Earnings Call Transcript - ENTA Q3 2021

Operator, Operator

Good afternoon. And welcome to Enanta Pharmaceuticals Fiscal Third Quarter 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. There will be a question-and-answer session at the end of the prepared remarks. Please be advised that this call is being recorded. I would now like to turn the call over to Jennifer Viera, Investor Relations. Please go ahead.

Jennifer Viera, Investor Relations

Thank you, Operator, and thanks to everyone for joining us this afternoon. The news release with our fiscal third quarter financial results was issued this afternoon and is available on our website. On the call today is Dr. Jay Luly, President and Chief Executive Officer; Paul Mellett, our Chief Financial Officer; and other members of Enanta’s senior management team. Before we begin with our formal remarks, we want to remind you that we will be making forward-looking statements, which may include our plans and expectations with respect to our research and development pipeline, and financial projections, all of which involve certain assumptions and risks beyond our control that could cause our actual developments and results to differ materially from those statements. A description of these risks is in our most recent Form 10-Q and other periodic reports filed with the SEC. Enanta does not undertake any obligation to update any forward-looking statements made during this call. With that, I’d now like to turn the call over to Dr. Jay Luly. Jay?

Dr. Jay Luly, CEO

Thank you, Jennifer, and good afternoon, everyone. Our fiscal third quarter was marked by the achievement of several important milestones and continued progress across our clinical portfolio. Starting with COVID-19, we are pleased to announce that we have identified a clinical development candidate EDP-235, an oral protease inhibitor specifically designed to treat SARS-CoV-2 infection and potentially other coronavirus infections. We are eager to progress this program into the clinic and are on track to initiate a Phase 1 study of EDP-235 early next year. In hepatitis B, we are excited by the progress we’ve made with EDP-514 and EDP-721, which we are developing as part of an all-oral combination regimen to achieve a functional cure. We expect to begin dosing in our Phase 1 study of EDP-721, a novel oral HBV RNA destabilizer, this month. Additionally, this quarter, we announced positive Phase 1b 28-day data for our core inhibitor EDP-514 in two important patient populations, chronic HBV patients who have a high viral load, whom we refer to as viremic patients, and chronic HBV patients who are on a treatment with a nucleoside reverse transcriptase inhibitor, whom we refer to as NUC-suppressed patients. The significant progress we’ve made across our HBV program brings us closer to our goal of developing an all-oral functional cure for patients. Moving to the rest of our pipeline, we have three ongoing Phase 2 clinical studies investigating 938 for respiratory syncytial virus or RSV and two ongoing clinical studies for candidates to treat nonalcoholic steatohepatitis or NASH. In addition to our clinical programs, we continued to progress our respiratory virus discovery initiatives to identify an L inhibitor for RSV and an inhibitor for human metapneumovirus or HMPV. With that, I’d like to dive deeper into each of the programs that make up our robust pipeline, beginning with SARS-CoV-2. We are pleased to have selected EDP-235, a direct-acting antiviral oral protease inhibitor, as our clinical development candidate for SARS-CoV-2 and plan to initiate a clinical study early next year. As SARS-CoV-2 continues to mutate and new variants arise, we believe there remains a need for a potent oral treatment that is specifically designed to inhibit replication of this virus, and we are excited to progress this program. While vaccines and antibody therapeutics in development today target the viral spike protein, EDP-235 has been specifically designed to target a conserved region in the active site of an enzyme essential for SARS-CoV-2 replication. So we do not expect mutations in the spike protein to significantly affect the activity of our candidate. Further, EDP-235 potently and selectively inhibits SARS-CoV-2 replication in multiple cellular models, including