A Phase 2, Randomized, Double-Blind, Placebo-Controlled, Parallel Group Study to Evaluate the Effects of EDP-235 in Non-hospitalized Adults with Mild or Moderate COVID-19 • Low frequency of adverse events; most were mild in severity – 1.3%, 6.4%, and 2.6% in the EDP-235 200mg, 400mg and placebo arms Clinical Symptoms – Additional analysis of patients with baseline viral load >5 log showed decline of 0.4 log at day 3 with EDP-235 compared to placebo • Rapid decline in nasal viral RNA observed in all study ar ...

[PART I. UNAUDITED FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20UNAUDITED%20FINANCIAL%20INFORMATION) This part presents the company's unaudited consolidated financial statements and management's analysis of financial performance and condition [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the periods ended March 31, 2023, and September 30, 2022 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets show a decrease in total assets and an increase in total liabilities as of March 31, 2023 Consolidated Balance Sheet Summary | Metric (in thousands) | March 31, 2023 | September 30, 2022 | Change (vs. Sep 30, 2022) | | :-------------------- | :------------- | :----------------- | :------------------------ | | Total Current Assets | $271,137 | $311,713 | -$40,576 | | Total Assets | $326,445 | $375,410 | -$48,965 | | Total Current Liabilities | $32,166 | $29,827 | +$2,339 | | Total Liabilities | $57,070 | $54,076 | +$2,994 | | Total Stockholders' Equity | $269,375 | $321,334 | -$51,959 | | Accumulated Deficit | $(139,823) | $(73,179) | -$(66,644) | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The statements of operations detail increased net losses for both the three and six-month periods ended March 31, 2023 Statement of Operations Summary | Metric (in thousands, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Total Revenue | $17,795 | $18,716 | $41,380 | $46,364 | | Total Operating Expenses | $57,246 | $52,563 | $110,844 | $110,620 | | Loss from Operations | $(39,451) | $(33,847) | $(69,464) | $(64,256) | | Net Loss | $(37,658) | $(33,592) | $(66,644) | $(63,707) | | Net Loss per Share, Basic and Diluted | $(1.79) | $(1.63) | $(3.19) | $(3.11) | [Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) These statements show a slightly reduced comprehensive loss for the six months ended March 31, 2023, despite a higher net loss Statement of Comprehensive Loss Summary | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net Loss | $(37,658) | $(33,592) | $(66,644) | $(63,707) | | Net Unrealized Gains (Losses) on Marketable Securities | $860 | $(2,031) | $1,909 | $(2,655) | | Comprehensive Loss | $(36,798) | $(35,623) | $(64,735) | $(66,362) | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased significantly due to the net loss incurred during the period - Total stockholders' equity decreased from **$321,334 thousand** at September 30, 2022, to **$269,375 thousand** at March 31, 2023, primarily due to a net loss of **$66,644 thousand** for the six months ended March 31, 2023, partially offset by stock-based compensation expense and other comprehensive income[18](index=18&type=chunk) - Additional paid-in capital increased by **$12,774 thousand**, driven by stock-based compensation expense (**$14,502 thousand**) and exercise of stock options (**$2,008 thousand**), partially offset by vesting of restricted stock units, net of withholding (**$3,734 thousand**)[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows reflect increased cash from investing activities and a net increase in total cash and equivalents Cash Flow Activity Summary | Cash Flow Activity (in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net Cash Used in Operating Activities | $(49,424) | $(39,646) | | Net Cash Provided by Investing Activities | $80,334 | $10,446 | | Net Cash Provided by (Used in) Financing Activities | $(1,726) | $12,983 | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $29,184 | $(16,217) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $77,146 | $41,597 | [Notes to Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) These notes provide detailed context for the company's financial statements, covering business nature, accounting policies, and specific financial items [1. Nature of the Business and Basis of Presentation](index=9&type=section&id=1.%20Nature%20of%20the%20Business%20and%20Basis%20of%20Presentation) The company is a biotechnology firm focused on viral infections, funded primarily by its AbbVie collaboration - Enanta Pharmaceuticals, Inc is a biotechnology company focused on discovering and developing small molecule drugs for viral infections, including RSV, SARS-CoV-2, hMPV, and HBV[24](index=24&type=chunk) - The company has reported net losses since fiscal 2020 and expects to continue generating operating losses, with an accumulated deficit of **$139,823 thousand** as of March 31, 2023[31](index=31&type=chunk) - The COVID-19 pandemic has impacted the company's royalty revenues due to reduced patient volumes and sales of AbbVie's HCV regimens[26](index=26&type=chunk)[27](index=27&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements rely on management estimates for revenue, stock-based awards, and R&D expenses - The preparation of financial statements requires management to make estimates and assumptions, particularly regarding revenue arrangements, valuation of stock-based awards, and accrual of R&D expenses[33](index=33&type=chunk) Potential Common Shares | Potential Common Shares (in thousands) | As of March 31, 2023 | As of March 31, 2022 | | :------------------------------------- | :------------------- | :------------------- | | Options to purchase common stock | 4,522 | 4,124 | | Unvested rTSRUs | 81 | 112 | | Unvested PSUs | 81 | 112 | | Unvested restricted stock units | 430 | 217 | [3. Fair Value of Financial Assets and Liabilities](index=11&type=section&id=3.%20Fair%20Value%20of%20Financial%20Assets%20and%20Liabilities) This note details the fair value measurement of the company's financial assets and liabilities - The Series 1 nonconvertible preferred stock is measured at fair value as a Level 3 liability, using a probability-weighted valuation model with unobservable inputs like payout probabilities (**0%-65%**) and a discount rate (**7.25%**)[38](index=38&type=chunk)[39](index=39&type=chunk) Fair Value of Financial Instruments | Financial Assets (in thousands) | March 31, 2023 (Total Fair Value) | September 30, 2022 (Total Fair Value) | | :------------------------------ | :-------------------------------- | :------------------------------------ | | Money market funds | $70,562 | $13,905 | | U.S. Treasury notes | $22,003 | $91,328 | | Corporate bonds | $46,124 | $76,411 | | Commercial paper | $83,819 | $66,784 | | **Total Assets** | **$222,508** | **$248,428** | | Series 1 nonconvertible preferred stock (Liability) | $1,423 | $1,423 | [4. Marketable Securities](index=13&type=section&id=4.%20Marketable%20Securities) The company's marketable securities portfolio consists primarily of corporate bonds, commercial paper, and U.S. Treasury notes - Most marketable securities mature within one year, with some corporate bonds and U.S. Treasury notes having maturities between one and two years, totaling **$15,040 thousand** at March 31, 2023[42](index=42&type=chunk) Marketable Securities by Type | Marketable Securities (in thousands) | Amortized Cost (Mar 31, 2023) | Fair Value (Mar 31, 2023) | Amortized Cost (Sep 30, 2022) | Fair Value (Sep 30, 2022) | | :----------------------------------- | :---------------------------- | :------------------------ | :---------------------------- | :------------------------ | | Corporate bonds | $47,329 | $46,124 | $78,663 | $76,411 | | Commercial paper | $83,819 | $83,819 | $66,784 | $66,784 | | U.S. Treasury notes | $22,229 | $22,003 | $92,416 | $91,328 | | **Total** | **$153,377** | **$151,946** | **$237,863** | **$234,523** | [5. Accrued Expenses](index=13&type=section&id=5.%20Accrued%20Expenses) This note provides a breakdown of the company's accrued expenses as of the reporting dates Accrued Expenses Summary | Accrued Expenses (in thousands) | March 31, 2023 | September 30, 2022 | | :------------------------------ | :------------- | :----------------- | | Accrued pharmaceutical drug manufacturing | $4,521 | $6,932 | | Accrued research and development expenses | $5,380 | $5,532 | | Accrued payroll and related expenses | $3,075 | $6,439 | | Accrued professional fees | $1,639 | $1,273 | | Accrued other | $867 | $760 | | **Total** | **$15,482** | **$20,936** | [6. AbbVie Collaboration](index=13&type=section&id=6.%20AbbVie%20Collaboration) The collaboration with AbbVie for HCV inhibitors is the company's primary source of revenue - The company has a Collaborative Development and License Agreement with AbbVie for HCV NS3 and NS3/4A protease inhibitors, including glecaprevir (MAVYRET®/MAVIRET®)[44](index=44&type=chunk) - Royalties are annually tiered, ranging from **ten percent up to twenty percent**, or a blended basis from **ten percent up to the high teens**, on the portion of AbbVie's net sales allocated to the protease inhibitor in the regimen[45](index=45&type=chunk) [7. Series 1 Nonconvertible Preferred Stock](index=14&type=section&id=7.%20Series%201%20Nonconvertible%20Preferred%20Stock) This note describes the outstanding Series 1 nonconvertible preferred stock, which is carried as a liability - As of March 31, 2023, **1,930 shares** of Series 1 nonconvertible preferred stock were outstanding, carried at fair value as a liability due to liquidation features[46](index=46&type=chunk) [8. Stock-Based Awards](index=14&type=section&id=8.%20Stock-Based%20Awards) This section details the company's stock-based compensation plans, including option activity and related expenses - As of March 31, 2023, the company had **$70,253 thousand** of unrecognized stock-based compensation cost, expected to be recognized over a weighted average period of **2.6 years**[53](index=53&type=chunk) Stock Option Activity | Stock Option Activity (in thousands) | Shares Issuable (Mar 31, 2023) | Weighted Average Exercise Price (Mar 31, 2023) | | :----------------------------------- | :----------------------------- | :--------------------------------------------- | | Outstanding as of Sep 30, 2022 | 3,993 | $53.57 | | Granted | 728 | $45.44 | | Exercised | (117) | $17.14 | | Forfeited | (82) | $65.95 | | Outstanding as of Mar 31, 2023 | 4,522 | $52.98 | Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Research and development | $2,520 | $2,710 | $5,052 | $5,294 | | General and administrative | $4,843 | $3,761 | $9,450 | $7,239 | | **Total** | **$7,363** | **$6,471** | **$14,502** | **$12,533** | [9. Commitments and Contingencies](index=15&type=section&id=9.%20Commitments%20and%20Contingencies) The company is involved in patent infringement litigation and provides standard business indemnifications - The company filed a patent infringement suit against Pfizer, Inc on June 21, 2022, in the U.S. District Court for the District of Massachusetts, seeking damages for infringement of U.S. Patent No 11,358,953 related to Pfizer's COVID-19 antiviral, Paxlovid™[55](index=55&type=chunk) - The company provides indemnifications in the ordinary course of business, including to directors and executive officers, with maximum potential amounts often unlimited[57](index=57&type=chunk) [10. Subsequent Events](index=16&type=section&id=10.