Earnings Call Transcript - ENTA Q2 2022

Operator, Operator

Good afternoon. And welcome to Enanta Pharmaceuticals' Fiscal Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a 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 second quarter 2022 financial results was issued this afternoon and is available on our website. On the call today are 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, President and CEO. Jay?

Jay Luly, President and CEO

Thank you, Jennifer, and good afternoon, everyone. Last quarter was an important one for Enanta during which we made progress in our pipeline and advanced our mission of developing therapeutics for life-threatening viral infections. This progress comes at an important time as we are soon approaching meaningful inflection points in our pipeline. Today, I'll start by detailing our most advanced programs in respiratory virology where we continue to build an industry-leading treatment portfolio. Respiratory syncytial virus, or RSV, can result in a severe respiratory infection and is associated with significant morbidity and mortality. The virus can cause serious disease in children, the elderly, and the immunocompromised, and there are no targeted treatments or vaccines available. Our robust RSV program includes EDP-938, the most advanced N-protein inhibitor in clinical development today, as well as our newest clinical candidate, EDP-323, a potent L-protein inhibitor. We're excited by the potential of EDP-938, which currently is in three Phase 2 studies in different patient populations. EDP-938 is an oral potent molecule that has shown robust clinical data in a Phase 2 challenge study where it was safe and well tolerated and resulted in a significant decline in viral load and reduced symptoms of infection. Our leadership in RSV is further highlighted by the recent publication of the results of the challenge study in the New England Journal of Medicine. Our most advanced study of EDP-938 is RSVP, a Phase 2b trial in otherwise healthy adults with community-acquired RSV infection. The study was designed to confirm in a community-acquired setting the positive results of our Phase IIa challenge study and to further characterize efficacy by measuring symptom alleviation and viral load decline. Enrollment in RSVP is now complete. We are on track to report top-line data from this study later this quarter. Our two other ongoing studies are RSVPs, a Phase 2 study in pediatric RSV patients, and RSVTx, a Phase 2b study in adult hematopoietic cell transplant recipients with RSV. Both are expected to recruit into 2023. Moving forward, our broad clinical development pipeline for EDP-938 will focus on evaluating its potential in populations with the greatest unmet need, including children, the elderly, adults with other high-risk conditions, and the immunocompromised. To that end, we are also planning to initiate another Phase 2b study in high-risk adults, including the elderly and those who have asthma, COPD, or congestive heart failure. We expect to initiate this study in the fourth quarter of this year. We're excited to add this study to our clinical development program as we believe EDP-938 has potential to deliver a potent oral antiviral treatment for all high-risk populations. Indeed, we believe these high-risk patients would benefit the most from antiviral treatment with EDP-938. They represent populations in which an even greater benefit is likely to be observed since they have suboptimal RSV immunity and manifest much greater RSV disease severity and mortality, allowing demonstration of the full potential of EDP-938. Adding to our robust RSV portfolio, in February, we introduced EDP-323, a novel oral antiviral therapeutic targeting the RSV L-protein RNA polymerase. Preclinical data have shown that EDP-323 has subnanomolar in vitro potency against major subtypes of RSV, RSV-A and RSV-B, and is not expected to have cross-resistance to other classes of inhibitors. Additionally, in preclinical studies, EDP-323 has shown strong oral absorption and good plasma exposure across different species. We believe EDP-323 could serve as a standalone treatment or may be used in combination with other agents such as EDP-938 to potentially broaden the