primary human airway epithelial cells demonstrated in EC90 of 33 nM. Importantly, activity is retained against currently circulating SARS-CoV-2 variants, and a high barrier to resistance has been observed. Additionally, EDP-235 demonstrates preclinical properties supportive of once-daily oral dosing. If we are successful, our vision is for an early diagnosis of COVID-19, followed by outpatient treatment with a highly potent and targeted oral therapy. Shifting gears to HBV. We recently announced preliminary data from the first two-dose cohorts of our Phase 1b study of EDP-514 in viremic chronic HBV patients, which further demonstrated the compound's safety and tolerability, as well as its ability to reduce HBV DNA levels significantly over the 28-day dosing period. To briefly recap the data, 16 patients were randomized to receive daily doses of either 200 milligrams or 400 milligrams of EDP-514 or placebo for 28 days. Mean reductions in HBV DNA of 2.9, 3.3, and 0.2 logs were observed in the 200-milligram, 400-milligram, and placebo groups, respectively, with a maximum reduction of 4.2 logs in the 400-milligram group versus 0.5 log in the placebo group. Four patients receiving EDP-514 had HBV DNA below the lower level of quantitation compared to none who received placebo. Additionally, mean reductions in HBV RNA of 2.9, 2.4, and 0.3 logs were observed in the 200-milligram, 400-milligram, and placebo groups, respectively, with a maximum reduction of 4.8 logs with EDP-514 versus 1.9 logs with placebo. HBV RNA was undetectable at day 28 in eight patients in the 514 group as compared to none in placebo. Further, EDP-514 was shown to be safe and well tolerated in this patient population. This study provides important clinical evidence of EDP-514’s safety profile as well as kinetics of viral inhibition when used as a single agent over 28 days and is a significant advance in our efforts to deliver an all-oral functional cure for hepatitis B. Building on that success, we also recently reported positive 28-day data from the first two cohorts, 200 milligrams, and 400 milligrams, of our Phase 2b study of EDP-514 in NUC-suppressed chronic HBV patients. Importantly, these 28-day data demonstrate that EDP-514, when combined with a NUC, was safe and well tolerated. Additionally, EDP-514 demonstrated reductions in HBV RNA, along with the pharmacokinetic profile supportive of once-daily dosing. Together, these data support the development of EDP-514 in combination with a NUC as a two-drug foundation on which to add other agents such as EDP-721. Such an all-oral combination therapy is a differentiated approach that could potentially lead to a functional cure for patients with chronic HBV. To that end, we expect to begin dosing in the Phase 1 study of EDP-721, our oral HBV RNA destabilizer this month. Our enthusiasm for the development of EDP-721 is based in part on the preclinical data we presented at EASL in June. In vitro, EDP-721 potently reduced HBV surface antigen with pan-genotypic HBV activity through its selective inhibition of PAP-D5 and PAP-D7. Moreover, EDP-721 showed additive to synergistic antiviral activity in vitro when combined with NUCs or HBV core inhibitors such as EDP-514. Oral administration of EDP-721 in the AAV HBV mouse model also demonstrated favorable efficacy characteristics, inducing up to a three-log drop in the HBV surface antigen. These preclinical data are particularly exciting because effective reduction of HBV surface antigen has presented a substantial challenge to achieving long-term HBV viral clearance. Moving to RSV, EDP-938, the only N inhibitor in advanced clinical development today is currently being evaluated in three ongoing Phase 2 studies. As a reminder, RSV is a severe respiratory infection associated with significant morbidity and mortality, not only in infants but in the elderly and in immune-compromised adults as well. There is no safe and effective treatment for this viral infection. As we previously mentioned, RSV like flu did not emerge during the most recent Northern and Southern Hemisphere seasons due to COVID-19 mitigation measures. However, where social distancing measures have subsided, RSV has begun to reemerge and has already been observed with recent spikes of pediatric RSV cases in Australia and parts