%20Subsequent%20Events) A significant royalty sale agreement was executed after the reporting period - In April 2023, the company entered into a royalty sale agreement with an affiliate of OMERS, receiving a **$200,000 thousand** cash purchase price in exchange for **54.5%** of future quarterly royalty payments on MAVYRET/MAVIRET net sales from September 30, 2023, through June 30, 2032, subject to a cap of **1.42 times** the purchase price[59](index=59&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, operational results, and future outlook [Overview](index=17&type=section&id=Overview) The company is a biotechnology firm specializing in viral infections, funded by AbbVie royalties and facing continued net losses - Enanta Pharmaceuticals is a biotechnology company specializing in small molecule drugs for viral infections, primarily funded by royalties from its collaboration with AbbVie for HCV treatment (MAVYRET®/MAVIRET®)[62](index=62&type=chunk) - The company has reported net losses since fiscal 2020, with **$66.6 million** and **$63.7 million** net losses for the six months ended March 31, 2023 and 2022, respectively, and an accumulated deficit of **$139.8 million** as of March 31, 2023[63](index=63&type=chunk) - As of March 31, 2023, the company had **$225.1 million** in cash, cash equivalents, and marketable securities[66](index=66&type=chunk) [Our Wholly-Owned Programs](index=18&type=section&id=Our%20Wholly-Owned%20Programs) The company's R&D pipeline is focused on developing treatments for RSV, COVID-19, hMPV, and HBV - The company's primary wholly-owned R&D programs focus on virology, specifically Respiratory Syncytial Virus (RSV), SARS-CoV-2 (COVID-19), Human Metapneumovirus (hMPV), and Hepatitis B Virus (HBV)[67](index=67&type=chunk) - The RSV program includes two clinical candidates: EDP-938 (N-protein inhibitor) in three ongoing Phase 2 studies and EDP-323 (L-protein inhibitor) in a Phase 1 study[67](index=67&type=chunk)[68](index=68&type=chunk) - The COVID-19 program features EDP-235 (3CL protease inhibitor) which completed a Phase 1 study with positive results and a Phase 2 SPRINT study showing dose-dependent symptom improvement[69](index=69&type=chunk) - The hMPV program includes a new research program for hMPV/RSV dual-inhibitors, with a clinical candidate expected in Q4 2023[70](index=70&type=chunk)[72](index=72&type=chunk) [Our Royalty Revenue Collaboration](index=20&type=section&id=Our%20Royalty%20Revenue%20Collaboration) Royalty revenue from AbbVie's sales of MAVYRET/MAVIRET remains the company's primary income source - Substantially all royalty revenue is derived from AbbVie's net sales of MAVYRET/MAVIRET, an HCV treatment containing glecaprevir, a protease inhibitor discovered by Enanta[73](index=73&type=chunk) - Royalty revenues declined in fiscal 2022 and the first half of fiscal 2023 due to the COVID-19 pandemic's impact on patient volumes, HCV diagnoses, and MAVYRET/MAVIRET sales[74](index=74&type=chunk) [Financial Operations Overview](index=21&type=section&id=Financial%20Operations%20Overview) Operations are funded by AbbVie royalties, with R&D expenses expected to increase as clinical programs advance - The company funds operations primarily through AbbVie collaboration royalties and existing cash/marketable securities[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) [Revenue](index=21&type=section&id=Revenue) Total revenue decreased due to lower royalty payments from AbbVie's HCV product sales - Royalty revenue decreased by **$0.9 million** for the three months and **$6.0 million** for the six months ended March 31, 2023, compared to the same periods in 2022, due to lower reported HCV sales by AbbVie[90](index=90&type=chunk)[97](index=97&type=chunk) - The company recognized **$1.0 million** in license revenue during the six months ended March 31, 2023, from an upfront payment for an antibacterial compound license agreement[98](index=98&type=chunk) Revenue Summary | Revenue (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :--------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Royalty revenue | $17,795 | $18,716 | $40,380 | $46,364 | | License revenue | — | — | $1,000 | — | | **Total revenue** | **$17,795** | **$18,716** | **$41,380** | **$46,364** | [Operating Expenses](index=22&type=section&id=Operating%20Expenses) Operating expenses fluctuated due to shifts in R&D program spending and increased G&A costs [Research and Development Expenses](index=22&type=section&id=Research%20and%20Development%20Expenses) R&D expenses shifted, with increased spending on virology programs and decreased spending on the non-viral liver disease program - R&D expenses increased by **$1.4 million** for the three months ended March 31, 2023, primarily due to a **$5.5 million** increase in the virology program offset by a **$5.0 million** decrease in the non-viral liver disease program[92](index=92&type=chunk) - For the six months, R&D expenses decreased by **$6.3 million**, driven by a **$9.7 million** decrease in the non-viral liver disease program, partially offset by a **$1.7 million** increase in the virology program[99](index=99&type=chunk) R&D Program Expenses | R&D Programs (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Virology | $41,384 | $35,912 | $80,142 | $78,434 | | Liver disease (non-viral) | $515 | $5,547 | $1,366 | $11,101 | | Other | $1,569 | $628 | $2,862 | $1,101 | | **Total R&D Expenses** | **$43,468** | **$42,087** | **$84,370** | **$90,636** | [General and Administrative Expenses](index=22&type=section&id=General%20and%20Administrative%20Expenses) G&A expenses rose due to higher stock-based compensation and legal fees from patent litigation - General and administrative expenses increased by **$3.3 million** for the three months and **$6.5 million** for the six months ended March 31, 2023, compared to the same periods in 2022, due to higher stock-based compensation expense and legal fees related to the Pfizer patent infringement suit[94](index=94&type=chunk)[100](index=100&type=chunk) [Other Income (Expense)](index=22&type=section&id=Other%20Income%20(Expense)) Net interest and investment income increased significantly due to favorable changes in interest rates - Interest and investment income, net, increased by **$1.6 million** for the three months and **$2.3 million** for the six months ended March 31, 2023, compared to the same periods in 2022, primarily due to changes in interest rates[95](index=95&type=chunk)[101](index=101&type=chunk) [Income Tax Expense](index=23&type=section&id=Income%20Tax%20Expense) The company recorded a minimal income tax expense for the current periods - Income tax expense was **$(44) thousand** for the three months and **$(10) thousand** for the six months ended March 31, 2023, compared to zero in the prior year periods[12](index=12&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section provides a comparative analysis of operational results for the three and six-month periods [Comparison of the Three Months Ended March 31, 2023 and 2022](index=23&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031,%202023%20and%202022) The net loss widened in the three-month period due to lower revenue and higher operating expenses Three-Month Operational Comparison | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Royalty revenue | $17,795 | $18,716 | -$921 | | R&D expenses | $43,468 | $42,087 | +$1,381 | | G&A expenses | $13,778 | $10,476 | +$3,302 | | Interest & investment income, net | $1,837 | $255 | +$1,582 | | Net loss | $(37,658) | $(33,592) | -$4,066 | [Comparison of the Six Months Ended March 31, 2023 and 2022](index=24&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20March%2031,%202023%20and%202022) The six-month net loss also increased, driven by lower royalty revenue and higher G&A expenses, despite a decrease in R&D costs Six-Month Operational Comparison | Metric (in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | Change | | :-------------------- | :------------------------------ | :------------------------------ | :----- | | Royalty revenue | $40,380 | $46,364 | -$5,984 | | License revenue | $1,000 | — | +$1,000 | | R&D expenses | $84,370 | $90,636 | -$6,266 | | G&A expenses | $26,474 | $19,984 | +$6,490 | | Interest & investment income, net | $2,830 | $549 | +$2,281 | | Net loss | $(66,644) | $(63,707) | -$2,937 | [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position is supported by existing cash, marketable securities, and a recent royalty sale - Net cash used in operating activities increased by **$9.8 million** to **$49.4 million** for the six months ended March 31, 2023, due to timing of R&D payments and a federal tax refund received in 2022[104](index=104&type=chunk) - Net cash provided by investing activities increased by **$69.9 million** to **$80.3 million**, driven by timing of marketable securities transactions, partially offset by increased capital expenditures for facility expansion[106](index=106&type=chunk) - Net cash used in financing activities was **$1.7 million**, a **$14.7 million** decrease from the prior year, due to lower proceeds from stock option exercises and higher payments for share-based awards[107](index=107&type=chunk) - The company expects its **$225.1 million** in cash, cash equivalents, and marketable securities as of March 31, 2023, plus the **$200.0 million** from the April 2023 royalty sale, to fund operations into calendar 2026[108](index=108&type=chunk) - Less than **5%** of the company's cash and marketable securities were held at Silicon Valley Bank (SVB) when it was closed, and transfers to a larger financial institution have been initiated[109](index=109&type=chunk) Cash Flow Activity Summary | Cash Flow Activity (in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Operating activities | $(49,424) | $(39,646) | | Investing activities | $80,334 | $10,446 | | Financing activities | $(1,726) | $12,983 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $29,184 | $(16,217) | [Off-Balance Sheet Arrangements](index=26&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet financing activities or interests in variable interest entities - The company does not engage in any off-balance sheet financing activities or have interests in variable interest entities[111](index=111&type=chunk) [Contractual Obligations and Commitments](index=26&type=section&id=Contractual%20Obligations%20and%20Commitments) A significant royalty sale agreement represents a key future financial commitment - In April 2023, the company sold **54.5%** of its future MAVYRET/MAVIRET royalty payments for **$200.0 million** cash, with payments capped at **1.42 times** the purchase price through June 30, 2032[112](index=112&type=chunk)[113](index=113&type=chunk) [Critical Accounting Policies](index=26&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies are referenced from its most recent Annual Report on Form 10-K - The company's critical accounting policies are detailed in its Annual Report on Form 10-K for the fiscal year ended September 30, 2022[114](index=114&type=chunk) [Recently Issued Accounting Pronouncements](index=26&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Information on new accounting pronouncements is available in the notes to the financial statements - A description of recently issued accounting pronouncements is provided in Note 2 to the consolidated financial statements[115](index=115&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There were no material changes to the company's market risk disclosures during the reporting period - No material changes to market risk disclosures occurred during the three and six months ended March 31, 2023[117](index=117&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls [Evaluation of Disclosure Controls and Procedures](index=27&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective as of the end of