treatment window or addressable RSV patient populations, and we plan to initiate a Phase 1 study of EDP-323 in the second half of this year. Turning to SARS-CoV-2, we are making strong progress with EDP-235, our oral inhibitor of the 3CL protease, also referred to as the main protease or Mpro. EDP-235 is specifically designed to be a once-daily oral treatment for COVID-19 without the requirement for ritonavir boosting. Novel variants of SARS-CoV-2 are continuing to emerge, causing new waves of COVID-19 cases globally. This highlights the need for conveniently dosed oral therapeutics, especially given the suboptimal vaccination rates, decreased protection against new variants, and waning immunity observed to date with the current boosters. We believe EDP-235 has the potential to be a best-in-class treatment for COVID-19 based on the preclinical data demonstrated to date, which positions it amongst the most potent direct-acting antivirals currently in development for SARS-CoV-2 infection. In March, the FDA granted fast track designation for EDP-235, further highlighting the potential for EDP-235 and emphasizing the urgent unmet need that exists for COVID-19 treatments. Last month, we presented data on EDP-235 in vitro pharmacology and molecular mechanism of action at the Annual Meeting of the American Society for Biochemistry and Molecular Biology. These preclinical data demonstrated that EDP-235 is a potent inhibitor of SARS-CoV-2 3CLpro with nanomolar antiviral activity against SARS-CoV-2 variants of concern, including the Delta and Omicron variants. EDP-235 also showed potent antiviral activity against most other pathogenic human coronaviruses, potentially making it a pan-coronavirus therapy. We are on schedule to report preliminary data from our Phase 1 study of EDP-235 later this quarter. This first-in-human single and multiple ascending dose-ranging study is evaluating the safety, tolerability, and pharmacokinetics of EDP-235 in healthy volunteers after once-daily dosing without ritonavir. If supported by Phase 1 results, we plan to advance EDP-235 to the next stage of clinical development in the second half of this year. We also continue to pursue our respiratory discovery program in human metapneumovirus, or hMPV, a virus that is similar to RSV and impacts vulnerable populations, including the elderly, adults with underlying pulmonary disease, and those who are immunocompromised. We are nearing completion of lead optimization of potent nanomolar hMPV inhibitors and plan to select a clinical candidate in the second half of this year. Moving to hepatitis B, we remain committed to developing a combination regimen as a functional cure for chronic HBV patients. EDP-514, our core HBV core inhibitor with Fast Track designation, has demonstrated safe and potent antiviral activity in two Phase 1 studies in different chronic HBV patient populations. Those who have a high viral load, whom we refer to as viremic patients, and those who are on a treatment with a nucleoside reverse transcriptase inhibitor, whom we refer to as NUC-suppressed patients. These data suggest EDP-514 has the potential to be a best-in-class core inhibitor for HBV. We remain focused on evaluating internal and external opportunities for additional components with alternative mechanisms to develop in combination with EDP-514 as we believe that a core inhibitor such as EDP-514 will ultimately be an important component of a successful combination regimen. Before moving to the financials, I'd like to wrap up by highlighting our near-term milestones. We plan to report data from RSVP this quarter and look forward to initiating a new Phase 2 RSV study in high-risk adults by year-end. We expect to report preliminary Phase 1 data for EDP-235, our oral antiviral specifically designed for the treatment of COVID-19 later this quarter. If indicated by Phase 1 results, we plan to advance EDP-235 to the next stage of clinical development in the second half of this year. We also look forward to initiating a Phase 1 study for EDP-323, our RSV L-inhibitor, as well as nominating a clinical candidate for human metapneumovirus in the second half of this year. With that, I'll turn the call over to Paul to discuss our financials. Paul?