of the United States. In fact, in June, the Centers for Disease Control and Prevention issued a health advisory to notify clinicians and caregivers about increased inter-seasonal RSV activity across parts of the Southern United States. With this in mind, we have continued to establish additional trial sites in North America, Europe, Asia-Pacific, and the Southern Hemisphere. These efforts will be key to our recruitment in our RSV clinical program, which includes RSVP, our Phase 2b study evaluating EDP-938 in adults with a community-acquired infection, RSVTx, a Phase 2b study evaluating EDP-938 in adult hematopoietic cell transplant recipients, and RSVPs, a Phase 2 study in pediatric RSV patients. Given that the recent reemergence of RSV does not follow any normal seasonal pattern, it’s very difficult to predict how significant or sustained the new incidents of RSV will be moving forward. Nonetheless, we are more hopeful that we’ll be able to complete enrollment in the RSVP study during the Northern Hemisphere winter season, as long as there are no renewed social distancing trends. Assuming this enrollment occurs, we would expect the data in the first half of 2022. As for RSVTx and RSVPs, which were initiated more recently than RSVP, we will continue to monitor the situation and update as appropriate. Beyond EDP-938, our other two respiratory virus discovery initiatives targeting RSV and human metapneumovirus are also showing promise during lead optimization. RSV L inhibitors are another drug class that blocks viral replication and could potentially be used alone or in combination with other agents such as EDP-938 to possibly broaden the treatment window or addressable patient population. As for HMPV, we believe this initiative is a natural adjacency for us as the virus is very similar to RSV. HMPV has been shown to have worldwide circulation with nearly universal infection by age five. Adults at highest risk include the elderly, adults with underlying pulmonary disease, and those who are immune-compromised. By year-end, we hope to nominate another clinical candidate from either our HMPV or RSV L inhibitor initiatives. Finally, I’ll end with the summary of our work in NASH, a liver disease with a significant unmet need, where we are conducting clinical studies of two FXR agonists, EDP-305 and EDP-297. Recruitment and dosing in ARGON-2, our Phase 2b study of EDP-305 in patients with biopsy-proven NASH with fibrosis, is progressing. Later this quarter, we’ll have a planned internal interim analysis based on 12 weeks of treatment in a subset of patients from this study. Also later this quarter, we expect to report data from a Phase 1 first-in-human study of our follow-on FXR agonist candidate EDP-297. We anticipate that the combined data from this Phase 1 study and the EDP-305 internal interim analysis will enable us to determine next steps such as potential partnering and combination approaches for our NASH program. Before moving to our financials, I’d like to highlight our upcoming milestones, which we believe position us for a strong remainder of the year. For COVID-19, we’ve nominated EDP-235 as our lead oral protease inhibitor and expect to initiate a clinical study in early 2022. In HBV, we plan to dose the first patient in the Phase 1 clinical study of EDP-721 this month. In NASH, we look forward to preliminary data from the Phase 1 study of EDP-297 later this quarter and determination of next steps for our NASH program following an internal interim analysis of ARGON-2. Finally, we continue to be excited about the early prospects coming out of our two other respiratory virology discovery initiatives and are eager to name a new clinical development candidate for RSV or human metapneumovirus by year-end. I’d also like to take a moment to thank Dr. Nathalie Adda, Senior Vice President and Chief Medical Officer for her dedication to the company over the last six years. During which she built and led the clinical development and regulatory team and helped advance our pipeline candidates. As announced, her retirement is planned for February, and we wish her the best. We’re thankful that she is staying with us in a consulting capacity thereafter. With that, I’ll stop here and turn the call over to Paul to discuss our financials for the quarter. Paul?