the reporting period - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of March 31, 2023[118](index=118&type=chunk) [Changes in Internal Control Over Financial Reporting](index=27&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes affecting internal control over financial reporting occurred during the quarter - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2023, that materially affected or are reasonably likely to materially affect internal control over financial reporting[119](index=119&type=chunk) [PART II. OTHER INFORMATION](index=27&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers risk factors, other corporate information, and a list of filed exhibits [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's previously disclosed risk factors occurred during the quarter - No material changes to the risk factors discussed in the 2022 Form 10-K occurred during the quarter ended March 31, 2023[120](index=120&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) This section reports on an amendment to the company's equity incentive plan [Item 5.02 Departure of Directors of Certain Officers; Election of Directors; Appointment of Certain Directors; Compensatory Arrangements of Certain Officers](index=27&type=section&id=Item%205.02%20Departure%20of%20Directors%20of%20Certain%20Officers%3B%20Election%20of%20Directors%3B%20Appointment%20of%20Certain%20Directors%3B%20Compensatory%20Arrangements%20of%20Certain%20Officers) The company's 2019 Equity Incentive Plan was amended to increase the number of shares available for issuance - The 2019 Equity Incentive Plan was amended on March 2, 2023, to increase the number of shares of common stock reserved for issuance by **975,000 shares**[121](index=121&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key agreements and certifications - Key exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, Royalty Purchase Agreement with OMERS, the amended 2019 Equity Incentive Plan, and certifications from the CEO and CFO[123](index=123&type=chunk) [Signatures](index=29&type=section&id=Signatures) The report is duly signed on behalf of the company by its Chief Financial Officer - The report was signed by Paul J Mellett, Chief Financial Officer, on May 9, 2023[127](index=127&type=chunk)

Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q1 2023 Earnings Conference Call February 7, 2023 4:30 PM ET Company Participants Jennifer Viera – Investor Relations Jay Luly – President and Chief Executive Officer Paul Mellett – Chief Financial Officer Tara Kieffer – Senior Vice President-New Product Strategy Development Conference Call Participants Joe Kim – RBC Luke Herrmann – Baird Roanna Ruiz – SVB Securities Matthew Hershenhorn – Oppenheimer Ed Arce – H.C. Wainwright & Co Eric Joseph – JPMorgan Roy Buchana ...

[PART I. UNAUDITED FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20UNAUDITED%20FINANCIAL%20INFORMATION) This section presents the company's unaudited consolidated financial statements, management's discussion of financial condition, market risk disclosures, and controls and procedures [Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The company's financial statements for Q4 2022 show decreased assets, a net loss of $29.0 million, and $35.6 million cash used in operations [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $347.5 million by December 31, 2022, driven by reduced cash, while liabilities and equity also declined Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $42,223 | $43,994 | | Total current assets | $283,704 | $311,713 | | **Total assets** | **$347,534** | **$375,410** | | Total current liabilities | $23,001 | $29,827 | | **Total liabilities** | **$46,697** | **$54,076** | | **Total stockholders' equity** | **$300,837** | **$321,334** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Total revenue for Q4 2022 was $23.6 million, with a net loss of $29.0 million, an improvement from the prior year due to lower R&D expenses Quarterly Operating Results (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Royalty revenue | $22,585 | $27,648 | | Total revenue | $23,585 | $27,648 | | Research and development | $40,902 | $48,549 | | General and administrative | $12,696 | $9,508 | | Loss from operations | ($30,013) | ($30,409) | | **Net loss** | **($28,986)** | **($30,115)** | | **Net loss per share, basic and diluted** | **($1.39)** | **($1.48)** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly increased to $35.6 million in Q4 2022, resulting in a net decrease in cash of $1.8 million Summary of Cash Flows (in thousands) | Activity | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($35,641) | ($13,271) | | Net cash provided by investing activities | $33,569 | $45,501 | | Net cash provided by financing activities | $301 | $9,632 | | **Net (decrease) increase in cash** | **($1,771)** | **$41,862** | [Notes to Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) Notes detail the company's drug development business, funding from AbbVie royalties, ongoing net losses, and a patent infringement lawsuit against Pfizer - The company's primary business is the discovery and development of small molecule drugs for viral infections, with R&D programs focused on RSV, SARS-CoV-2, HBV, and hMPV. Operations are funded by royalties from its collaboration with AbbVie on the HCV drug MAVYRET/MAVIRET[24](index=24&type=chunk) - The company has a collaboration agreement with AbbVie for HCV protease inhibitors, receiving tiered royalties on net sales of MAVYRET/MAVIRET. Total proceeds from the collaboration have reached approximately **$1.228 billion** through December 31, 2022[45](index=45&type=chunk) - In June 2022, Enanta filed a patent infringement lawsuit against Pfizer, Inc., seeking damages for the manufacture, use, and sale of Paxlovid™, alleging it infringes on Enanta's U.S. Patent No. 11,358,953[55](index=55&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses decreased royalty revenue, reduced R&D expenses, and the company's cash position, expected to fund operations into Q4 fiscal 2024, alongside pipeline progress [Overview](index=16&type=section&id=Overview) Enanta, a biotechnology company, focuses on antiviral drug development, funded by HCV royalties, and expects continued net losses while holding **$241.4 million** in cash - The company's primary R&D focus is on treatments for respiratory syncytial virus (RSV), SARS-CoV-2 (COVID-19), hepatitis B virus (HBV), and human metapneumovirus (hMPV)[62](index=62&type=chunk)[65](index=65&type=chunk) - The company reported a net loss of **$29.0 million** for the quarter ended December 31, 2022, and expects to continue incurring net losses for the foreseeable future[63](index=63&type=chunk) - As of December 31, 2022, cash, cash equivalents, and marketable securities totaled **$241.4 million**, which is expected to fund operations into approximately the fourth quarter of fiscal 2024[65](index=65&type=chunk) [Our Wholly-Owned Programs](index=17&type=section&id=Our%20Wholly-Owned%20Programs) Enanta is advancing antiviral candidates, including EDP-938 in Phase 2 for RSV, EDP-235 in Phase 2 for COVID-19, and EDP-514 for HBV, with new programs for hMPV/RSV - **RSV Program:** EDP-938 is in three ongoing Phase 2 studies (RSVPEDs, RSVTx, RSVHR) in high-risk populations. A Phase 1 study of a second compound, EDP-323, was initiated with data expected in Q2 2023[67](index=67&type=chunk) - **COVID-19 Program:** Lead candidate EDP-235 is in a Phase 2 study (SPRINT) with data expected in Q2 2023. A Phase 3 study could initiate in the second half of 2023. A new program targeting the PLpro enzyme was also announced[68](index=68&type=chunk)[69](index=69&type=chunk) - **HBV and hMPV Programs:** The lead HBV candidate, EDP-514, is a core inhibitor with potential to be best-in-class. A new research program is targeting a dual inhibitor for hMPV and RSV, with a clinical candidate selection expected in Q4 2023[69](index=69&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q4 FY2023 total revenue was $23.6 million, down from $27.6 million, primarily due to lower MAVYRET/MAVIRET sales, while R&D expenses decreased and G&A expenses increased Comparison of Operating Results (in thousands) | Item | Q1 FY2023 (ended Dec 31, 2022) | Q1 FY2022 (ended Dec 31, 2021) | | :--- | :--- | :--- | | Royalty revenue | $22,585 | $27,648 | | License revenue | $1,000 | $— | | Research and development | $40,902 | $48,549 | | General and administrative | $12,696 | $9,508 | | **Net loss** | **($28,986)** | **($30,115)** | - Royalty revenue decreased by **$5.0 million** due to lower HCV sales by AbbVie, as patient volumes remain below pre-COVID-19 levels[90](index=90&type=chunk) - R&D expenses decreased by **$7.6 million**, primarily due to a **$4.7 million** reduction in the non-viral liver disease (NASH) program and a **$3.8 million** decrease in virology program costs related to clinical trial timing[93](index=93&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company held **$241.4 million** in cash and equivalents as of December 31, 2022, with **$35.6 million** cash used in operations, sufficient to fund operations into Q4 fiscal 2024 Summary of Cash Flows (in thousands) | Activity | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Cash used in operating activities | ($35,641) | ($13,271) | | Cash provided by investing activities | $33,569 | $45,501 | | Cash provided by financing activities | $301 | $9,632 | - Cash used in operating activities increased by **$22.4 million** year-over-year, driven by the timing of R&D payments and a federal tax refund of **$8.5 million** received in the prior-year period[98](index=98&type=chunk) - The company believes its existing cash, equivalents, marketable securities, and future royalties will be sufficient to meet cash requirements into approximately Q4 of fiscal 2024[102](index=102&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk is primarily from interest rate sensitivity on its cash portfolio and foreign exchange risk, both currently considered immaterial - The company's portfolio of cash, cash equivalents, and marketable securities (**$241.4 million** at Dec 31, 2022) is sensitive to interest rate changes, but a 1% change is not expected to have a material impact[108](index=108&type=chunk) - Foreign currency exchange risk, primarily from the British Pound and Euro, was immaterial during the quarter but may increase with the expansion of clinical trials and manufacturing outside the U.S[109](index=109&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2022, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[110](index=110&type=chunk) - No changes occurred in the company's internal control over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, these controls[111](index=111&type=chunk) [PART II. OTHER INFORMATION](index=25&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section addresses risk factors and lists exhibits filed with the Form 10-Q [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2022, were reported - There have been no material changes to the risk factors discussed in the 2022 Form 10-K during the quarter ended December 31, 2022[112](index=112&type=chunk) [Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in Inline XBRL format - The exhibits filed with the report include certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1) and the financial data in Inline XBRL format (Exhibits 101, 104)[114](index=114&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-35839 ENANTA PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) DELAWARE 2834 04-3205099 (State or other jurisdiction of incorporation or organization) ...

Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Q4 2022 Earnings Conference Call November 21, 2022 4:30 PM ET Company Participants Jennifer Viera - Senior Director, Investor Relations & Corporate Communications Jay Luly - President & Chief Executive Officer Paul Mellett - Chief Financial Officer Tara Kieffer - Senior Vice President, New Product Strategy & Development Conference Call Participants Brian Abrahams - RBC Capital Markets Yasmeen Rahimi - Piper Sandler Brian Skorney - Baird Liisa Bayko - Evercore ISI E ...

Financial Data and Key Metrics Changes - For Q3 2022, total revenue was $19.5 million, a decrease from $21.6 million in the same period of 2021, primarily due to lower royalty revenue from AbbVie's MAVYRET sales [32] - Research and development expenses decreased to $39.1 million from $47 million year-over-year, attributed to the timing of clinical trials [33] - General and administrative expenses increased to $12.9 million from $8.4 million, driven by higher headcount and compensation expenses [33] - Net loss for the quarter was $31.7 million, or a loss of $1.53 per diluted share, compared to a net loss of $24 million, or a loss of $1.19 per diluted share in Q3 2021 [34] - The company ended the quarter with approximately $292.7 million in cash and marketable securities, expected to be sufficient for the next two years [34] Business Line Data and Key Metrics Changes - The company is advancing its COVID-19 treatment candidate EDP-235, which has shown promising Phase I trial results, indicating potential for a best-in-class antiviral treatment [6][12] - EDP-938, part of the RSV program, did not meet primary endpoints in a Phase IIb trial but showed a statistically significant antiviral effect in a low-risk population [17] - EDP-514, a core inhibitor for hepatitis B, is being developed as part of a combination regimen for chronic HBV patients, with promising Phase Ib study results [24] Market Data and Key Metrics Changes - The COVID-19 landscape remains dynamic, with ongoing infections due to new variants, highlighting the need for effective antiviral treatments [14] - The RSV program targets high-risk populations, including children and the elderly, where there is a significant unmet medical need [16] Company Strategy and Development Direction - The company aims to leverage its expertise in virology and liver disease to develop groundbreaking medicines, focusing on antiviral treatments for COVID-19 and RSV [5] - EDP-235 is designed to be a once-daily oral treatment without the need for ritonavir boosting, facilitating rapid treatment of COVID infections [15] - The company is also pursuing a broad clinical development plan for EDP-938, focusing on high-risk populations for RSV [19] Management's Comments on Operating Environment and Future Outlook - Management highlighted the urgent need for convenient antiviral treatments for COVID-19, especially with the emergence of new variants [14] - The company plans to finalize the Phase II protocol for EDP-235 and initiate the study in Q4 2022, with expectations to advance to Phase III next year [13][39] - Management expressed confidence in the potential of EDP-514 as a best-in-class core inhibitor for HBV, emphasizing the importance of combination therapy [25] Other Important Information - The company is involved in ongoing patent litigation regarding Pfizer's infringement of its patent related to COVID-19 antiviral treatments [26] - A new Chief Medical Officer, Dr. Scott Rottinghaus, has joined the company, bringing extensive experience in infectious diseases [28] Q&A Session Summary Question: Potential for accelerated approval of COVID antivirals - Management indicated that antiviral development differs from vaccines and antibodies, and an accelerated path for antivirals is not expected [37][38] Question: Design considerations for Phase II trials - Management is currently designing the Phase II trial, considering the changing vaccination status and variant landscape [39] Question: Lung-to-plasma ratio and EC90 data - The 4:1 lung-to-plasma ratio refers to total drug measurements, and the EC90 data was not adjusted for plasma [41][43] Question: Concerns about paxlovid rebound - Management hypothesized that paxlovid's short half-life may contribute to rebound issues, while EDP-235 has a longer half-life and better tissue targeting [45][47] Question: Potential for combination therapies - Currently, there is no need for combination therapies with EDP-235, but the company is exploring other mechanisms for future variants [64][66] Question: Cost and patient response in trials - The cost of trials for EDP-235 will depend on trial design, and low variability was observed in the Phase I study, with expectations for high patient response rates [68][71]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This chapter provides the company's unaudited consolidated financial statements as of March 31, 2022, and September 30, 2021, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, with detailed notes, prepared in accordance with GAAP - Consolidated financial statements are unaudited, prepared according to SEC interim financial statement rules, and should be read with the company's 10-K annual report as of September 30, 2021[28](index=28&type=chunk) - Management believes all adjustments have been made to fairly present the financial position as of March 31, 2022, and the results of operations and cash flows for the three and six months ended March 31, 2022, and 2021[28](index=28&type=chunk) [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets were $406,818 thousand, a decrease from $438,791 thousand as of September 30, 2021, with changes in cash and cash equivalents, marketable securities, total liabilities, and stockholders' equity Consolidated Balance Sheets Key Data (Thousands of Dollars) | Indicator | March 31, 2022 | September 30, 2021 | | :--------------------------------- | :------------- | :------------- | | **Assets** | | | | Cash and cash equivalents | 40,989 | 57,206 | | Short-term marketable securities | 239,338 | 186,796 | | Total current assets | 341,869 | 319,021 | | Long-term marketable securities | 42,218 | 108,416 | | Total assets | 406,818 | 438,791 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | 30,738 | 36,172 | | Operating lease liabilities, net of current portion | 15,115 | 1,126 | | Total liabilities | 48,235 | 39,362 | | Total stockholders' equity | 358,583 | 399,429 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2022, royalty revenue was $18,716 thousand, a decrease from the prior year, while R&D and G&A expenses increased, leading to an expanded net loss of $33,592 thousand, with a significant increase in net loss for the six-month period as well Consolidated Statements of Operations Key Data (Thousands of Dollars, except per share amounts) | Indicator | For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the six months ended March 31, 2022 | For the six months ended March 31, 2021 | | :------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Royalty revenue | 18,716 | 20,132 | 46,364 | 51,875 | | Research and development expenses | 42,087 | 41,506 | 90,636 | 78,171 | | General and administrative expenses | 10,476 | 8,326 | 19,984 | 15,703 | | Operating loss | (33,847) | (29,700) | (64,256) | (41,999) | | Net loss | (33,592) | (22,045) | (63,707) | (30,373) | | Basic net loss per share | (1.63) | (1.09) | (3.11) | (1.51) | | Diluted net loss per share | (1.63) | (1.09) | (3.11) | (1.51) | [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) For the three months ended March 31, 2022, comprehensive loss expanded to $35,623 thousand from $22,395 thousand in the prior year, primarily due to increased net loss and unrealized net loss on marketable securities Consolidated Statements of Comprehensive Loss Key Data (Thousands of Dollars) | Indicator | For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the six months ended March 31, 2022 | For the six months ended March 31, 2021 | | :--------------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Net loss | (33,592) | (22,045) | (63,707) | (30,373) | | Unrealized net loss on marketable securities | (2,031) | (350) | (2,655) | (789) | | Comprehensive loss | (35,623) | (22,395) | (66,362) | (31,162) | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) As of March 31, 2022, total stockholders' equity was $358,583 thousand, a decrease from $399,429 thousand as of September 30, 2021, primarily due to stock option exercises, RSU vesting, stock-based compensation, net loss, and accumulated other comprehensive loss Changes in Stockholders' Equity (Thousands of Dollars, except share count) | Indicator | Balance as of September 30, 2021 | Stock option exercises | RSU vesting | Stock-based compensation expense | Other comprehensive loss | Net loss | Balance as of March 31, 2022 | | :------------------- | :---------------- | :----------- | :----------------- | :----------- | :----------- | :------- | :---------------- | | Common stock (shares) | 20,238 | 248 | 20 | — | — | — | 20,618 | | Common stock (amount) | 202 | 2 | 1 | — | — | — | 206 | | Additional paid-in capital | 351,033 | 10,407 | (778) | 6,062 | — | — | 376,545 | | Accumulated other comprehensive loss | (382) | — | — | — | (624) | — | (3,037) | | Retained earnings (accumulated deficit) | 48,576 | — | — | — | — | (30,115) | (15,131) | | Total stockholders' equity | 399,429 | 10,409 | (777) | 6,062 | (624) | (30,115) | 358,583 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended March 31, 2022, the company experienced a net cash outflow from operating activities of $39,646 thousand, a net cash inflow from investing activities of $10,446 thousand, and a net cash inflow from financing activities of $12,983 thousand, resulting in a net decrease of $16,217 thousand in cash, cash equivalents, and restricted cash Consolidated Statements of Cash Flows Key Data (Thousands of Dollars) | Indicator | For the six months ended March 31, 2022 | For the six months ended March 31, 2021 | | :------------------------------------- | :----------------------- | :----------------------- | | Net cash outflow from operating activities | (39,646) | (19,469) | | Net cash inflow from investing activities | 10,446 | 8,013 | | Net cash inflow from financing activities | 12,983 | 1,451 | | Net decrease in cash, cash equivalents, and restricted cash | (16,217) | (10,005) | | Cash, cash equivalents, and restricted cash at end of period | 41,597 | 77,734 | [Notes to Consolidated Financial Statements (unaudited)](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) The notes detail the company's business, accounting policies, fair value of financial assets and liabilities, marketable securities, accrued expenses, AbbVie collaboration, preferred stock, equity compensation, net loss per share, income taxes, commitments, contingencies, and updated lease information - The company is a biotechnology firm focused on discovering and developing small molecule drugs for viral infections and liver diseases, primarily generating royalty revenue from the AbbVie collaboration for HCV drug MAVYRET®/MAVIRET®, which funds its wholly-owned R&D programs for RSV, HBV, SARS-CoV-2, and hMPV[26](index=26&type=chunk)[60](index=60&type=chunk) - The COVID-19 pandemic has led to decreased sales of AbbVie's HCV drug and may impact the supply chain and patient enrollment for the company's clinical trials, but existing cash flow and financial