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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35839

 

ENANTA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

 

04-3205099

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

500 Arsenal Street

Watertown, Massachusetts

 

02472

(Address of principal executive offices)

 

(Zip Code)

 

(Registrants telephone number, including area code:) (617) 607-0800

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ENTA

NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of April 27, 2022, the registrant had 20,712,691,shares of common stock, $0.01 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Consolidated Financial Statements

3

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Operations

4

 

Consolidated Statements of Comprehensive Loss

5

 

Consolidated Statements of Stockholders' Equity

6

 

Consolidated Statements of Cash Flows

7

 

Notes to Consolidated Financial Statements (unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

 

Item 1A.

Risk Factors

26

Item 6.

Exhibits

53

Signatures

54

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. For example, statements in this Quarterly Report regarding the potential future impact of the COVID-19 pandemic on our business and results of operations are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will” or the negative of these terms or other similar expressions. We caution you that the foregoing list may not encompass all of the forward-looking statements made in this Quarterly Report.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Quarterly Report.

2


 

PART I—FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except per share amounts)

 

 

 

March 31,

 

 

September 30,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,989

 

 

$

57,206

 

Short-term marketable securities

 

 

239,338

 

 

 

186,796

 

Accounts receivable

 

 

18,716

 

 

 

23,576

 

Prepaid expenses and other current assets

 

 

14,078

 

 

 

14,188

 

Income tax receivable

 

 

28,748

 

 

 

37,255

 

Total current assets

 

 

341,869

 

 

 

319,021

 

Long-term marketable securities

 

 

42,218

 

 

 

108,416

 

Property and equipment, net

 

 

4,815

 

 

 

5,943

 

Operating lease, right-of-use assets

 

 

17,216

 

 

 

4,711

 

Restricted cash

 

 

608

 

 

 

608

 

Other long-term assets

 

 

92

 

 

 

92

 

Total assets

 

$

406,818

 

 

$

438,791

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,985

 

 

$

9,540

 

Accrued expenses and other current liabilities

 

 

21,740

 

 

 

22,429

 

Operating lease liabilities

 

 

3,013

 

 

 

4,203

 

Total current liabilities

 

 

30,738

 

 

 

36,172

 

Operating lease liabilities, net of current portion

 

 

15,115

 

 

 

1,126

 

Series 1 nonconvertible preferred stock

 

 

1,506

 

 

 

1,506

 

Other long-term liabilities

 

 

876

 

 

 

558

 

Total liabilities

 

 

48,235

 

 

 

39,362

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock; $0.01 par value per share, 100,000 shares authorized; 20,618 and
   
20,238 shares issued and outstanding at March 31, 2022 and
   September 30, 2021, respectively

 

 

206

 

 

 

202

 

Additional paid-in capital

 

 

376,545

 

 

 

351,033

 

Accumulated other comprehensive loss

 

 

(3,037

)

 

 

(382

)

(Accumulated deficit) retained earnings

 

 

(15,131

)

 

 

48,576

 

Total stockholders' equity

 

 

358,583

 

 

 

399,429

 

Total liabilities and stockholders' equity

 

$

406,818

 

 

$

438,791

 

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty revenue

 

$

18,716

 

 

$

20,132

 

 

$

46,364

 

 

$

51,875

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

42,087

 

 

 

41,506

 

 

 

90,636

 

 

 

78,171

 

General and administrative

 

 

10,476

 

 

 

8,326

 

 

 

19,984

 

 

 

15,703

 

Total operating expenses

 

 

52,563

 

 

 

49,832

 

 

 

110,620

 

 

 

93,874

 

Loss from operations

 

 

(33,847

)

 

 

(29,700

)

 

 

(64,256

)

 

 

(41,999

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

255

 

 

 

545

 

 

 

549

 

 

 

1,222

 

Total other income, net

 

 

255

 

 

 

545

 

 

 

549

 

 

 

1,222

 

Loss before income taxes

 

 

(33,592

)

 

 

(29,155

)

 

 

(63,707

)

 

 

(40,777

)

Income tax benefit

 

 

 

 

 

7,110

 

 

 

 

 

 

10,404

 

Net loss

 

$

(33,592

)

 

$

(22,045

)

 

$

(63,707

)

 

$

(30,373

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(1.63

)

 

$

(1.09

)

 

$

(3.11

)

 

$

(1.51

)

Diluted

 

$

(1.63

)

 

$

(1.09

)

 

$

(3.11

)

 

$

(1.51

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

20,551

 

 

 

20,171

 

 

 

20,473

 

 

 

20,131

 

Diluted

 

 

20,551

 

 

 

20,171

 

 

 

20,473

 

 

 

20,131

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


 

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(33,592

)

 

$

(22,045

)

 

$

(63,707

)

 

$

(30,373

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized losses on marketable securities

 

 

(2,031

)

 

 

(350

)

 

 

(2,655

)

 

 

(789

)

Total other comprehensive loss

 

 

(2,031

)

 

 

(350

)

 

 

(2,655

)

 

 

(789

)

Comprehensive loss

 

$

(35,623

)

 

$

(22,395

)

 

$

(66,362

)

 

$

(31,162

)

 

The accompanying notes are an integral part of these consolidated financial statements.

