ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q, or Form 10-Q, and the audited consolidated financial statements and notes thereto for our fiscal year ended September 30, 2022 included in our Annual Report on Form 10-K for that fiscal year, which is referred to as our 2022 Form 10-K. Please refer to our note regarding forward-looking statements on page 2 of this Form 10-Q, which is incorporated herein by this reference.
The Enanta name and logo are our trademarks. This Form 10-Q also includes trademarks, trade names and service marks of other persons. All other trademarks, trade names and service marks appearing in this Form 10-Q are the property of their respective owners.
Overview
We are a biotechnology company that uses our robust, chemistry-driven approach and drug discovery capabilities to become a leader in the discovery and development of small molecule drugs, with an emphasis on treatments for viral infections. We discovered glecaprevir, the second of two protease inhibitors discovered and developed through our collaboration with AbbVie for the treatment of chronic infection with hepatitis C virus, or HCV. Glecaprevir is co-formulated as part of AbbVie’s leading brand of direct-acting antiviral, or DAA, combination treatment for HCV, which is marketed under the tradenames MAVYRET® (U.S.) and MAVIRET® (ex-U.S.) (glecaprevir/pibrentasvir). Our royalties from our AbbVie collaboration provide us funding to support our wholly-owned research and development programs, which are primarily focused on the following disease targets:
•Respiratory syncytial virus, or RSV, the most common cause of bronchiolitis and pneumonia in young children and a significant cause of respiratory illness in older adults, with estimates suggesting that on average each year RSV leads to 3 million hospitalizations globally in children under 5 years old and 177,000 hospitalizations in the U.S. in adults over the age of 65;
•SARS-CoV-2, the virus that causes COVID-19, as well as other coronaviruses, with estimates suggesting that COVID-19 has caused over 240,000 deaths and over 1.7 million hospitalizations in the U.S. in 2022 through October 29, with comparable, or at least significant, impact in other major populations of the world and with new variants still emerging;
•Hepatitis B virus, or HBV, the most prevalent chronic hepatitis, which is estimated by the World Health Organization to affect close to 300 million individuals worldwide; and
•Human metapneumovirus, or hMPV, an important, relatively recently identified cause of respiratory tract infections, particularly in children, the elderly and immunocompromised individuals, with symptoms similar to RSV.
Since fiscal 2020, we have reported a net loss. Our ability to generate revenue sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $23.6 million and $27.6 million for the three months ended December 31, 2022 and 2021, respectively, and incurred net losses of $29.0 million and $30.1 million for those same periods. As of December 31, 2022, we had an accumulated deficit of $102.2 million. We expect to continue to incur net losses for the foreseeable future. As a result, we may need additional funding for expenses related to our operating activities, including general and administrative expenses and research and development expenses.
Because of the numerous risks and uncertainties associated with clinical development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through a combination of equity offerings, or other non-dilutive financings, collaborations, strategic alliances and licensing agreements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we are unable to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations.
As of December 31, 2022, we had $241.4 million in cash, cash equivalents and short-term and long-term marketable securities. We believe that our existing cash, cash equivalents and short-term and long-term marketable securities and revenue from continuing HCV royalties, will enable us to fund our operating expenses and capital expenditure requirements into approximately the fourth quarter of fiscal 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and Capital Resources.”
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Our Wholly-Owned Programs
Our primary wholly-owned research and development programs are in virology, namely RSV, SARS-CoV-2, HBV and hMPV:
•RSV: We have a clinical stage program for RSV, with two compounds in clinical trials – EDP-938 and EDP-323. EDP-938, which has Fast Track designation from the U.S. Food and Drug Administration, or FDA, is a potent N-protein inhibitor of activity of both major subgroups of RSV, referred to as RSV-A and RSV-B. It has been investigated in a Phase 2a challenge study and is currently in three ongoing Phase 2 studies, each in a different patient population. In addition, we recently announced the initiation of a Phase 1 clinical study of EDP-323, an inhibitor of the RSV L-protein.
oEDP-938 - N-protein Inhibitor Candidate: We have studied EDP-938 in two Phase 2 studies that were designed to be proof-of-concept and exploratory studies to understand better viral response in the context of RSV infection. These studies were conducted in otherwise healthy adults. The first study was the challenge study, which was reported out in mid-2019. The second study, known as RSVP, was in an adult outpatient population with community-acquired RSV infection that had a data read out in May 2022. EDP-938 has demonstrated a favorable safety profile, consistent with that observed in approximately 500 subjects exposed to EDP-938 to date. We believe that EDP-938 continues to have the greatest potential to show optimal efficacy in high-risk populations, as these patients have reduced RSV immunity which manifests in a higher and longer duration of viral load and greater disease severity, allowing a bigger window to realize the full potential of EDP-938. Based on the efficacy and growing safety profile of EDP-938, we are continuing to evaluate EDP-938 in high-risk populations in the following ongoing and planned clinical studies, including pediatric patients, adult hematopoietic stem cell recipients and high-risk adults, all of which have significant unmet need:
▪RSVPEDs: RSVPEDs is a Phase 2 study in pediatric patients. This dose-ranging, randomized, double-blind, placebo-controlled study, will evaluate multiple ascending doses in up to four age cohorts to determine safety, tolerability, and pharmacokinetics, as well as a second part evaluating the selected dose for antiviral activity.