Paul Mellett, CFO

Thank you, Jay. I'd like to remind everyone that Enanta reports on a September 30 fiscal year schedule. Today, we are reporting results for our second fiscal quarter ended March 31, 2022. For the quarter, total revenue was $18.7 million and consisted entirely of royalty revenue earned on AbbVie's global HCV product sales of $380 million. This compares to total revenue of $20.1 million for the same period in 2021. This decrease is due to treated patient volumes continuing to remain suppressed compared to pre-COVID levels. AbbVie has guided to $1.7 billion for global HCV sales in calendar 2022. As a reminder, our royalties are calculated on a calendar year basis. Therefore, royalties for our fiscal quarter ending March 31 will be calculated at 10%, our lowest royalty rate tiered in our fiscal year. You can review our royalty tier schedule in our 2021 Form 10-K. Moving on to our expenses. For the three months ended March 31, 2022, research and development expenses totaled $42.1 million compared to $41.5 million for the same period in 2021. The increase was driven by the timing of manufacturing and clinical trial costs associated with the company's virology and liver disease programs. General and administrative expense for the quarter was $10.5 million compared to $8.3 million for the same period in 2021. This increase was primarily due to increased headcount and stock-related compensation expense. Enanta recorded no income tax expense for the three months ended March 31, 2022, compared to an income tax benefit of $7.1 million for the same period in 2021. Enanta recorded an income tax benefit in 2021 due to the provision of the CARES Act of 2020, which enabled the company to carry back its tax loss in the 2021 period to offset taxable income in prior years. This provision does not apply to periods ending after September 30, 2021. Net loss for the three months ended March 31, 2022, was $33.6 million or a loss of $1.63 per diluted common share compared to a net loss of $22 million or a loss of $1.09 per diluted common share for the corresponding period in 2021. Enanta ended the quarter with $322.5 million in cash and marketable securities. Enanta expects that its current cash, cash equivalents and marketable securities as well as its continuing royalty revenue will be sufficient to meet the anticipated cash requirements of its 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-Q when filed. I'd now like to turn the call back to the operator and open up the lines for questions. Operator?

Luke Herrmann, Analyst

Hi. This is Luke Herrmann on for Brian. Thank you for taking the questions. Just a few on COVID, could you discuss your current stance regarding the potential for an invasive mutation of the main protease to reduce the antiviral impact of the existing PIs or EDP-235? And then is there anything specific about the healthy volunteer data you think could be particularly informative about a potential advantage over the competition at this point? Thanks.

Jay Luly, President and CEO

Hi, thanks. This is Jay speaking. So with regards to resistance, we wouldn't expect to see much in an acute infection like COVID or even in some instances, perhaps RSV. If you have a good, robust molecule going after the drug, and it's only five days of treatment, I think that helps minimize things a lot. I don't think Pfizer has reported anything at this as of now. With regards to the healthy volunteer study, absolutely, so we'll be looking at safety, of course, first and foremost making to demonstrate a good safety profile. We'll also learn a lot from pharmacokinetics. I think, again, the goal here really in this COVID protease space is to try to come with something that's very convenient not only for the patient but also for the healthcare provider treating the patient. And to that end, something that's once-daily dosing and once-daily dosing without ritonavir boosting. And as you know, ritonavir adds a lot of complexity to the patient care. So those are the main points, I think we'll be turning to assess in our healthy volunteer study.

Luke Herrmann, Analyst

Great. And if I could just ask one more. Could you just provide any color on what a Phase 2 design might look like at this point? Or is that to be announced?

Jay Luly, President and CEO

Well, it will be announced in the future. We have completed our current evaluations, and in light of the evolving circumstances, it is typical to examine any viral activity. Therefore, I believe there's a good possibility we will assess that antiviral activity and subsequently engage in discussions with regulators to finalize our approach.

Operator, Operator

And our next question coming from the line of Brian Abrahams with RBC Capital Markets. Your line is open.

Brian Abrahams, Analyst

Hi. Good afternoon. Thanks for taking my questions. Two for me. I guess, first off, on 938. What's the right way that we should be thinking about the potential translatability from the RSVP data to a higher-risk population that you're going to be testing subsequently? I'm just wondering, I guess, if there's differences in immune impairment that might change the impact that 938 might have on viral load or on symptoms between the two populations? And then my second question is on 235. There's been some, I guess, anecdotal reports on rebound from and also some recent prophylactic data that didn't quite hit statistical significance. So I'm curious if those evolving data points, I guess, how those shape the way you might think about a development or regulatory path for 235 with respect to the doses, durations, and populations you might study to best elicit its potential differentiation? Thanks.