resources are expected to support R&D programs for at least two years[27](index=27&type=chunk)[60](index=60&type=chunk)[70](index=70&type=chunk) Fair Value Measurement of Financial Assets and Liabilities (Thousands of Dollars) | Indicator | Total as of March 31, 2022 | Total as of September 30, 2021 | | :--------------------------- | :---------------- | :---------------- | | **Assets** | | | | Cash equivalents: Money market funds | 36,356 | 54,819 | | Marketable securities: U.S. Treasury bills | 106,992 | 83,038 | | Marketable securities: Corporate bonds | 108,190 | 124,703 | | Marketable securities: Commercial paper | 66,374 | 87,471 | | **Liabilities** | | | | Series 1 non-convertible preferred stock | 1,506 | 1,506 | Accrued Expenses and Other Long-Term Liabilities (Thousands of Dollars) | Indicator | March 31, 2022 | September 30, 2021 | | :--------------------------- | :------------- | :------------- | | **Accrued Expenses** | | | | Accrued drug manufacturing expenses | 14,412 | 8,402 | | Accrued research and development expenses | 2,616 | 6,062 | | Accrued salaries and related expenses | 2,960 | 6,094 | | **Other Long-Term Liabilities** | | | | Uncertain tax positions | 530 | 558 | | Asset retirement obligations | 346 | — | - As of March 31, 2022, the company has received approximately **$1,169,000 thousand** in license fees, preferred stock proceeds, R&D funding, milestone payments, and royalties from the AbbVie collaboration[43](index=43&type=chunk) Stock-Based Compensation Expense (Thousands of Dollars) | Expense Type | For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the six months ended March 31, 2022 | For the six months ended March 31, 2021 | | :------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Research and development | 2,710 | 2,536 | 5,294 | 4,955 | | General and administrative | 3,761 | 2,744 | 7,239 | 5,208 | | **Total** | **6,471** | **5,280** | **12,533** | **10,163** | - As of March 31, 2022, total unrecognized stock-based compensation cost was **$66,162 thousand**, expected to be recognized over a weighted-average period of **2.9 years**[50](index=50&type=chunk) - For the three and six months ended March 31, 2022, the company recognized no income tax benefit, whereas in the prior year, it recognized **$7,110 thousand** and **$10,404 thousand** respectively, due to federal net operating loss carrybacks under the CARES Act, and has a valuation allowance against all net deferred tax assets[54](index=54&type=chunk) - The company extended its lease for office and laboratory space at 500 Arsenal Street on November 19, 2021, for an additional five years until September 1, 2027, increasing the right-of-use asset and lease liability by **$15,048 thousand**[57](index=57&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This chapter provides management's detailed discussion of the company's financial condition and operating results, covering an overview, wholly-owned R&D programs, AbbVie royalty collaboration, COVID-19 impact, financial operations, liquidity, and capital resources, with comparative analysis of key financial metrics - The company is a biotechnology firm focused on discovering and developing small molecule drugs for viral infections and liver diseases, primarily generating royalty revenue from the AbbVie collaboration for HCV drug MAVYRET®/MAVIRET®, which funds its wholly-owned R&D programs for RSV, HBV, SARS-CoV-2, and hMPV[60](index=60&type=chunk) - As of March 31, 2022, the company held **$322.5 million** in cash, cash equivalents, and short-term and long-term marketable securities, with existing funds and HCV royalty revenue expected to support wholly-owned R&D programs for at least two years[60](index=60&type=chunk)[70](index=70&type=chunk) - The COVID-19 pandemic has led to decreased sales of AbbVie's HCV drug and impacted patient enrollment for the company's RSV clinical studies, but the company has taken measures to address this and anticipates continued pandemic effects on its business[68](index=68&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - The company anticipates higher R&D expenses in fiscal year 2022 compared to 2021, driven by advancing wholly-owned programs like EDP-938 for RSV and EDP-235 for COVID-19, while seeking external licensing for its liver disease program (NASH FXR agonist)[71](index=71&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) [Overview](index=15&type=section&id=Overview) The company is a biotechnology firm leveraging its chemistry-driven drug discovery capabilities to find and develop small molecule drugs for viral infections and liver diseases, with primary revenue from AbbVie's MAVYRET®/MAVIRET® HCV drug royalties, funding its R&D programs in RSV, SARS-CoV-2, HBV, and hMPV - The company primarily generates royalty revenue from AbbVie's MAVYRET®/MAVIRET® HCV drug collaboration, which funds its wholly-owned R&D programs in RSV, SARS-CoV-2, HBV, and hMPV[60](index=60&type=chunk) - As of March 31, 2022, the company held **$322.5 million** in cash, cash equivalents, and short-term and long-term marketable securities, with existing funds and HCV royalty revenue expected to support wholly-owned R&D programs for at least two years[60](index=60&type=chunk) [Our Wholly-Owned Programs](index=15&type=section&id=Our%20Wholly-Owned%20Programs) The company's wholly-owned R&D programs focus on virology, including RSV, COVID-19, HBV, and hMPV, with EDP-938 in three Phase II RSV studies, EDP-323 (new L-protein inhibitor) planned for Phase I in H2 2022, EDP-235 (oral 3CL protease inhibitor) for COVID-19 in first-in-human study since February 2022, EDP-514 (HBV core inhibitor) completing Phase I, and hMPV program optimizing nanomolar inhibitors for a clinical candidate in H2 2022 - RSV program: EDP-938 is undergoing three Phase II studies: RSVP (adult outpatients), RSVPEDs (pediatric), and RSVTx (adult hematopoietic stem cell transplant recipients); a new L-protein inhibitor, EDP-323, is planned to initiate a Phase I study in the second half of 2022[61](index=61&type=chunk)[63](index=63&type=chunk) - COVID-19 program: The oral 3CL protease inhibitor, EDP-235, initiated first-in-human studies in February 2022, with preliminary data expected in the second quarter of 2022; EDP-235 demonstrates nanomolar inhibitory activity against SARS-CoV-2 and its variants (including Delta and Omicron), with favorable pharmacokinetics and tissue penetration[63](index=63&type=chunk) - HBV program: The core inhibitor, EDP-514, completed Phase I studies, showing good tolerability and pharmacokinetics in healthy subjects and NUC-suppressed patients, and significant reductions in HBV DNA and RNA levels in viremic patients[63](index=63&type=chunk) - hMPV program: Nanomolar inhibitors are being optimized, with the goal of selecting a first clinical candidate in the second half of 2022[65](index=65&type=chunk) [Our Royalty Revenue Collaboration](index=17&type=section&id=Our%20Royalty%20Revenue%20Collaboration) The company earns royalties through its collaboration agreement with AbbVie, primarily from net sales of MAVYRET®/MAVIRET® (glecaprevir/pibrentasvir), calculated at annual tiered double-digit rates based on 50% of the combination's net sales - The company's royalty revenue primarily stems from AbbVie's net sales of the MAVYRET®/MAVIRET® (glecaprevir/pibrentasvir) combination[67](index=67&type=chunk) - Royalties are calculated at annual tiered double-digit rates, based on **50%** of MAVYRET/MAVIRET combination net sales, with tiers resetting annually on January 1[67](index=67&type=chunk) [COVID-19 Update](index=17&type=section&id=COVID-19%20Update) The COVID-19 pandemic continues to significantly impact the company's business operations, clinical trials, and royalty revenue, leading to reduced HCV patient volumes, diagnoses, and treatment rates, affecting MAVYRET/MAVIRET sales, while clinical trial enrollment and completion times remain uncertain despite employees gradually returning to on-site work, though existing funds and royalties are expected to support R&D for at least two years - The COVID-19 pandemic has led to decreased HCV patient volumes, diagnoses, and treatment rates, with MAVYRET/MAVIRET sales remaining below pre-pandemic levels, impacting the company's royalty revenue[70](index=70&type=chunk) - The pandemic has slowed enrollment in RSV clinical studies, and other clinical trials face disruptions and complexities, leading to uncertainty regarding future enrollment and completion timelines[70](index=70&type=chunk) - The company has resumed full laboratory operations, most employees are on a hybrid work model, and existing cash and investments (totaling **$322.5 million** as of March 31, 2022) are expected to support R&D programs for at least two years[70](index=70&type=chunk) [Financial Operations Overview](index=18&type=section&id=Financial%20Operations%20Overview) The company primarily funds operations through royalties from its AbbVie collaboration and existing cash, cash equivalents, and marketable securities, but anticipates continued net losses in fiscal year 2022 due to decreased HCV revenue from COVID-19 and increased expenses from advancing wholly-owned R&D programs (RSV, SARS-CoV-2, hMPV) - The company primarily funds operations through royalties from the AbbVie collaboration and existing cash, cash equivalents, and marketable securities[71](index=71&type=chunk) - Due to decreased HCV revenue and increased R&D expenses, the company anticipates continued net losses in fiscal year 2022[71](index=71&type=chunk) - The company is advancing wholly-owned programs such as RSV and SARS-CoV-2, and expects R&D expenses to continue increasing in the future[71](index=71&type=chunk) [Internal Programs](index=18&type=section&id=Internal%20Programs) The company's wholly-owned product candidates are currently in Phase I or Phase II clinical development, have not generated product sales revenue, and are not expected to do so for several years, with operating expenses, including R&D and G&A, increasing for the three and six months ended March 31, 2022 - The company's wholly-owned product candidates are currently in Phase I or Phase II clinical development, have not generated product sales revenue, and are not expected to do so for several years[72](index=72&type=chunk) Operating Expenses (Thousands of Dollars) | Indicator | For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the six months ended March 31, 2022 | For the six months ended March 31, 2021 | | :------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Research and development expenses | 42,087 | 41,506 | 90,636 | 78,171 | | General and administrative expenses | 10,476 | 8,326 | 19,984 | 15,703 | | **Total Operating Expenses** | **52,563** | **49,832** | **110,620** | **93,874** | [Research and Development Expenses](index=19&type=section&id=Research%20and%20Development%20Expenses) R&D expenses encompass costs for basic research, preclinical, and clinical development activities, primarily comprising personnel costs, third-party contract costs, lab supplies, facility-related costs, and third-party license fees, with an expectation of continued increases in the future, though completion dates and costs are difficult to predict due to clinical trial enrollment uncertainties (impacted by COVID-19) - R&D expenses primarily include personnel costs, third-party contract costs (research, formulation, manufacturing, preclinical, and clinical trials), laboratory supplies, facility-related