▪RSVTx: RSVTx is a Phase 2b study in adult hematopoietic cell transplant recipients with acute RSV infection and symptoms of upper respiratory tract infection. We plan to enroll approximately 200 adult subjects 18 to 75 years of age, within 72 hours of symptom onset, who will receive EDP-938 or placebo for 21 days and will be monitored for the incidence of lower respiratory tract complications within 28 days of enrollment.
▪RSVHR: On October 3, 2022, we announced the initiation of a Phase 2b study called RSVHR in high-risk adults, including those who are older than 65 years of age and those who have asthma, chronic obstructive pulmonary disease, or COPD, or congestive heart failure. Approximately 180 patients will be treated with 800 mg of EDP-938 or placebo for five days and evaluated for 28 days thereafter. The primary endpoint of the study is time to resolution of RSV lower respiratory tract disease symptoms.
oThe three ongoing studies are expected to continue through 2023 and we are monitoring RSV epidemiology to determine the impact on trial enrollment and timing for the data readouts.
oEDP-323 - L-protein Inhibitor Candidate: Our newest clinical candidate for RSV is a novel oral, direct-acting antiviral selectively targeting the RSV L-protein, a viral RNA-dependent RNA polymerase enzyme that contains multiple enzymatic activities required for RSV replication. EDP-323 has shown nanomolar potency against RSV-A and RSV-B in vitro and is not expected to have cross-resistance to other classes of inhibitors. EDP-323 has the potential to be used alone or in combination with other RSV mechanisms, such as EDP-938, to broaden the treatment window or addressable patient populations. We initiated a Phase 1 clinical study of EDP-323 in October 2022 and expect to report data from this study in the second quarter of 2023.
•COVID-19: We have been leveraging our expertise in developing protease inhibitors to discover new compounds specifically designed to target the SARS-CoV-2 virus and potentially other coronaviruses.
oEDP-235 - Protease Inhibitor Candidate: Our lead clinical candidate for COVID-19, EDP-235, is an oral inhibitor of coronavirus 3CL protease, also referred to as 3CLpro or the main coronavirus protease, or Mpro, which has been granted Fast Track designation by the FDA. In addition to SARS-CoV-2, EDP-235 has potent antiviral activity against other human coronaviruses, enabling the potential for a pan-coronavirus treatment, including possibly coronaviruses that may infect human populations in the future.
▪Phase 1 Study – In July 2022, we completed a Phase 1 study and reported positive topline results. This first-in-human, randomized, double-blind, placebo-controlled study enrolled healthy volunteers to evaluate the safety, tolerability, and pharmacokinetics, or PK, of oral EDP-235 in single ascending doses, and multiple ascending doses, for seven days, and the effect of food. Data from the Phase 1 study
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demonstrated EDP-235 was generally safe and well-tolerated in doses up to 400 mg for seven days with strong exposure multiples over the EC90, which is a measure of potency, specifically the concentration of drug that results in 90% inhibition of viral replication in vitro. EDP-235 200 mg taken once daily with food resulted in mean trough plasma levels at steady state that were 7-fold over the plasma-protein-adjusted EC90 for the Omicron variant of SARS-CoV-2, while 400 mg resulted in levels that were 13-fold over the plasma-protein-adjusted EC90. These target exposure multiples were achieved without the need for ritonavir boosting and its associated drug-drug interactions. EDP-235 is projected to have four times higher drug levels in lung tissue compared to plasma, which would be expected to drive the 400 mg multiples to 28-fold and 52-fold for the respective variants. Adverse events were infrequent and mild.
▪Phase 2 Study – In November 2022, we initiated SPRINT (SARS-CoV-2 Protease Inhibitor Treatment), a Phase 2 clinical trial of EDP-235 in non-hospitalized, symptomatic adults with mild or moderate COVID-19. This randomized, double-blind, placebo-controlled study is designed to evaluate the safety, tolerability and antiviral activity of 200 mg and 400 mg once-daily doses of EDP-235 compared to placebo. The study will enroll approximately 200 non-hospitalized, symptomatic patients with mild to moderate COVID-19 who are not at increased risk for developing severe disease. Patients will be eligible to participate if they have had symptoms for five days or less and have not received a SARS-CoV-2 vaccine or been infected with SARS-CoV-2 within 90 days of enrollment. Patients will receive EDP-235 orally with food at a dose of 200 mg or 400 mg or placebo once daily for five days. The primary objective of the study includes evaluation of safety and tolerability, and secondary objectives include pharmacokinetics and multiple virology measures to guide dose selection for other trials. We expect to report data from this Phase 2 study in the second quarter of 2023 and, if supported by the SPRINT data, initiate a Phase 3 study of EDP-235 in the second half of 2023.