Jay Luly, President and CEO

Sure. So addressing 938 on the translation, again, we're — as you know, we're coming on the heels of some very strong data in the human challenge study, which, of course, was in healthy volunteers who were infected with virus, all infected with the same strain and the same level of inoculum and then ultimately, treated. What we saw was a dramatic reduction in symptoms. We saw a dramatic reduction in viral load. And so RSVP steps into the real world. We're dealing with a not terribly dissimilar patient population. They're otherwise healthy volunteers or adults. And the big difference is how did they contract the virus? What was the strain, what was the degree of inoculum, and so on and so forth. But one of the gating items is the emergence of symptoms. So that's sort of a grand unifier in the patient population as when did symptoms emerge. And then getting people dosed and treated within the first 48 hours post-symptom onset. So it's a great translational study going from a challenge study to the real world. It's a slightly different patient population than others in the real world. So obviously, we have a transplant study going on where people are immunocompromised. We have a pediatric study in young children, many of whom haven't been exposed before and are now being exposed. Later this year, we're going to have a study in high-risk adults. Adults elderly have another issue going on that puts them at high risk in an RSV infection setting. So each one of them is a little bit different. But I think you're going to be firmly grounded on the fundamentals the fact that the drug has very strong PK, very good exposures, half-life, it's a very potent drug, as well as the resistance. So all of the things — all the boxes that you could check along the way are in place. I think these are tremendous confidence-building steps. And you mentioned could there be a — I would say the most different patient population is perhaps the immunocompromised, where obviously you don't have the helping hand of the competent immune system, working alongside the antiviral. But to that end, we're mitigating some of that by dosing for 21 days, a longer duration. Ultimately, in severe immune compromise, maybe that will in a rare instance spawn the need for a combo with a molecule, for example, like EDP-323. So it's about as good of an interesting transitional confidence-building step as you could do. But in these high-risk patient populations, I'll remind you that they're at high risk; that sort of goes without saying. But often, the viral loads are higher and often, the duration of infection is longer, and often, the consequences along the way are more substantial. So it will, I think, be an ideal backdrop for a strong antiviral to really showcase in effect in that high-risk patient population. So steady issue goes. You had a question a couple of I think what one was about its fairly rare. I think it is sort of rebound of symptoms in patients. So one can think about different durations. I think a duration of 5 days was what Pfizer used. I think there was some discussion in the Pfizer and some recent discussions from regulators recently around a kind of test of, well, if you see such a thing should we be dosing with another 5-day course. I think that was recommended against at least for now that it should be fine dosing with the first course. And then in the rare instance where something appears, it’s probably not enough of a deal to really focus on any further treatment. So obviously, we'll be progressing our molecule with our eyes wide open in terms of the latest and greatest on that front, but I think that's the state of play on that.

Brian Abrahams, Analyst

Well, I think you kind of covered it, but I was just getting at some of the possible shortcomings that are beginning to emerge and maybe some slightly disappointing data on the prophylactic side, if that sort of changes how you might gear 235 for future development to most differentiate it and maybe take advantage of some of the potential advantageous properties like potency?

Jay Luly, President and CEO

Got it. Yeah, I think in the sort of standard risk and lower-risk patient population, I think people are still trying to sort through what are the best endpoints to be looking at there. I think Pfizer had their run at it with some fairly stringent endpoints. And the question is what will that set of endpoints look like in the patient population as the virus continues to evolve? We'll be paying close attention to that. The same is true with post-exposure prophylaxis. Again, some of the first trial information is starting to come out. But I think figuring out the dynamics of how and when to get that drug on board to make a difference in that patient population; these are all things to sort out. But having one that is more accessible and easier to use without limitations based on ritonavir DDIs with other drugs, it's one thing if you're trying to treat a single patient who's infected. It's another to prophylax and then bring it into a broader swath of family members or their close contacts where each of them might have different circumstances that are confounded by ritonavir. So each one of those things would need to be carefully thought through and sorted through. And meanwhile, the clock is ticking. So you want to try to mitigate that by getting people on drug as soon as possible. And that's why we're really focused on things that are easy to use and hopefully with every time of dosing.