Paul Mellett, CFO

Thank you, Jay. I’d like to remind everyone that Enanta reports on a September 30th fiscal year schedule. Today, we are reporting results for our third quarter ended June 30, 2021. For the quarter, total revenue was $21.6 million and consisted of royalty revenue earned on AbbVie’s global MAVYRET net product sales. This compares to total revenue of $18.7 million for the same period in 2020. The increase in royalty revenue compared to the same period last year was driven by higher HCV product sales, as treated patient volumes have increased compared to the third quarter of last year when the COVID-19 pandemic began. HCV product sales continue to remain below pre-COVID levels as a residual impact from the pandemic continues. Royalty revenue was calculated on 15% of MAVYRET sales at a royalty rate for the quarter of 10%, after adjustments for certain contractual discounts, rebates, and set-offs, which are now approximately 2% of AbbVie’s total reported HCV product sales. You can review our royalty tier schedule in our 2020 Form 10-K. Moving on to our expenses, for the three months ended June 30, 2021, research and development expenses totaled $47 million, compared to $34.7 million for the same period in 2020. The increase was primarily due to the timing of our clinical trials year-over-year. General and administrative expense for the quarter was $8.4 million, compared to $6.8 million for the same period in 2020. The increase was due to an increase in headcount and compensation expense. Enanta recorded an income tax benefit of $9.4 million for the three months ended June 30, 2021, compared to an income tax benefit of $7.1 million for the same period of 2020. These income tax benefits were due to the provisions of the CARES Act of 2020, which enables the company through fiscal 2021 to carry back its projected current year tax loss to offset taxable income in prior years. Net loss for the three months ended June 30, 2021, was $24 million or a loss of $1.19 per diluted common share, compared to a net loss of $14.3 million or a loss of $0.71 per diluted common share for the corresponding period of 2020. Enanta ended the quarter with approximately $373 million in cash and marketable securities. We expect that our current cash, cash equivalents, and short-term and long-term marketable cash and marketable securities, as well as our ongoing royalty revenue will continue to be sufficient to meet the anticipated cash requirements of our existing business and development programs for at least the next two years. Further financial details are available in our press release and will be available in our quarterly report on Form 10-K when filed. I’d now like to turn the call back to the operator and open up the lines for questions. Operator?

Operator, Operator

Your first question will come from Brian Skorney with Baird. Please proceed.

Brian Skorney, Analyst

Hey. Good afternoon, guys. Thanks so much for taking the question. So I really want to talk about EDP-938 and I was wondering if you could kind of give us some compare and contrast on the potency of the protease inhibitor with remdesivir and maybe Pfizer’s PI. And can you do effective serial passage studies with SARS-CoV-2 models and can you comment at all on what sort of resistance you can induce? And then just on the safety front, what sort of room do you have on selectivity index before you start hitting some of the human proteases and seeing cytotoxin? That’s it.

Dr. Jay Luly, CEO

Hi Brian. This is Jay. So I think you meant EDP-235 not EDP-938.

Brian Skorney, Analyst

Oh! Sorry. Yeah.

Dr. Jay Luly, CEO

So, anyway, EDP-235, the SARS-CoV-2 protease inhibitor that we announced today, serial passage, I mean, we don’t have the live SARS-CoV-2 virus in-house. So we rely on external providers for some of those kinds of studies. But we do do extensive work looking in resistance in-house, but we use model coronaviruses for that work. And so to that end, the profile that we’ve generated so far internally, it’s very, very nice. And so we’re excited by not only that net attribute but obviously also the potency that we have there. I think when you look at a candidate, which way we look at a candidate versus others that are out there, just even where we put the mark on the map for what we’re trying to hit, we obviously want to drill down on potency and look at that in lots of different ways. We’ve reported good data in primary human airway epithelial cells, which is a great way to look. We also look at activity against variants and we’re pleased with the profile that we’ve seen there, talked about the serial passages that we’ve done. And then getting on to safety, I think, we do sort of extensive safety work prior to taking any of our candidates that we feel very comfortable with the safety package that we’ve put together for this candidate. So given the potency and the wide windows, we don’t expect any sort of complications going into our clinical studies with this molecule. But looking beyond that, these are sort of the meat and potato things that we pushed it and looked at even further. As you know, we’re always looking at tissue targeting and social distribution, whether it’s with our FXR, whether it’s with our hepatitis drugs. And SARS-CoV-2 exceptionally, we saw very good tissue distribution and looked at lung levels in rodents, very pleased with that profile. And also having surveyed PK across multiple different species, we feel pretty confident that this is a QD dosing drug. So it’s really the aggregate of all these things put together, you can put a punch those together and check nine of the 10, but we weren’t done until we checked every box we were aiming to do in this candidate. I think the other sort of exciting aspect of this is we have seen activity against other coronaviruses with this as well. So there’s the possibility that we could go beyond SARS-CoV-2 here and think about readiness for other pandemic viruses or the coronaviruses. So, all in, it’s a very exciting candidate, and as we’ve mentioned, we’re on track to initiate clinical studies early next year.