costs, and third-party license fees[74](index=74&type=chunk) - The company anticipates R&D expenses will continue to increase, but completion dates and costs are difficult to predict due to clinical trial enrollment uncertainties (impacted by COVID-19) and inherent risks in the development process[74](index=74&type=chunk) [General and Administrative Expenses](index=19&type=section&id=General%20and%20Administrative%20Expenses) G&A expenses primarily include compensation, benefits, and stock-based compensation for executive, finance, business, corporate development, and other administrative personnel, as well as travel, facility-related costs, D&O insurance, and audit, tax, legal, and patent fees, with an expectation of future increases due to expanding operational activities - G&A expenses primarily include compensation, benefits, and stock-based compensation for executive, finance, business, corporate development, and other administrative personnel, as well as travel, facility-related costs, D&O insurance, and professional service fees[75](index=75&type=chunk) - The company anticipates G&A expenses will increase in the future to support the expansion of operational activities for its wholly-owned R&D programs[75](index=75&type=chunk) [Other Income (Expense), Net](index=19&type=section&id=Other%20Income%20(Expense),%20Net) Other income (expense), net, includes interest and investment income, as well as changes in the fair value of Series 1 non-convertible preferred stock, with interest income derived from cash equivalents and marketable securities, and investment income representing amortization or accretion of marketable securities - Other income (expense), net, includes interest and investment income, as well as changes in the fair value of Series 1 non-convertible preferred stock[76](index=76&type=chunk) - Interest income is derived from cash equivalents and marketable securities, while investment income represents the amortization or accretion of marketable securities[76](index=76&type=chunk) [Income Tax Benefit](index=19&type=section&id=Income%20Tax%20Benefit) Income tax benefit typically arises from federal and state tax credits, release of tax reserves, or refunds from current year tax losses carried back to prior years, with CARES Act benefits no longer applicable from fiscal year 2022 - Income tax benefit typically arises from federal and state tax credits, the release of tax reserves, or refunds generated by current year tax losses carried back to prior years[77](index=77&type=chunk) - CARES Act benefits are no longer applicable from fiscal year 2022[77](index=77&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of operating results for the three and six months ended March 31, 2022, and 2021, showing decreased royalty revenue due to lower AbbVie HCV sales, and increased R&D and G&A expenses, leading to an expanded net loss Operating Results Comparison (Thousands of Dollars) | Indicator | For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the six months ended March 31, 2022 | For the six months ended March 31, 2021 | | :------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Royalty revenue | 18,716 | 20,132 | 46,364 | 51,875 | | Research and development expenses | 42,087 | 41,506 | 90,636 | 78,171 | | General and administrative expenses | 10,476 | 8,326 | 19,984 | 15,703 | | Other income (expense), net | 255 | 545 | 549 | 1,222 | | Income tax benefit | — | 7,110 | — | 10,404 | | Net loss | (33,592) | (22,045) | (63,707) | (30,373) | - Royalty revenue decreased by **$1.4 million** and **$5.5 million** for the three and six months ended March 31, 2022, respectively, primarily due to lower AbbVie-reported HCV sales, as HCV patient volumes remain below pre-pandemic levels[79](index=79&type=chunk)[87](index=87&type=chunk) - R&D expenses increased by **$0.6 million** and **$12.5 million** for the three and six months ended March 31, 2022, respectively, driven by higher manufacturing costs for clinical studies in virology programs and increased personnel expenses, partially offset by decreased clinical trial costs for liver disease programs[82](index=82&type=chunk)[90](index=90&type=chunk) - G&A expenses increased by **$2.2 million** and **$4.3 million** for the three and six months ended March 31, 2022, respectively, primarily due to increased personnel expenses supporting the expansion of R&D operations[84](index=84&type=chunk)[91](index=91&type=chunk) - There was no income tax benefit in the 2022 periods, whereas the 2021 periods recognized income tax benefits from federal net operating loss carrybacks under the CARES Act, which is no longer applicable after September 30, 2021[86](index=86&type=chunk)[92](index=92&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company held $322.5 million in cash, cash equivalents, and marketable securities, a decrease from $352.4 million as of September 30, 2021, with increased cash outflow from operating activities, increased cash inflow from investing activities, and significantly increased cash inflow from financing activities, resulting in a net decrease in cash, though existing funds are expected to meet cash needs for at least two years, subject to various future funding factors - As of March 31, 2022, the company held **$322.5 million** in cash, cash equivalents, and short-term and long-term marketable securities, a decrease from **$352.4 million** as of September 30, 2021[93](index=93&type=chunk) Cash Flow Summary (Thousands of Dollars) | Cash Flow Type | For the six months ended March 31, 2022 | For the six months ended March 31, 2021 | | :--------------------------- | :----------------------- | :----------------------- | | Net cash outflow from operating activities | (39,646) | (19,469) | | Net cash inflow from investing activities | 10,446 | 8,013 | | Net cash inflow from financing activities | 12,983 | 1,451 | | Net decrease in cash, cash equivalents, and restricted cash | (16,217) | (10,005) | - Net cash outflow from operating activities increased by **$20.2 million**, primarily due to increased R&D costs, partially offset by **$8.5 million** in federal tax refunds[94](index=94&type=chunk) - Net cash inflow from financing activities increased by **$11.5 million**, primarily due to increased stock option exercises[97](index=97&type=chunk) - The company expects existing cash, cash equivalents, and marketable securities to be sufficient to meet cash needs for at least two years, but future capital requirements are influenced by royalties, COVID-19 impact, R&D program progress, manufacturing costs, regulatory approvals, commercialization costs, and intellectual property litigation[98](index=98&type=chunk) [Off-Balance Sheet Arrangements](index=24&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has not engaged in any off-balance sheet financing activities nor does it own any variable interest entities - The company has not engaged in any off-balance sheet financing activities nor does it own any variable interest entities[100](index=100&type=chunk) [Contractual Obligations and Commitments](index=24&type=section&id=Contractual%20Obligations%20and%20Commitments) The company extended its lease for its 500 Arsenal Street location in November 2021 for an additional five years until September 1, 2027, with updated total minimum lease payments of $20.3 million - The company extended its lease for its 500 Arsenal Street location for an additional five years until September 1, 2027, with updated total minimum lease payments of **$20.3 million**[102](index=102&type=chunk) [Critical Accounting Policies](index=24&type=section&id=Critical%20Accounting%20Policies) The company's consolidated financial statements are prepared in accordance with U.S. GAAP, requiring management estimates and assumptions, where actual results may differ, with detailed critical accounting policies available in the company's fiscal year 2021 10-K annual report - The company's consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), requiring management estimates and assumptions, where actual results may differ from these estimates[103](index=103&type=chunk) - Detailed critical accounting policies are available in the company's fiscal year 2021 10-K annual report[103](index=103&type=chunk) [Recently Issued Accounting Pronouncements](index=24&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section refers to recently issued accounting pronouncements, whose potential impact on the company's financial condition and operating results is discussed in Note 2 to the financial statements - The potential impact of recently issued accounting pronouncements on the company's financial condition and operating results is discussed in Note 2 to the financial statements[104](index=104&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This chapter discloses the company's market risks, primarily interest rate sensitivity and foreign currency risk, noting that due to the nature of investments, interest rate changes are not expected to significantly impact financial condition or operating results, and foreign currency risk is currently immaterial but may increase with international clinical trials - Interest rate sensitivity: As of March 31, 2022, the company held **$322.5 million** in cash, cash equivalents, and marketable securities, but a **100 basis point** change in market interest rates is not expected to have a material impact on financial condition or operating results due to the nature of these investments[105](index=105&type=chunk) - Foreign currency risk: Currently, foreign currency risk is not material, but as the company conducts clinical trials abroad, it may face greater risks from fluctuations in the British Pound and Euro against the U.S. Dollar in the future[106](index=106&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) This chapter describes management's assessment of the effectiveness of disclosure controls and procedures, confirming their effectiveness as of March 31, 2022, with no significant changes in internal control over financial reporting - As of March 31, 2022, the company's management (with the participation of the Chief Executive Officer and Chief Financial Officer) assessed and concluded that disclosure controls and procedures are effective[108](index=108&type=chunk) - There were no changes in internal control over financial reporting during the three months ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[110](index=110&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This chapter details significant risks and uncertainties facing the company, including business dependencies, competition, COVID-19 impact, clinical development, regulatory approval, commercialization, third-party collaborations, intellectual property, industry-specific risks, and risks related to common stock, all of which could materially and adversely affect the company's business prospects, financial condition, and operating results - The company's financial prospects are highly dependent on the success of AbbVie's sales of MAVYRET/MAVIRET, and the COVID-19 pandemic may lead to a sustained decline in HCV sales volumes[113](index=113&type=chunk)[116](index=116&type=chunk) - The company faces intense competition in disease areas such as RSV, SARS-CoV-2, HBV, and hMPV, with many competitors having product candidates in more advanced stages of development[113](index=113&type=chunk)[125](index=125&type=chunk) - The COVID-19 pandemic continues to