Brian Abrahams, Analyst

Make sense. Thanks so much, Jay.

Jay Luly, President and CEO

You’re welcome.

Operator, Operator

Our next question coming from the line of Yasmeen Rahimi with Piper Sandler. Your line is open.

Swapnil Malekar, Analyst

Hi. This is Swapnil for Yasmeen. I have a couple of questions. We've been speaking with experts and key opinion leaders about protease inhibitors, and they suggested that the need for a return or boost might be crucial to maintain efficacy, especially with the rise of new variants. How confident are you that 235 will not require a boost and can maintain similar efficacy? Additionally, when do you plan to pursue a partnership for this asset? Could you walk us through the decision-making process for that? Thanks for addressing my questions.

Jay Luly, President and CEO

Sure. Ritonavir is a known factor in how the drug has functioned previously, particularly with its original dosing schedule of three times a day and over a gram of dosage. The decision was made that boosting with ritonavir would enhance drug exposure, making a twice-a-day regimen feasible. There’s no inherent complexity to it; it’s an HIV drug that can be boosted to improve the effectiveness of various medications, which can be both advantageous and challenging. If it can be shown that similar or improved pharmacokinetics can be achieved without ritonavir, there would be no justification for including it. This is the approach we are currently investigating, and the product profile looks promising. We are actively working on this. Regarding partnerships, as I've mentioned before, we aim to collaborate with others. This is a worldwide issue that is larger than any single entity. Similar to our approach with hepatitis C, it makes sense to join forces to tackle such a significant global challenge. Our aim is to establish partnerships in a timely manner so that we are well-positioned for the global supply chain and launch when the time comes. We have that aspect under control for clinical trial supplies through to registration. We will assess fees afterwards, and given the often tight timelines, we are looking to move forward with this sooner rather than later. This is definitely part of our strategic plan.

Operator, Operator

Our next question coming from the line of Akash Tewari with Jefferies. Your line is open.

Akash Tewari, Analyst

Hey, guys. So given the RSVP study completed sometime in January, is the C-suite fully blinded to the data at this time? And if that's the case, what gives you the confidence to initiate the high-risk study before getting a chance to look at the RSVP data? Additionally, I noticed on the press release today, you mentioned RSVP was running a low-risk in otherwise healthy population. Is it fair to say the chances of outright success for this trial are low given the background patient dynamics? Thank you.

Jay Luly, President and CEO

Thank you for the question. It highlights an interesting point regarding the progression beyond RSVP, which is somewhat independent as we examine high-risk patient populations. We aim to demonstrate safety in these patients and, ideally, reduction in symptoms and changes in viral load. When considering high-risk patient populations, as I mentioned earlier, there is a greater dynamic window. This raises a relevant question about the differences between low-risk and high-risk groups. For instance, in the COVID scenario, efficacy was shown in high-risk populations before any results were available for lower-risk groups. This is partly related to the dynamic range and the endpoints available for study. Therefore, I see this as an interesting translational study, but I consider them separately.

Operator, Operator

And our next question coming from the line of Roy Buchanan with JMP Securities. Your line is now open.

Roy Buchanan, Analyst

Hi. Thanks for taking the question. Just a couple of quick ones for me. On the RSVP study, Jay, I think you've said that it's designed to show a 40% benefit. Just want to check, that's at 80% or 90% powering?

Jay Luly, President and CEO

It's designed to demonstrate a 55% effect with an 80% power. The smallest effect size that can be detected with this sample size is a 40% reduction. Therefore, if the final results indicate a 40% reduction, the study will be considered positive.

Roy Buchanan, Analyst

Okay. Great. And then for the EDP-235, the Phase 1 later this quarter, you said preliminary data. I just want to check, are we going to get both the single ascending and multiple ascending results this quarter? Or is it just a single ascending?