Brian Skorney, Analyst

Great. Thanks for taking my question Jay.

Dr. Jay Luly, CEO

You’re welcome.

Operator, Operator

Your next question will come from Yasmeen Rahimi with Piper Sandler. Please proceed.

Swapnil Malekar, Analyst

Hi. Good evening. This is Swapnil on for Yas. A couple of questions, first is for 721, should we expect to see the 800-milligram cohort data at ASLD and then based upon your internal PKPD modeling work, how much additional HBV DNA knockdown benefit do you expect to see over the reported 200-milligram and 400-milligram doses?

Dr. Jay Luly, CEO

Yeah. I think you’ve got a compound number mixed up too. I think you said EDP-721 and I think you were referring to EDP-514, the...

Swapnil Malekar, Analyst

Yeah. Yeah. That’s right. Sorry. Yeah.

Dr. Jay Luly, CEO

We have a lot of molecules to keep track of. Regarding 514, the 200-milligram and 400-milligram doses showed good performance, both in terms of safety and pharmacokinetics, which were critical factors for us. In NUC-suppressed patients, we ensured that our molecule worked well with a NUC, as we aim to establish a foundation for a two-drug combination, eventually adding the other molecule, 721, to create an all-oral triple therapy. Based on the virology results we observed at both doses, whether analyzing DNA or RNA, we noted good safety and virology across different patient populations, which positions us well for future progress. For the 800-milligram dose, we need to evaluate the data to determine if further exposure will provide additional benefits, even though we've seen significant results at the lower doses. We'll review the findings and present them at upcoming major scientific conferences. So, stay tuned for further updates. Overall, 514 has demonstrated strong antiviral effects, an excellent safety and tolerability profile in HBV patients over 28 days, and lays a solid foundation for a combination with EDP-721.

Swapnil Malekar, Analyst

Okay. Great. I had one follow-up question, so for 235, what gating factors are remaining, where are you guys in terms of regulatory pathway before you initiate the Phase 1 trial in 2022?

Dr. Jay Luly, CEO

Yeah. I’d say that, I mean, all the IND-enabling studies are done. So we’re packaging that sort of stuff at. We’re procuring drug supply. We’re doing all those kinds of things in terms of readiness as we prepare for the Phase 1 study, but it’s just sort of routine stuff at this point.

Swapnil Malekar, Analyst

Great. Thanks for taking the question.

Operator, Operator

Your next question will come from Brian Abrahams with RBC Capital Markets. Please proceed.

Brian Abrahams, Analyst

Hey, guys. Congrats on the progress. Thanks for taking my question and my congratulations and best of luck to Dr. Adda’s retirement. First question on 235, maybe a bigger picture question, I was wondering if you could maybe talk about how you’re thinking about next steps here, Phase 1 and beyond for the program, what you think the clinical path might look like? And is this something where you might expect a PI alone to be adequate or do you think this could be more akin to HIV or hep C, where you would want to combine this with other classes of direct-acting antivirals like NUCs?

Dr. Jay Luly, CEO

It's a good question, Brian. The answer is that nobody really knows, but we are dealing with an acute infection here, so we're encouraged that a single agent could be sufficient. When we initiated this program at the beginning of the pandemic, we explored multiple mechanisms, not just this one, because we want to be prepared for any future variants or other developments. However, we are optimistic about the potential to see a positive impact on viral loads fairly quickly with these mechanisms. While we haven’t determined if combination therapy will be necessary as it might be in hepatitis C or hepatitis B, we are investigating short-term treatment options with our RSV drug, which is aimed at being a moderate agent. Similar to our approach with SARS-CoV-2, we're planning to utilize multiple strategies. If we can develop a better option later, that would be beneficial. We aim to have several quality assets available, which is why we are actively researching RSV in multiple Phase 3 studies with a promising agent. Our goal is to reach different patient populations, possibly treating more severe cases or expanding the treatment window. One of our overarching goals with RSV is early diagnosis and rapid treatment, which we've discussed for several years. We believe this approach also applies to metapneumovirus and possibly with SARS-CoV-2. As vaccine options have decreased, there is growing concern about the lack of therapeutics. People are looking for an accessible treatment option—one where if a patient is symptomatic, they can quickly get tested and treated with an easy-to-use, safe oral drug, allowing them to recover quickly and return to their daily lives. This is definitely part of our consideration moving forward. I hope that helps.