5


 

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Earnings

 

 

Equity

 

Balances at September 30, 2020

 

 

20,077

 

 

$

201

 

 

$

326,963

 

 

$

844

 

 

$

127,572

 

 

$

455,580

 

Exercise of stock options

 

 

33

 

 

 

 

 

 

833

 

 

 

 

 

 

 

 

 

833

 

Vesting of restricted stock units, net of
   withholding

 

 

32

 

 

 

 

 

 

(534

)

 

 

 

 

 

 

 

 

(534

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,883

 

 

 

 

 

 

 

 

 

4,883

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(439

)

 

 

 

 

 

(439

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,328

)

 

 

(8,328

)

Balances at December 31, 2020

 

 

20,142

 

 

$

201

 

 

$

332,145

 

 

$

405

 

 

$

119,244

 

 

$

451,995

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

43

 

 

 

1

 

 

 

1,151

 

 

 

 

 

 

 

 

 

1,152

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,280

 

 

 

 

 

 

 

 

 

5,280

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(350

)

 

 

 

 

 

(350

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,045

)

 

 

(22,045

)

Balances at March 31, 2021

 

 

20,185

 

 

$

202

 

 

$

338,576

 

 

$

55

 

 

$

97,199

 

 

$

436,032

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

(Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

Deficit)

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

Equity

 

Balances at September 30, 2021

 

 

20,238

 

 

$

202

 

 

$

351,033

 

 

$

(382

)

 

$

48,576

 

 

$

399,429

 

Exercise of stock options

 

 

248

 

 

 

2

 

 

 

10,407

 

 

 

 

 

 

 

 

 

10,409

 

Vesting of restricted stock units, net of
   withholding

 

 

20

 

 

 

1

 

 

 

(778

)

 

 

 

 

 

 

 

 

(777

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,062

 

 

 

 

 

 

 

 

 

6,062

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(624

)

 

 

 

 

 

(624

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,115

)

 

 

(30,115

)

Balances at December 31, 2021

 

 

20,506

 

 

$

205

 

 

$

366,724

 

 

$

(1,006

)

 

$

18,461

 

 

$

384,384

 

Exercise of stock options

 

 

97

 

 

 

1

 

 

 

3,801

 

 

 

 

 

 

 

 

 

3,802

 

Vesting of restricted stock units, net of
   withholding

 

 

15

 

 

 

 

 

 

(451

)

 

 

 

 

 

 

 

 

(451

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,471

 

 

 

 

 

 

 

 

 

6,471

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(2,031

)

 

 

 

 

 

(2,031

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,592

)

 

 

(33,592

)

Balances at March 31, 2022

 

 

20,618

 

 

 

206

 

 

 

376,545

 

 

 

(3,037

)

 

 

(15,131

)

 

 

358,583

 

 

The accompanying notes are an integral part of these consolidated financial statements

6


 

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

 

Six Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(63,707

)

 

$

(30,373

)

Adjustments to reconcile net income to net cash provided by
   operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

12,533

 

 

 

10,163

 

Depreciation and amortization expense

 

 

1,602

 

 

 

1,705

 

Premium paid on marketable securities

 

 

(802

)

 

 

(1,238

)

Amortization of premium on marketable securities

 

 

928

 

 

 

956

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

4,860

 

 

 

3,360

 

Prepaid expenses and other current assets

 

 

110

 

 

 

(5,444

)

Income tax receivable

 

 

8,507

 

 

 

 

Operating lease, right-of-use assets

 

 

2,784

 

 

 

2,565

 

Accounts payable

 

 

(3,473

)

 

 

15

 

Accrued expenses

 

 

(808

)

 

 

1,703

 

Operating lease liabilities

 

 

(2,498

)

 

 

(2,797

)

Other long-term liabilities

 

 

318

 

 

 

(84

)

Net cash used in operating activities

 

 

(39,646

)

 

 

(19,469

)

Cash flows from investing activities

 

 

 

 

 

 

Purchase of marketable securities

 

 

(124,631

)

 

 

(171,586

)

Proceeds from maturities and sale of marketable securities

 

 

135,514

 

 

 

179,917

 

Purchase of property and equipment

 

 

(437

)

 

 

(318

)

Net cash provided by investing activities

 

 

10,446

 

 

 

8,013

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

14,211

 

 

 

1,985

 

Payments for settlement of share-based awards

 

 

(1,228

)

 

 

(534

)

Net cash provided by financing activities

 

 

12,983

 

 

 

1,451

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(16,217

)

 

 

(10,005

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

57,814

 

 

 

87,739

 

Cash, cash equivalents and restricted cash at end of period

 

$

41,597

 

 

$

77,734

 

Supplemental disclosure of non-cash information:

 

 

 

 

 

 

Purchases of fixed assets included in accounts payable and accrued expenses

 

$

174

 

 

$

17

 

Operating lease liabilities arising from obtaining right-of-use assets

 

$

15,559