Jay Luly, President and CEO

So we should have most cohorts from SAD and MAD. We'll see if we have all, but we should have most of them.

Roy Buchanan, Analyst

Okay. Great. I'm going to add one more question. Regarding the RSVP study, is it distinguishing between hospitalized and non-hospitalized patients? I didn't find any specifics on clinical trials.gov about upper and lower respiratory tract infections. Is that being differentiated? Also, can we assume that hospitalization indicates a lower respiratory tract infection? Thanks.

Jay Luly, President and CEO

I'll let Nathalie answer this one. The hospitalization aspect is partly due to this being the first study in feeds, and it's conducted in a very controlled environment. That's why hospitalization is involved. Nathalie, would you like to add anything about stratification?

Nathalie Adda, Senior Management

Yeah, sure. Thank you, Jay. I can just complement the answer. So there's no stratification in our first cohort. There was mainly a requirement from regulatory because of safety purposes. And that was necessarily just for the first cohort. So it doesn't mean necessarily that the kids will come with an.

Roy Buchanan, Analyst

Got it. Thank you.

Nathalie Adda, Senior Management

You’re welcome.

Jay Luly, President and CEO

Welcome.

Operator, Operator

And our next question coming from the line of Eric Joseph with JPMorgan. Your line is open.

Hannah Adeoye, Analyst

Hi. This is Hannah on for Eric. Thanks for taking the question. So first, just can you talk a little bit about some of the gating items to reporting data from the RSVP study? Enrollment has been complete since the end of last year. Just wondering if there's any work left to complete prior to announcing that data? And then also, you're planning to initiate the RSVP study or the RSV study in older adults at high risk by the end of the year. Just wondering from a sense of timeline, would you be anticipating being able to complete the study within one RSV season? And what data sets from which studies would you need to have in hand prior to designing or initiating a Phase 3 pivotal study? Thank you.

Jay Luly, President and CEO

Sure. Regarding the high-risk patient study, it will begin in the second half of this year. Historically, it has been very challenging to recruit for a seasonal study within a single season in North America. The timeline will depend on RSV rates, which will influence how quickly we can enroll participants. It's difficult to provide detailed guidance on our progress into the actual season. However, as we move through the study, we'll have a better understanding. This study is intended to lead to a Phase 3 registration study, which we will further discuss with the agency at our upcoming end-of-Phase 2 meeting. As for your other question about the RSVP study, we completed enrollment late last year. A key factor in this was the collection of virologic data samples from an external clinical virology vendor. We're currently on track to report our top-line data this quarter.

Hannah Adeoye, Analyst

So just a follow-up on just pivotal, thinking about the pivotal design for RSV. So with each Phase 2 study, do you then plan to evaluate a pivotal opportunity in that setting? Or would you wait until all three studies are completed or I guess, all four studies have completed?

Jay Luly, President and CEO

No, we wouldn't wait. We would definitely not wait.

Hannah Adeoye, Analyst

Okay. Make sense. Thank you.

Jay Luly, President and CEO

Yeah. You’re welcome.

Operator, Operator

And our next question coming from the line of Jay Olson with Oppenheimer. Your line is open.

Jay Olson, Analyst

Hi. Thanks for the update. And thanks for taking the questions. For RSV, how are you thinking about the monotherapy versus combination opportunities in various different patient populations? And what's the best strategy to advance both 938 and 323?

Jay Luly, President and CEO

Sure. I'm going to hand it over to Tara Kieffer to discuss that strategy.

Tara Kieffer, Senior Management

Sure. No problem, Jay, this is Tara. So we're certainly looking at 323 that advances into the clinic, and we'll be looking at that in a typical Phase 1 study and then understanding a little bit more about the characteristics and antiviral activity on its own and then thinking about potential combinations down the road with 938. And that would be either to look at different patient populations or potentially expanding the treatment window, the opportunity of when we're able to treat patients after symptom onset. And so we'll be thinking about how best to bring both of those compounds forward alone and which, I think, we might try in combination. But certainly, both compounds have the ability and the profile to move forward as a monotherapy and there may be settings where we want to look in combination.