Brian Abrahams, Analyst

Thank you, Jay, that's very helpful. I have one more question regarding 938. I know you’ve been expanding and mobilizing your sites. I'm curious about how you have been able to leverage the recent off-cycle RSV spikes. How consistent are these spikes regionally in relation to your trial sites? Additionally, are there any adjustments in how you might screen or monitor patients during an off-season RSV surge compared to the typical seasonal increase? Thank you.

Dr. Jay Luly, CEO

We are quite geographically diverse in both the U.S. and globally. You pointed out that in the Southern Hemisphere, with the arrival of summer, there was a noticeable increase in pediatric RSV cases, especially as masks were removed in Australia. We were considering that a similar trend could occur here, and recently the CDC reported a significant increase in interseasonal RSV cases in certain Southern regions. We have sites in various locations and have observed some upticks, which gives us cautious optimism. If these trends continue into the winter season, we could potentially conclude the RSV study this season, with data available in the first half of next year. However, we need to monitor whether these interseasonal spikes will diminish or reemerge strongly in the fall, particularly when RSV is typically more prevalent. There’s an increasing awareness of RSV, as testing has become more prevalent, and the CDC has advised not to assume a respiratory illness is COVID-19 without testing for RSV as well. With our extensive site network, we are prepared to enroll patients as they come in.

Brian Abrahams, Analyst

Great. Thanks again.

Dr. Jay Luly, CEO

You’re welcome.

Operator, Operator

Your next question will come from Roy Buchanan with JMP Securities. Please proceed.

Roy Buchanan, Analyst

Hi. Great. Thanks for taking the question. Had a couple on 235, I guess, so the structure of Pfizer’s lead oral inhibitors out there. I am just curious if you guys did any side-by-side comparisons in view of potential differences between assays and if you have a side-by-side comparison of the potency? And then can you tell us if 235 is covalent, is it reversible and a follow-up.

Dr. Jay Luly, CEO

Yeah. No. I know exactly the kinds of questions you’re asking. It’s not the kind of questions I usually answer until we’re ready to answer them. But it’s fair to assume that we do extensive benchmarking across all kinds of parameters with every molecule that we can lay our hands on. And we’ve done that with 235.

Roy Buchanan, Analyst

Okay. And then kind of along the same lines, are you going to present or publish either preclinical or chemical data before the Phase 1 results or are the Phase 1 results going to be the first we’re going to see data?

Dr. Jay Luly, CEO

So there might be some discussion about presenting preclinical data of some sort?

Roy Buchanan, Analyst

Right. As opposed to paper, right?

Dr. Jay Luly, CEO

We are advancing that strategy internally. On one hand, we are deciding how to share this information in various public forums. However, our main focus is on mobilizing and moving forward to get into the clinic and ultimately progress to later-stage clinical studies as quickly as possible, so that the data will be available in due course.

Roy Buchanan, Analyst

Okay. Got it. And I had a few on 721, looking at the clinicaltrials.gov record, I see the one site in New Zealand, I guess that there are going to be additional sites added. And I didn’t see any breakdown of the number of patients in the viremic and the NUC-suppressed groups. Can you give us a sense of what that target breakdown is, if there is one and then I have a few more questions?

Dr. Jay Luly, CEO

Currently, we have initiated the 721 study and are in the screening phase. We expect to start dosing this month. We'll conduct the study and provide more details on our clinical trial design, including how we plan to combine the triple therapy. Additional information will be available at a later date.

Roy Buchanan, Analyst

Okay. Fair enough. You probably won’t answer my other questions either, but I didn’t see you have the combo with 514 in the trial design, so that’s exciting. Sorry, I guess, I’ll ask…

Dr. Jay Luly, CEO

Yeah.

