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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

For the quarterly period ended June 30, 2020

OR

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

Commission File Number 001-35839

 

ENANTA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

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 30, 2020, the registrant had 20,072,144 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, 2020

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 Income (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

 

18

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

28

Item 4.

Controls and Procedures

 

28

PART II—OTHER INFORMATION

 

 

Item 1A.

Risk Factors

 

29

Item 6.

Exhibits

 

54

Signatures

 

55

 

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.

2


 

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,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

99,855

 

 

$

51,230

 

Short-term marketable securities

 

 

270,145

 

 

 

284,006

 

Accounts receivable

 

 

18,653

 

 

 

51,313

 

Prepaid expenses and other current assets

 

 

24,728

 

 

 

15,299

 

Total current assets

 

 

413,381

 

 

 

401,848

 

Long-term marketable securities

 

 

65,404

 

 

 

65,013

 

Property and equipment, net

 

 

9,285

 

 

 

10,927

 

Deferred tax assets

 

 

15,289

 

 

 

11,341

 

Operating lease, right-of-use assets

 

 

7,645

 

 

 

 

Restricted cash

 

 

608

 

 

 

608

 

Other long-term assets

 

 

92

 

 

 

92

 

Total assets

 

$

511,704

 

 

$

489,829

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,074

 

 

$

6,689

 

Accrued expenses and other current liabilities

 

 

13,576

 

 

 

15,920

 

Operating lease liabilities

 

 

4,264

 

 

 

 

Total current liabilities

 

 

23,914

 

 

 

22,609

 

Operating lease liabilities, net of current portion

 

 

4,547

 

 

 

 

Series 1 nonconvertible preferred stock

 

 

1,628

 

 

 

1,628

 

Other long-term liabilities

 

 

1,058

 

 

 

3,100

 

Total liabilities

 

 

31,147

 

 

 

27,337

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock; $0.01 par value per share, 100,000 shares authorized; 20,070 and

   19,703 shares issued and outstanding at June 30, 2020 and

   September 30, 2019, respectively

 

 

201

 

 

 

197

 

Additional paid-in capital

 

 

321,985

 

 

 

298,409

 

Accumulated other comprehensive income

 

 

1,458

 

 

 

146

 

Retained earnings

 

 

156,913

 

 

 

163,740

 

Total stockholders' equity

 

 

480,557

 

 

 

462,492

 

Total liabilities and stockholders' equity

 

$

511,704

 

 

$

489,829

 

 

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

3


 

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Royalty revenue

 

$

18,653

 

 

$

44,367

 

 

$

98,842

 

 

$

153,884

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

34,682

 

 

 

34,461

 

 

 

100,070

 

 

 

103,494

 

General and administrative

 

 

6,823

 

 

 

6,151

 

 

 

20,628

 

 

 

20,083

 

Total operating expenses

 

 

41,505

 

 

 

40,612

 

 

 

120,698

 

 

 

123,577

 

Income (loss) from operations

 

 

(22,852

)

 

 

3,755

 

 

 

(21,856

)

 

 

30,307

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

1,445

 

 

 

2,415

 

 

 

5,471

 

 

 

6,545

 

Total other income (expense), net

 

 

1,445

 

 

 

2,415

 

 

 

5,471

 

 

 

6,545

 

Income (loss) before income taxes

 

 

(21,407

)

 

 

6,170

 

 

 

(16,385

)

 

 

36,852

 

Income tax benefit

 

 

7,142

 

 

 

866

 

 

 

9,558

 

 

 

340

 

Net income (loss)

 

$

(14,265

)

 

$

7,036

 

 

$

(6,827

)

 

$

37,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.71

)

 

$

0.36

 

 

$

(0.34

)

 

$

1.90

 

Diluted

 

$

(0.71

)

 

$

0.33

 

 

$

(0.34

)

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

20,020

 

 

 

19,673

 

 

 

19,897

 

 

 

19,549

 

Diluted

 

 

20,020

 

 

 

21,105

 

 

 

19,897

 

 

 

20,999

 

 

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

4


 

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)

 

$

(14,265

)

 

$

7,036

 

 

$

(6,827

)

 

$

37,192

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains on marketable securities, net of

   tax of $271 and $56, $418 and $179

 

 

850

 

 

 

175

 

 

$

1,312

 

 

$

561

 

Total other comprehensive income, net of tax

 

 

850

 

 

 

175

 

 

 

1,312

 

 

 

561

 

Comprehensive income (loss)

 

$

(13,415

)

 

$

7,211

 

 

$

(5,515

)

 

$

37,753

 

 

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

5


 

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Earnings

 

 

Equity

 

Balances at September 30, 2018

 

 

19,395

 

 

$

194

 

 

$

276,526

 

 

$

(398

)

 

$

117,357

 

 

$

393,679

 

Exercise of stock options

 

 

40

 

 

 

 

 

 

1,161

 

 

 

 

 

 

 

 

 

1,161

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,843

 

 

 

 

 

 

 

 

 

5,843

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

141

 

 

 

 

 

 

141

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,011

 

 

 

26,011

 

Balances at December 31, 2018

 

 

19,435

 

 

$

194

 

 

$

283,530

 

 

$

(257

)

 

$

143,368

 

 

$

426,835

 

Exercise of stock options

 

 

157

 

 

 

2

 

 

 

4,464

 

 

 

 

 

 

 

 

 

4,466

 

Vesting of restricted stock units, net of

   withholding

 

 

77

 

 

 

1

 

 

 

(4,189

)

 

 

 

 

 

 

 

 

 

 

(4,188

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

4,707

 

 

 

 

 

 

 

 

 

4,707

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

245

 

 

 

 

 

 

245

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,145

 

 

 

4,145

 

Balances at March 31, 2019

 

 

19,669

 

 

$

197

 

 

$

288,512

 

 

$

(12

)

 

$

147,513

 

 

$

436,210

 

Exercise of stock options

 

 

13

 

 

 

 

 

 

512

 

 

 

 

 

 

 

 

 

512

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

4,164

 

 

 

 

 

 

 

 

 

4,164

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

175

 

 

 

 

 

 

175

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,036

 

 

 

7,036

 

Balances at June 30, 2019

 

 

19,682

 

 

 

197

 

 

 

293,188

 

 

 

163

 

 

 

154,549

 

 

 

448,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

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

6


 

ENANTA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

 

Nine Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(6,827

)

 

$

37,192

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

14,830

 

 

 

14,714

 

Depreciation and amortization expense

 

 

2,735

 

 

 

2,367

 

Deferred income taxes

 

 

(4,366

)

 

 

(1,953

)

Premium paid on marketable securities

 

 

(3,094

)

 

 

(274

)

Accretion of discount on marketable securities

 

 

(95

)

 

 

(3,489

)

Other non-cash items

 

 

(51

)

 

 

37

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

32,660

 

 

 

22,838

 

Prepaid expenses and other current assets

 

 

(9,429

)

 

 

(13,193

)

Operating lease, right-of-use assets

 

 

2,182

 

 

 

 

Accounts payable

 

 

(672

)

 

 

1,639

 

Accrued expenses

 

 

(1,936

)

 

 

3,956

 

Income taxes payable

 

 

 

 

 

(1,388

)

Operating lease liabilities

 

 

(2,446

)

 

 

 

Other long-term liabilities

 

 

(942

)

 

 

427

 

Net cash provided by operating activities

 

 

22,549

 

 

 

62,873

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(267,587

)

 

 

(353,382

)

Proceeds from maturities and sale of marketable securities

 

 

286,028

 

 

 

324,047

 

Purchase of property and equipment

 

 

(1,115

)