Jay Olson, Analyst

Great. Thank you. And if I could ask a follow-up on 235, do you expect 235 to benefit from an Emergency Use Authorization? And also, will future studies of 235 require an active control line?

Jay Luly, President and CEO

So there's — in terms of a control arm, I think we don't know. This is going to have to ultimately be discussed with the agency. With regards to EUA, again, that's sort of facts and circumstances on the ground at the time in terms of the agency deciding what gets Emergency Use Authorization. In some instances, as you've know, they've given it and then they've pulled it back depending upon the evolution of the virus and the severity. Right now, there is a thought that EUA could possibly be available in high-risk patient population that needs to be confined ultimately, obviously, through discussions with the agency.

Jay Olson, Analyst

Great, super helpful. Thank you, both very much.

Jay Luly, President and CEO

You’re welcome.

Operator, Operator

Our next question coming from the line of Zegbeh Jallah with ROTH Capital. Your line is open.

Zegbeh Jallah, Analyst

Hello. Thank you for taking questions. I do have a few here. The first one, Jay, just about your 235 program relative to We've been looking at the chemical structure. We've just been wondering what you did to kind of optimize your molecule relative to theirs? And then how do you expect these programs to be differentiated in the clinic?

Jay Luly, President and CEO

Well, as much as I would love to, we won't delve into chemical structures this evening. However, this is what we do at Enanta. Among other things, we excel at drug candidate optimization. It's a process we are very familiar with and have successfully executed multiple times, particularly with protease inhibitors, leading to the market launch of two. This current process is no different. We have a strong drug discovery initiative, and we are now enhancing that with a robust development effort. What was the second part of your question?

Zegbeh Jallah, Analyst

I was just wondering how your first molecule could be in the clinic efficacy safety.

Jay Luly, President and CEO

Absolutely. Many people can create a potent molecule, but I don't want to downplay it. While it's sometimes straightforward to design a strong compound, ensuring it meets all the desired characteristics for a drug candidate is what can reduce the potency benefits. The challenge lies in successfully integrating all these elements into one formulation. We've spent considerable time focusing on the critical characteristics of the molecule, ensuring it has excellent oral absorption, favorable half-lives, appropriate trough drug concentrations, and effective delivery to key target organs like lung tissue. This was an iterative journey that involved experimenting with various molecules and chemical classes. Ultimately, we refined all these essential attributes, including multiple aspects of virology, into a single candidate for development. So far, the preclinical safety results have been promising. We will soon move into clinical trials, where we will be able to assess safety and pharmacokinetics. I believe these parameters will help us stand out starting from Phase 1, and we have already demonstrated differentiation in our preclinical studies.

Zegbeh Jallah, Analyst

And then the follow-up here is just another catalyst program. I think everyone has been trying to figure out how would this translate to the high-risk patient population. And so I just kind of wanted to follow up one of the questions regarding which patient population do you think it will be more difficult or easier to kind of show a treatment benefit? I know you are doing the high risk because of the more addressable patient population, but in terms of translating the data from the less severe patients to the more high-risk patients, which patient population is it more difficult to show a benefit in?

Jay Luly, President and CEO

That's a great question, but it's challenging to provide a straightforward answer because each patient group is unique. For example, children are distinct from adults in terms of their needs, and high-risk elderly patients often present differently due to various comorbidities that can complicate their immune response. Therefore, comparing three vastly different patient populations to determine which one presents the most challenges in showing treatment benefits is difficult from our current perspective. However, it's relatively clear how each of these groups could benefit from antiviral treatment compared to not receiving any. Ultimately, demonstrating significant clinical benefits is essential, and if we can achieve that, we will make progress in an area that has seen little advancement.