Roy Buchanan, Analyst

... one last question on a different topic, so NASH not the current programs, but you guys have talked about a novel mechanism for some time. I am just curious when you might disclose the target or the pathway, just any news there? Thanks.

Dr. Jay Luly, CEO

Yeah. So we obviously haven’t prepared to disclose that target and program this quarter. But I think it’s fair to say we’ve just got a lot in NASH all coming together here in the next little bit. And I think this quarter we will be really interesting for us as we’re pulling in our internal interim read on ARGON-2. We’ll have Phase 1 data on our other FXR agonist, EDP-297. With the ARGON-2 IA, our hope is to figure out what are the appropriate doses that we can peel off then and entertain combination studies with perhaps in the context of a partnership, et cetera, et cetera. So suffice it to say, we’re thinking about this quarter in NASH and a big picture sort of way. Even if we were thinking of ultimately teaming up in some sort of a partnership, would we do that even with our earlier stage program? These are questions that we haven’t completely sorted out, but we’re thinking through right now. But with regards to your very specific question about what is the target, we’re not at that point.

Unidentified Analyst, Analyst

Can you discuss what we should focus on in the data as we prepare for RSVP in order to make an assessment?

Dr. Jay Luly, CEO

Sure. I'll let Nathalie elaborate on this question in more detail. I’d like to start by mentioning our human challenge study where volunteers were intentionally infected with the virus. We closely monitored their viral loads, and once these loads reached a specific threshold, we began administering the drug. Those receiving the drug also displayed symptoms. One of the key findings from that study was the favorable viral kinetics we observed, which was markedly different from the placebo group. As soon as we started the drug, the infection's trajectory shifted significantly—those on placebo continued to deteriorate while those on the drug improved. This was evident when we analyzed both viral loads and the time course of symptoms. In the outpatient setting, however, we don’t have the same capacity for frequent viral load monitoring. During the challenge study, we could take swabs twice a day, which isn’t practical for outpatients. That said, we will still be tracking symptoms, and occasionally, we will gather virology data as well. Nathalie, would you like to add anything?

Nathalie Adda, CMO

Thank you for your question, Liisa. To add to what Jay mentioned, I want to emphasize our goal of confirming the selected dose of 800 milligrams assessed in the challenge study. Although we initially used 600 milligrams, we needed to increase it this year. It’s crucial to accurately assess and confirm that this is the optimal dose for patient savings. Additionally, we aim to validate the primary endpoint, which is the status quo. Our objective is to exit the study with an understanding that the results from the challenge study, which was a controlled environment, translate effectively into an outpatient setting. We want to demonstrate that by treating patients promptly, we can prevent them from progressing to more severe disease, which would lead to additional symptoms. This focus aligns with our primary endpoints. We have a robustly powered dose study that supports this approach, and we believe the assessed effect size for the study is appropriate, especially compared to the challenge study, though we approached our RSVP study conservatively. Therefore, we anticipate being able to confirm the translation from the challenge study to the outpatient allocation phase.

Unidentified Analyst, Analyst

Okay. Great. Jay, could you discuss the various potential paths we might take with the NASH program and what you're hoping to learn from the upcoming data to guide those options? Also, could you summarize your thoughts as we await the data? Thanks.

Dr. Jay Luly, CEO

We have consistently stated that we do not aim to become a commercial stage NASH company or reach Phase 3 in NASH development. Our focus is on conducting Phase 2 studies, obtaining relevant Phase 2 data points, and then partnering with another entity. We believe that FX, at the right doses, can still have a significant impact, particularly in combination therapies. This is why we are preparing to receive the upcoming IA. In our ARGON-1 study, we tested 1 milligram and 2.5 milligrams but encountered unacceptable pruritus at the higher dose. We are now looking at the dosing for ARGON-2, focusing on doses between those two to see if there is an effective dosage other than 1 milligram, where we previously observed significant target engagement. We want to see if we can refine the dosage to enhance efficacy without inducing pruritus. We will collect additional data on the various doses to explore different combination opportunities, and we intend to pursue this within the framework of a partnership.