impact the company's business operations and clinical trials, potentially causing supply chain disruptions, clinical trial delays, and patient enrollment difficulties[113](index=113&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - The clinical drug development process is lengthy, expensive, and uncertain, and any failure or delay in clinical trials for wholly-owned product candidates could hinder their commercialization[115](index=115&type=chunk)[159](index=159&type=chunk)[163](index=163&type=chunk) - The company may not be able to obtain or maintain adequate patent protection and may face third-party intellectual property infringement claims, leading to costly litigation and business disruptions[115](index=115&type=chunk)[228](index=228&type=chunk)[231](index=231&type=chunk) - The company relies on third-party manufacturers and contract research organizations (CROs) for drug supply and clinical trials, and any failure by these parties could delay or harm product development and commercialization[115](index=115&type=chunk)[213](index=213&type=chunk)[221](index=221&type=chunk) - The company's common stock price is highly volatile, influenced by clinical trial results, regulatory approvals, competition, COVID-19 impact, financial performance, key personnel changes, and market sentiment[113](index=113&type=chunk)[252](index=252&type=chunk) [SUMMARY OF PRINCIPAL RISK FACTORS](index=26&type=section&id=SUMMARY%20OF%20PRINCIPAL%20RISK%20FACTORS) This section outlines the company's main risks, including financial dependence on AbbVie's MAVYRET/MAVIRET sales, the ongoing COVID-19 impact on sales and clinical trials, intense competition in the HCV market, disadvantages of wholly-owned R&D programs in competition, continuous operating losses due to increased R&D expenses, clinical trial uncertainties, intellectual property protection challenges, and stock price volatility - The company's financial prospects are highly dependent on the success of AbbVie's sales of MAVYRET/MAVIRET, and the COVID-19 pandemic may lead to a sustained decline in HCV sales volumes[113](index=113&type=chunk)[116](index=116&type=chunk) - The company faces intense competition in disease areas such as RSV, SARS-CoV-2, HBV, and hMPV, with many competitors having product candidates in more advanced stages of development[113](index=113&type=chunk)[125](index=125&type=chunk) - The COVID-19 pandemic continues to impact the company's business operations and clinical trials, potentially causing supply chain disruptions, clinical trial delays, and patient enrollment difficulties[113](index=113&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Increased R&D expenses will lead to continuous operating losses unless the company develops other revenue sources[113](index=113&type=chunk)[145](index=145&type=chunk) - The clinical drug development process is lengthy, expensive, and uncertain, and any failure or delay in clinical trials for wholly-owned product candidates could hinder their commercialization[115](index=115&type=chunk)[159](index=159&type=chunk)[163](index=163&type=chunk) [Risks Related to Our Business](index=27&type=section&id=Risks%20Related%20to%20Our%20Business) This section details core risks in the company's business operations, including ongoing reliance on AbbVie's MAVYRET/MAVIRET sales and the risk of declining sales, intense competition in the HCV market, the continuing adverse impact of the COVID-19 pandemic on business operations and clinical trials, limited in-house clinical development experience, risks of failing to successfully develop wholly-owned product candidates, expectations of continuous operating losses, reliance on senior management and key scientific personnel, challenges in managing growth and expansion, and the potential need for substantial additional financing in the future - The company's financial prospects in the coming years primarily depend on the success of AbbVie's sales of MAVYRET/MAVIRET, and a decline in AbbVie's sales will adversely affect the company's revenue[116](index=116&type=chunk)[120](index=120&type=chunk) - The COVID-19 pandemic continues to significantly impact the company's business operations, clinical trials, and royalty revenue, potentially causing supply chain disruptions, clinical trial delays, and decreased HCV patient treatment volumes[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - The company has not independently developed any approved products and has limited clinical development experience, making it difficult to assess its ability to independently develop and commercialize product candidates[138](index=138&type=chunk)[139](index=139&type=chunk) - The company has reported net losses and expects continuous operating losses in the future, primarily due to declining royalty revenue and increasing R&D expenses[145](index=145&type=chunk)[149](index=149&type=chunk) - The company's success depends on its ability to attract and retain senior management and key scientific personnel, and the loss of any key personnel could delay or hinder product development[150](index=150&type=chunk)[151](index=151&type=chunk) - The company may require substantial additional financing in the future, and if it cannot obtain the necessary capital in a timely manner, it may be forced to delay, limit, reduce, or terminate some or all product development efforts[154](index=154&type=chunk)[158](index=158&type=chunk) [Risks Related to Development, Clinical Testing and Regulatory Approval of Our Product Candidates](index=33&type=section&id=Risks%20Related%20to%20Development,%20Clinical%20Testing%20and%20Regulatory%20Approval%20of%20Our%20Product%20Candidates) This section details inherent risks in product candidate development, including the lengthy, expensive, and uncertain clinical drug development process that may lead to clinical trial failures or delays; the potential for adverse side effects that could delay or prevent market approval; the unreliability of early clinical trial results in predicting later outcomes; and the lengthy, time-consuming, and unpredictable approval processes of the FDA, EMA, and other regulatory agencies, which may prevent timely regulatory approval - The clinical drug development process is lengthy, expensive, and uncertain, and any failure or delay in clinical trials for wholly-owned product candidates could hinder their commercialization[159](index=159&type=chunk)[163](index=163&type=chunk) - Product candidates may produce adverse side effects, which could delay or prevent market approval, or even lead to market withdrawal or sales restrictions after approval[166](index=166&type=chunk)[171](index=171&type=chunk) - Early clinical trial results do not necessarily predict later clinical trial outcomes, and product candidates may fail in later trials due to safety or efficacy issues[175](index=175&type=chunk) - The approval processes of the FDA, EMA, and other regulatory agencies are lengthy, time-consuming, and unpredictable, which may prevent the company from obtaining timely regulatory approval and severely harm its business[178](index=178&type=chunk)[179](index=179&type=chunk) - The regulatory approval pathway for COVID-19 treatments (such as EDP-235) is continuously evolving, potentially leading to unexpected challenges and longer approval times[181](index=181&type=chunk)[182](index=182&type=chunk) [Risks Related to Commercialization of Our Product Candidates](index=37&type=section&id=Risks%20Related%20to%20Commercialization%20of%20Our%20Product%20Candidates) This section discusses risks in product candidate commercialization, including adverse pricing regulations, third-party reimbursement policies, or healthcare reform measures that could harm the company's business; uncertainty regarding the market opportunity for EDP-235 as a COVID-19 treatment; strict price controls by foreign governments potentially impacting future profitability; and the risk that the company may not successfully commercialize product candidates if it cannot establish its own sales, marketing, and distribution capabilities or secure collaboration agreements - Adverse pricing regulations, third-party reimbursement policies, or healthcare reform measures could harm the company's business, limiting market acceptance and revenue for MAVYRET/MAVIRET or any future products[191](index=191&type=chunk)[195](index=195&type=chunk) - Significant uncertainty exists regarding the future course of the COVID-19 pandemic, and the market opportunity for EDP-235 as a COVID-19 treatment may diminish if the pandemic ends or new infections substantially decrease[196](index=196&type=chunk) - Strict price controls by foreign governments (especially in the EU and Japan) could delay product launch and adversely affect future profitability[199](index=199&type=chunk)[200](index=200&type=chunk) - If the company cannot establish its own sales, marketing, and distribution capabilities, or secure favorable licensing or collaboration agreements, it may not successfully commercialize any product candidates[201](index=201&type=chunk)[205](index=205&type=chunk) [Risks Related to Our Dependence on Third Parties](index=40&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) This section outlines risks from the company's reliance on third parties, including the failure to establish new product collaborations potentially harming its ability to develop and commercialize product candidates; dependence on third-party manufacturers for development-stage and commercial product supply, where any failure could delay or harm clinical trials or product sales; and the conduct of some R&D and key intermediate manufacturing activities in China, which may face supply chain disruptions, increased costs, or political risks - The company may not successfully establish new product collaborations, which could harm its ability to develop and commercialize product candidates and increase cash expenditures[209](index=209&type=chunk)[212](index=212&type=chunk) - The company relies on third-party manufacturers for development-stage and commercial product supply, and any failure by a manufacturer to produce as required or comply with regulations could delay or harm clinical trials or product sales[213](index=213&type=chunk)[215](index=215&type=chunk) - Some R&D and key intermediate manufacturing activities are conducted in China, potentially facing risks such as production disruptions, increased costs, trade wars, political instability, or pandemics (e.g., COVID-19)[217](index=217&type=chunk)[219](index=219&type=chunk) - The company relies on third parties (CROs, hospitals, etc.) to monitor, support, and supervise clinical trials, and if these third parties fail to perform their duties as required, it could lead to clinical trial delays or rejection of data[220](index=220&type=chunk)[221](index=221&type=chunk) [Risks Related to Our Intellectual Property Rights](index=43&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property%20Rights) This section details risks related to the company's intellectual property, including the potential inability to obtain or maintain adequate patent protection in the highly competitive drug development field; the possibility of third parties claiming the company's products or their use infringe their patents or other intellectual property, leading to costly litigation; and the potential ineffectiveness of confidentiality agreements with employees and third parties in preventing unauthorized disclosure of