Zegbeh Jallah, Analyst

Thanks. And then the last one is a combo question. The first part is just about plans or a more detailed specifics about the metapneumovirus program. I think one of the things we liked about the pipeline initially with the multiple shots on goal. And so I think people are just really interested in kind of understanding where you are with your next development candidate. And then the second part is for Paul. Can you talk a little bit about capital allocation towards these different efforts, including early-stage development efforts? And then whether or not the expenses associated with the NASH program have all fallen off? Thanks, again.

Jay Luly, President and CEO

The program is looking very promising. We've developed many drug candidates at Enanta and are currently finalizing molecules for human trials. To remind everyone, human metapneumovirus is the second leading cause of conditions related to RSV and affects a similar patient population, including young children, the elderly, high-risk individuals, and the immunocompromised. It complements our RSV efforts nicely. We have two candidates progressing in the RSV area, and human metapneumovirus and COVID will also be part of our portfolio. In terms of capital allocation, we manage it based on necessity, which can vary at different stages. As we transition into safety studies, costs can rise significantly on the preclinical side before moving into Phase 1 trials. Our pipeline development and timing are well-organized, although allocation may shift slightly. Regarding NASH, you are correct that the clinical trials have been concluded. However, we have a fascinating discovery program that we'll present at EASL, representing the final phase of our internal NASH work. Our focus is now on two FXRs, where we've established doses for potential future combinations, which would ultimately be pursued through business development by our partners. Thank you.

Operator, Operator

Our next question coming from the line of Roanna Ruiz from SVB Securities. Your line is open.

Roanna Ruiz, Analyst

Great. Afternoon. So a question on your new adult RSV study. Could you talk a bit more about the rationale behind selecting high-risk patients that have asthma, chronic obstructive pulmonary disease, or congestive heart failure over other possible comorbidities that could have conferred high risk? And I know it's still in the works, but are you considering doing anything to help balance enrollment across the subgroups in the future trial? Or are you thinking about other levers that you can pull here?

Jay Luly, President and CEO

Sure. Why don't I ask Nathalie to take that one in terms of the other sub-patient populations stress anymore?

Nathalie Adda, Senior Management

So maybe just simply answering that one of the patient populations that we are defining at higher risk of developing severe progression of RSV disease are well established regulatory guidance, but also from a clinical standpoint. So patients with high risk are defined as being age of more than 65 years old. So that will be part of our next study for adult with high-risk outpatient study. Typically, the one that has COPD that has congestive heart failure and asthma are also candidates to develop progression to severe disease with RSV. So it is important, obviously, to look at that patient population to better understand once you use an antiviral treatment, how you change the course of the progression of the disease. So those are mainly the justification of why we are defining our adult high-risk patient this way. Did I answer your question?

Roanna Ruiz, Analyst

Yeah. But I was curious if you would do anything to balance enrollment across the different subgroups?

Nathalie Adda, Senior Management

There's no particular need to stratify within this group. But there will be certainly — once the study is and well completed, as you know, we always need a different subpopulation if we need to, but there's no need to stratify. And again, I think Jay has mentioned earlier that we will give a little bit more color on the protocol design as we are getting closer to disclose it and after discussion with our regulatory.

Roanna Ruiz, Analyst

Got it. And one more RSV question for me. So do you have any updates on how recruitment is going for the RSVPs and RSVTx studies? Have you noticed any seasonal trends or unusual seasonal trends, et cetera, across your different sites?

Jay Luly, President and CEO

Yeah. So as you might have seen, the RSV kind of spiked up and spiked back down, and so it's actually very low rates presently. So I think like before, we'll be looking for spikes in the Southern Hemisphere followed by ultimately spikes in the Northern Hemisphere in the fall and early months.

Roanna Ruiz, Analyst

Okay. Great. Thanks.

Jay Luly, President and CEO

You’re welcome.

Operator, Operator

Thank you. And I will now turn the call back over to Jennifer Viera.

Jennifer Viera, Investor Relations

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

Operator, Operator

Ladies and gentlemen, that does complete the conference for today. Thank you for your participation. You may now disconnect.