Unidentified Analyst, Analyst

Okay. Great. Thank you.

Dr. Jay Luly, CEO

You’re welcome.

Operator, Operator

Your next question will come from Jay Olson with Oppenheimer. Please proceed.

Unidentified Analyst, Analyst

Hi. This is Matt on for Jay. Thanks for taking our question. The first thing I wanted to ask was since HBV is a large global opportunity, what are your thoughts for a potential partnership there, especially ex-U.S.? And also since a potential partner would be likely to seek a role in clinical development, at what point would you consider potentially identifying a potential partner in HBV? Thanks.

Dr. Jay Luly, CEO

Certainly. Those are excellent questions. As we've discussed partnering in NASH, I've also mentioned our collaborations in HBV, which differs slightly from NASH, as well as our human respiratory program. Focusing on HBV and comparing it to HCV, our past deal with Abbott, now AbbVie, involved a protease inhibitor, but we lacked the necessary combination for an all-oral cure at that time. In contrast, we are currently bringing together agents that we believe may suffice for an all-oral cure. We've incorporated standard-of-care elements, and everyone generally gets a NUC as part of that. We've presented two strong data sets on our core inhibitor, and we will soon begin dosing 721, which is the third component of this potential all-oral triple therapy. We will conduct clinical trials to determine if this combination is sufficient. We are very enthusiastic about this opportunity because a differentiated product profile featuring an all-oral therapy is highly advantageous. In general, all-oral treatments tend to outperform combinations of injectable and oral therapies. With the introduction of 721 earlier this year, we see promising prospects due to its potential effect on S antigen reduction. This positions us well in the near term, as we hope to initiate a trial for the all-oral triple therapy next year. If the data is positive, we can then consider the next steps, especially since HBV represents a significant global infection. When aggregating the patient populations in the U.S., the EU five countries, and Japan, the market is substantial, but still only a fraction of the overall unmet need for treating chronic hepatitis B. Hence, for global reach and scale, it’s highly probable that we will seek a global commercialization partner. Would we consider retaining co-commercialization rights in specific regions? Yes, we could at least explore that option. Previously, we had the opportunity for co-commercialization with two drugs in our hepatitis C program with AbbVie, but we chose not to pursue it at that time, primarily as we were a private company. Moving forward, if we achieve an all-oral triple therapy, the circumstances might be different, but we still believe partnering will be vital for maximizing patient access worldwide. I hope that answers your questions.

Unidentified Analyst, Analyst

Okay. Got it. Yeah. That’s awesome. Really helpful. Thank you. And then the last question we had was just on EDP-938 and so for the pediatrics and adult studies that you recently initiated. Just curious what you’re hoping to see in the data there also when we could expect to see data and kind of how you’re thinking about the market opportunities for each, that would be great? Thank you.

Dr. Jay Luly, CEO

Certainly. The pediatric market is the largest, I can tell you that. The transplant market is also very important. For individuals who are immunocompromised, an RSV infection can be extremely serious, making it a crucial patient population. However, pediatrics is definitely a larger group. We just initiated the transplant study at the end of last year and began the pediatric study in March. I’d also like to point out that the first part of the pediatric study focuses on safety and pharmacokinetics, while the second part will explore other aspects of RSV infection. These studies are following the ongoing RSVP study, which is already partially enrolled, so it’s a bit too early for us to provide specific timing on those two studies. The upcoming season should provide significant insights for both studies, and once we get through this next season, we should have a much clearer understanding of our position.

Unidentified Analyst, Analyst

Okay. Got it. That makes sense. Really helpful. Thanks again for taking our question.

Dr. Jay Luly, CEO

You’re welcome.

Operator, Operator

And at this time, there are no further questions. I would now like to turn the call back to Jennifer Viera for closing remarks.

Jennifer Viera, Investor Relations

Thank you, everyone, for joining us today. If you have any additional questions, please feel free to contact us by email or call us in the office. Thanks and have a good night.

Operator, Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.