 million compared to an income tax expense of $0.4 million for the same period in 2016. The company's estimated annual effective tax rate for fiscal 2017 of approximately 33% reflects research and development tax credits which reduced the company's annual effective tax rate slightly below the statutory rate of 35%.

For the quarter ended June 30, 2017, we incurred a net loss of $8.4 million or $0.44 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) Our first question comes from the line of Jessica Fye with JPMorgan.

This is Yuko on the call for Jessica. Within the biomarkers you're evaluating for 305's ongoing Phase I study, what will you point to investors as to the most important to watch? And what is the magnitude of change you want to see over this dosing period that will give you confidence you'll be able to trial the efficacy? And also from a tolerability standpoint, do you think the Phase I data will give us a good sense as to whether 305 may have better tolerability profile than OCA? And if so, on what measures do you think it might differentiate on tolerability?

Sure. So with regards to biomarkers, I mean, we'll be looking at several different things: throwing lots of labs and looking at various other kinds of markers. Certainly, FGF19 upregulation and reduction in C4 will probably be a couple of the guiding markers that we and others have used in this field to look at. Regarding magnitude, you should be able to see, hopefully, a dose-dependent effect on these -- we studied a wide range of doses. So we're hoping to have captured that range effectively, but we'll have to get all the data in and look at it. With regards to tolerability versus OCA, we'll be looking at safety and tolerability as a standard part of the Phase I study. We'll be -- have lipid panels and all the rest that you can imagine. We'll be doing that not only in healthy volunteers, but we're also, as you probably know, looking at it in presumptive NAFLD. So we wanted to get into this sort of different patient population that is obese and may or may not have type 2 diabetes or prediabetes so that we could again sort of further examine the molecule before going into, "full-blown Phase II study." So we'll have the data when we have it. It will be -- I think it will be a strong dataset from the perspective of we will have looked at safety and tolerability and pharmacodynamic biomarkers in about 150 subjects. So it's a pretty good-sized study, and the data will be rolling in very soon. And again, our target is to put it out in the October time frame at AASLD.

Our next question comes from the line of Liisa Bayko with JMP securities.

This is Jon on for Liisa. Just a couple of questions on 305 as well. Can you remind us what the split is between the number of healthy volunteers and the presumptive NAFLD in the Phase I? I just can't recall.

Sure. So the Phase I has a -- in healthies, it is a single-ascending dose in healthies, and it's a multiple-ascending dose in healthies, and then it's a multiple-ascending dose in presumptive NAFLD. And it's roughly 1/3, 1/3, 1/3.

Got you. And I was just wondering if you had any comments or your takeaways from the recent Intercept data with the ability to lower LDL with the use of statins. Is there any read-through to your 305 with that data set?

Well, we certainly haven't looked at statin use with 305, and we don't know whether or not that would even be an appropriate thing to do. I mean, we -- as I said, in the study we've got ongoing, we'll be collecting all that lipid data and see what it looks like. Preclinically, we have seen some signs that there potentially could be some differentiation there. But at the end of the day, the clinical trials are what's going to trump everything else. So I think we just need to get that data in and look at it. I guess, it's encouraging from that perspective for Intercept, but that's about all we can say with regards to our program. We just don't have that data yet.

And lastly, what are the NASH-enabling studies you have ongoing now? And what else is left to do before you can actually begin the Phase II?

Well, it's really just wrapping up the existing dataset, getting the data all analyzed and figuring now what the appropriate doses would be for our next studies on our existing Phase I study, the one we just talked about. And then from a NASH-enabling study, we're doing things like DDI studies so that we can understand how best to effectively dose EDP-305 in patients who could be on concomitant meds or other NASH-related conditions. So some of them are just very standard DDI studies. We're also doing a hepatic impairment study so that we can study the effects of EDP-305 in patients with hepatic impairment. Again, understanding that behavior as well as the DDI behavior will set you up to most optimally enroll from a broader patient population in your Phase II study. So those studies are all ongoing and, in some cases, wrapping up. So I think that's where we are.

(Operator Instructions) There appear to be no further questions at this time.

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

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.