SEC Filing | Enanta Pharmaceuticals, Inc.

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enta-10q_20210630.htm

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 June 30, 2021

☐	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

2834

04-3205099

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

500 Arsenal Street

Watertown, Massachusetts 02472

(617) 607-0800

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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 July 29, 2021, the registrant had 20,214,850 shares of common stock, $0.01 par value per share, outstanding.

ENANTA PHARMACEUTICALS, INC.

FORM 10-Q — Quarterly Report

For the Quarterly Period Ended June 30, 2021

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	3
	Unaudited Consolidated Balance Sheets	3
	Unaudited Consolidated Statements of Operations	4
	Unaudited Consolidated Statements of Comprehensive Loss	5
	Unaudited Consolidated Statements of Stockholders’ Equity	6
	Unaudited Consolidated Statements of Cash Flows	7
	Unaudited Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4.	Controls and Procedures	26
PART II—OTHER INFORMATION
Item 1A.	Risk Factors	28
Item 6.	Exhibits	53
Signatures		54

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Form 10-Q, contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about overall trends, royalty revenue trends, research and clinical development plans, liquidity and capital needs and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions. These forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions. These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and discussed elsewhere in this Form 10-Q. These forward-looking statements speak only as of the date of this Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Form 10-Q.

PART I—FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except per share amounts)

	June 30,			September 30,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	4,601		$	87,131
Short-term marketable securities		252,223			299,518
Accounts receivable		21,624			23,492
Prepaid expenses and other current assets		12,137			13,655
Income tax receivable		30,570			13,041
Total current assets		321,155			436,837
Long-term marketable securities		115,706			32,634
Property and equipment, net		6,613			8,596
Deferred tax assets		345			345
Operating lease, right-of-use assets		5,917			7,020
Restricted cash		608			608
Other long-term assets		92			92
Total assets	$	450,436		$	486,132
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	5,895		$	5,737
Accrued expenses and other current liabilities		17,695			14,159
Operating lease liabilities		5,034			4,261
Total current liabilities		28,624			24,157
Operating lease liabilities, net of current portion		1,637			3,838
Series 1 nonconvertible preferred stock		1,479			1,479
Other long-term liabilities		846			1,078
Total liabilities		32,586			30,552
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock; $0.01 par value per share, 100,000 shares authorized; 20,211 and 20,077 shares issued and outstanding at June 30, 2021 and September 30, 2020, respectively		202			201
Additional paid-in capital		344,737			326,963
Accumulated other comprehensive income (loss)		(264	)		844
Retained earnings		73,175			127,572
Total stockholders' equity		417,850			455,580
Total liabilities and stockholders' equity	$	450,436		$	486,132

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

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2021			2020			2021			2020

Royalty revenue	$	21,624		$	18,653		$	73,499		$	98,842
Operating expenses:
Research and development		46,994			34,682			125,165			100,070
General and administrative		8,477			6,823			24,180			20,628
Total operating expenses		55,471			41,505			149,345			120,698
Loss from operations		(33,847	)		(22,852	)		(75,846	)		(21,856	)
Other income (expense):
Other income (expense), net		439			1,445			1,661			5,471
Total other income (expense), net		439			1,445			1,661			5,471
Loss before income taxes		(33,408	)		(21,407	)		(74,185	)		(16,385	)
Income tax benefit		9,384			7,142			19,788			9,558
Net loss	$	(24,024	)	$	(14,265	)	$	(54,397	)	$	(6,827	)

Net loss per share:
Basic	$	(1.19	)	$	(0.71	)	$	(2.70	)	$	(0.34	)
Diluted	$	(1.19	)	$	(0.71	)	$	(2.70	)	$	(0.34	)

Weighted average shares outstanding:
Basic		20,201			20,020			20,155			19,897
Diluted		20,201			20,020			20,155			19,897

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

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Net loss	$	(24,024	)	$	(14,265	)	$	(54,397	)	$	(6,827	)
Other comprehensive income (loss):
Net unrealized gains (losses) on marketable securities, net of tax of $0, $271, $0 and $418		(319	)		850		$	(1,108	)	$	1,312
Total other comprehensive income (loss), net of tax		(319	)		850			(1,108	)		1,312
Comprehensive loss	$	(24,343	)	$	(13,415	)	$	(55,505	)	$	(5,515	)

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

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		Earnings			Equity
Balances at September 30, 2019		19,703	$	197	$	298,409		$	146	$	163,740		$	462,492
Exercise of stock options		76		1		2,305			—		—			2,306
Vesting of restricted stock units, net of withholding		31		—		(1,140	)		—		—			(1,140	)
Stock-based compensation expense		—		—		5,098			—		—			5,098
Other comprehensive income, net of tax		—		—		—			88		—			88
Net income		—		—		—			—		13,443			13,443
Balances at December 31, 2019		19,810	$	198	$	304,672		$	234	$	177,183		$	482,287
Exercise of stock options		160		2		4,714			—		—			4,716
Vesting of restricted stock units, net of withholding		16		—		(358	)		—		—			(358	)
Stock-based compensation expense		—		—		4,977			—		—			4,977
Other comprehensive income, net of tax		—		—		—			374		—			374
Net loss		—		—		—			—		(6,005	)		(6,005	)
Balances at March 31, 2020		19,986		200		314,005			608		171,178			485,991
Exercise of stock options		84		1		3,225			—		—			3,226
Stock-based compensation expense		—		—		4,755			—		—			4,755
Other comprehensive income, net of tax		—		—		—			850		—			850
Net loss		—		—		—			—		(14,265	)		(14,265	)
Balances at June 30, 2020		20,070		201		321,985			1,458		156,913			480,557

								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
Exercise of stock options		26		—		686			—			—			686
Stock-based compensation expense		—		—		5,475			—			—			5,475
Other comprehensive loss		—		—		—			(319	)		—			(319	)
Net loss		—		—		—			—			(24,024	)		(24,024	)
Balances at June 30, 2021		20,211		202		344,737			(264	)		73,175			417,850

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

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Nine Months Ended
	June 30,
	2021			2020
Cash flows from operating activities
Net loss	$	(54,397	)	$	(6,827	)
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		15,638			14,830
Depreciation and amortization expense		2,528			2,735
Deferred income taxes		—			(4,366	)
Premium paid on marketable securities		(3,427	)		(3,094	)
(Accretion) amortization of (discount) premium on marketable securities		1,516			(95	)
Other non-cash items		—			(51	)
Change in operating assets and liabilities:
Accounts receivable		1,868			32,660
Prepaid expenses and other current assets		1,518