trade secrets and other proprietary information - In the highly competitive field of small molecule drug development, the company may not be able to obtain or maintain adequate patent protection, or existing patents may be deemed invalid or unenforceable[227](index=227&type=chunk)[228](index=228&type=chunk) - Third parties may claim that the company's products or their use infringe their patents or other intellectual property, leading to costly litigation, royalty payments, or business disruptions[230](index=230&type=chunk)[231](index=231&type=chunk)[234](index=234&type=chunk) - Confidentiality agreements with employees and third parties may not effectively prevent unauthorized disclosure of trade secrets and other proprietary information, thereby harming the company's competitive position[236](index=236&type=chunk)[239](index=239&type=chunk) [Risks Related to Our Industry](index=45&type=section&id=Risks%20Related%20to%20Our%20Industry) This section discusses industry-specific risks, including product liability lawsuits potentially leading to substantial liabilities and commercialization restrictions; potential failures or security breaches in internal computer systems or third-party systems causing development project disruptions; and relationships with customers and third-party payors being subject to healthcare laws and regulations such as anti-kickback, fraud, and abuse, which could result in criminal sanctions, civil penalties, and reputational damage - Product liability lawsuits could expose the company to substantial liabilities and may restrict the commercialization of product candidates, consuming significant resources even if successful[240](index=240&type=chunk)[241](index=241&type=chunk) - Failures or security breaches in the company's internal computer systems or third-party systems could disrupt development projects, lead to data loss, reputational damage, and significant liabilities[243](index=243&type=chunk)[247](index=247&type=chunk) - The company's relationships with customers and third-party payors are subject to healthcare laws and regulations such as anti-kickback, fraud, and abuse, and non-compliance could result in criminal sanctions, civil penalties, and reputational damage[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) [Risks Related to Our Common Stock](index=47&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) This section outlines risks related to the company's common stock, including high stock price volatility potentially leading to significant shareholder losses; provisions in the company's charter and Delaware law that could make acquisitions more difficult and prevent shareholders from replacing management; employment agreements with executives that may require severance payments upon a change of control; the company's intention not to pay cash dividends in the foreseeable future, meaning investors may not receive a return on investment; and the potential for a significant drop in stock price if a large number of common shares are sold in the open market - The company's stock price is highly volatile, influenced by clinical trial results, regulatory approvals, competition, COVID-19 impact, financial performance, key personnel changes, and market sentiment, potentially leading to significant shareholder losses[252](index=252&type=chunk) - Provisions in the company's charter and Delaware law could make it more difficult for the company to be acquired and may prevent shareholders from replacing management[253](index=253&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) - Employment agreements with executives may require severance payments of up to **$5.9 million** and accelerated vesting of equity awards totaling **$26.8 million** upon a change of control, potentially harming the company's financial condition[258](index=258&type=chunk)[259](index=259&type=chunk) - The company does not intend to pay cash dividends in the foreseeable future, requiring investors to rely on stock price appreciation for returns[260](index=260&type=chunk)[261](index=261&type=chunk) - The sale of a large number of common shares in the open market (including existing outstanding shares and shares under equity incentive plans) could lead to a significant drop in the company's stock price[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk) [General Risk Factors](index=49&type=section&id=General%20Risk%20Factors) This section covers broader general risks, including the potential for existing patents to be deemed invalid or unenforceable; intellectual property litigation possibly leading to adverse outcomes and reputational damage; limitations of intellectual property rights in fully protecting competitive advantages; changes in patent law potentially weakening patent value; failure to comply with environmental, health, and safety laws and regulations possibly resulting in fines and costs; insurance policies potentially being insufficient to cover all risks; failure to maintain effective internal control over financial reporting possibly harming financial reporting reliability; and information technology system failures, cyberattacks, or social media use potentially leading to liabilities or reputational damage - Existing patents may be deemed invalid or unenforceable, or intellectual property litigation could lead to adverse outcomes, limiting R&D activities or commercialization capabilities[265](index=265&type=chunk)[268](index=268&type=chunk) - Intellectual property rights have limitations and may not fully protect the company's competitive advantage, for example, competitors may develop similar but non-patented products[272](index=272&type=chunk) - Changes in patent law could weaken patent value, affecting the company's ability to protect its products[273](index=273&type=chunk)[275](index=275&type=chunk) - Failure to comply with environmental, health, and safety laws and regulations could result in fines, penalties, or significant costs[276](index=276&type=chunk)[278](index=278&type=chunk) - The company's insurance policies are expensive and only protect against specific business risks, potentially exposing it to significant uninsured liabilities[280](index=280&type=chunk)[281](index=281&type=chunk) - Failure to maintain effective internal control over financial reporting could lead to inaccurate financial reporting or fraud, undermining investor confidence[282](index=282&type=chunk)[283](index=283&type=chunk) - Information technology system failures, cyberattacks, or information security breaches could adversely affect the business, leading to data loss, reputational damage, and legal liabilities[284](index=284&type=chunk)[288](index=288&type=chunk) - The use of social media could lead to liabilities or reputational damage[290](index=290&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This chapter lists the exhibits filed with this quarterly report, including financial statements in XBRL format, articles of incorporation, equity incentive plans, and certifications from the Chief Executive Officer and Chief Financial Officer - Exhibits include financial statements in XBRL format (101, 104), articles of incorporation (3.1, 3.2), the 2019 Equity Incentive Plan (10.2), and certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1)[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) [Signatures](index=54&type=section&id=Signatures) This chapter contains the report's signature by Paul J. Mellett, Chief Financial Officer of Enanta Pharmaceuticals, Inc., as required by the Securities Exchange Act of 1934 - This report was signed by Paul J. Mellett, Chief Financial Officer of Enanta Pharmaceuticals, Inc., on May 9, 2022[299](index=299&type=chunk)[303](index=303&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-35839 | --- | --- | --- | |-----------------------------------------|------------------------------------------------------------|----------------------------------------------- ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2021 was $21.6 million, an increase from $18.7 million in Q3 2020, driven by higher royalty revenue from AbbVie's MAVYRET sales [38][39] - Research and development expenses rose to $47 million from $34.7 million in the same period last year, primarily due to the timing of clinical trials [41] - Net loss for the quarter was $24 million, or a loss of $1.19 per diluted share, compared to a net loss of $14.3 million, or a loss of $0.71 per diluted share in Q3 2020 [43] Business Line Data and Key Metrics Changes - The company reported an increase in royalty revenue due to higher HCV product sales, although these sales remain below pre-COVID levels [39][40] - Positive Phase 1b data for EDP-514 in chronic HBV patients showed significant reductions in HBV DNA levels, indicating progress in the HBV program [15][16][18] Market Data and Key Metrics Changes - The ongoing clinical studies for EDP-938 in RSV are expanding, with recent spikes in pediatric RSV cases observed in the U.S. and Australia, indicating a potential market opportunity [25][27][74] - The company is preparing for increased recruitment in its RSV clinical program due to the recent reemergence of RSV cases [28][74] Company Strategy and Development Direction - The company aims to develop an all-oral functional cure for hepatitis B, with EDP-514 and EDP-721 as key components of its strategy [21][102] - The focus on COVID-19 includes the development of EDP-235, an oral protease inhibitor, with plans to initiate a Phase 1 study early next year [6][34] - The company is also exploring partnerships for its HBV program, particularly for global commercialization opportunities [99][104] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential of EDP-235 to treat SARS-CoV-2 and other coronaviruses, highlighting its unique mechanism of action [12][53] - The company is cautiously optimistic about completing enrollment in its RSV studies during the Northern Hemisphere winter season, which could lead to data in the first half of 2022 [29][74] Other Important Information - The company ended the quarter with approximately $373 million in cash and marketable securities, expected to be sufficient for at least the next two years [44] - Dr. Nathalie Adda, Chief Medical Officer, announced her retirement planned for February, with a transition to a consulting role [37] Q&A Session Summary Question: Can you compare the potency of EDP-235 with remdesivir and Pfizer's protease inhibitors? - Management clarified that they do not have live SARS-CoV-2 virus in-house for direct comparisons but have conducted extensive resistance studies using model coronaviruses [47][50] Question: What are the next steps for EDP-235? - All IND-enabling studies are completed, and the company is preparing for the Phase 1 study, focusing on routine preparations [60] Question: What are the expectations for EDP-514 in terms of clinical data? - Management indicated that the 200 mg and 400 mg doses showed good performance, and they are optimistic about the upcoming 800 mg cohort data [58][59] Question: What is the potential for partnerships in the HBV program? - The company is considering partnerships for global commercialization, especially if the all-oral triple therapy proves effective [99][104] Question: What are the market opportunities for EDP-938 in pediatric and adult studies? - Management highlighted the pediatric market as significant, with ongoing studies expected to provide insights into safety and efficacy [107]