oPLpro inhibitor program: We are also researching additional compounds that might be eligible to be designated for clinical development for SARS-CoV-2. In January 2023, we announced a new research program focused on the discovery and development of inhibitors of the SARS-CoV-2 PLpro for the oral treatment of COVID-19. PLpro is an essential enzyme, which, along with the 3CL protease (3CLpro, or Mpro), plays an important role in viral replication and also acts to suppress the innate immune response. Inhibition of PLpro blocks viral replication and has the potential to restore the dysregulated immune response to SARS-CoV-2 infection. As this mechanism is distinct from 3CL protease inhibition, it has the potential to be used alone or in combination with 3CL protease inhibitors such as EDP-235 or other compounds to provide a range of treatment regimens for different patient populations suffering from COVID-19.
•HBV: Our lead clinical candidate for the treatment of chronic infection with hepatitis B virus, or HBV, is EDP-514, a core inhibitor that displays potent anti-HBV activity in vitro at multiple points in the HBV lifecycle. Our goal is to develop a combination therapy approach, including existing approved treatments such as a nucleoside reverse transcriptase inhibitor, or NUC, with EDP-514 and one or more other mechanisms, which could lead to a functional cure for patients with chronic HBV infection. We are in the process of seeking other compounds that could be developed with EDP-514 for such a treatment regimen.
oEDP-514 - Core Inhibitor Candidate: In June 2022, final data from two of our Phase 1b studies of EDP-514 were presented at The International Liver CongressTM 2022. EDP-514, which has Fast Track designation from the FDA, has been shown to be safe and potent in two different chronic HBV patient populations – those who have a high viral load and those who are on a treatment with a nucleoside reverse transcriptase inhibitor. Based on these data, we remain convinced that EDP-514 has the potential to be a best-in-class core inhibitor for HBV.
•hMPV: Human metapneumovirus, or hMPV, is a virus that is a significant cause of respiratory tract infections, or RTIs, particularly in children, the elderly and immunocompromised individuals. It is the second most common cause of lower respiratory tract infections in children, with symptoms similar to RSV. The viral structure and lifecycle of hMPV are also similar to RSV.
ohMPV/RSV Dual-Inhibitor: In January 2023, we announced a new research program with broader spectrum antiviral activity, targeting hMPV and RSV with a single agent, which we refer to as a dual-inhibitor. In preclinical studies, these dual-inhibitors maintained activity against multiple genotypes and strains of hMPV and RSV in a range of cell types. We expect to select a clinical dual hMPV/RSV candidate in the fourth quarter of 2023.
We have utilized our internal chemistry and drug discovery capabilities to generate all of our development-stage programs. We continue to invest substantial resources in research programs to discover back-up compounds as well as new compounds targeting different mechanisms of action, both in our disease areas of focus as well as potentially in other disease areas.
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The following table summarizes our product development pipeline in our virology and liver disease programs:
*Fixed-dose antiviral combination contains Enanta’s glecaprevir and AbbVie’s NS5A inhibitor, pibrentasvir. Marketed by AbbVie as MAVYRET (U.S.) and MAVIRET (ex-U.S.).
Our Royalty Revenue Collaboration
Our royalty revenue is generated through our Collaborative Development and License Agreement with AbbVie, under which we have discovered and out-licensed to AbbVie two protease inhibitor compounds that have been clinically tested, manufactured, and commercialized by AbbVie as part of its combination regimens for HCV.
Glecaprevir is the HCV protease inhibitor we discovered that was developed by AbbVie in a fixed-dose combination with its NS5A inhibitor, pibrentasvir, for the treatment of chronic HCV. This patented combination, currently marketed under the brand names MAVYRET® (U.S.) and MAVIRET® (ex-U.S.), is referred to in this report as MAVYRET/MAVIRET. The first protease inhibitor developed through this collaboration, paritaprevir, is part of Abbvie’s initial HCV regimens, which have been almost entirely replaced by MAVYRET/MAVIRET. Since August 2017, substantially all of our royalty revenue has been derived from AbbVie’s net sales of MAVYRET/MAVIRET. Our ongoing royalty revenues from this regimen consist of annually tiered, double-digit, per-product royalties on 50% of the calendar year net sales of the 2-DAA glecaprevir/pibrentasvir combination in MAVYRET/MAVIRET. The annual royalty tiers return to the lowest tier for sales on and after each January 1.
COVID-19 Update
The COVID-19 pandemic had an impact on our royalty revenues received from AbbVie. We continued to report lower royalty revenue during fiscal 2022 and in the first quarter of fiscal 2023 as compared to periods ending before March 2020. The pandemic resulted in a decline in patient volumes, HCV diagnoses, HCV prescriptions and sales of MAVYRET/MAVIRET.
Please see Item 1A “Risk Factors” in our 2022 Form 10-K for additional discussion of risks and potential risks of the COVID-19 pandemic on our business, results of operations and financial condition.
Financial Operations Overview
We are currently funding all research and development for our wholly-owned programs, which are targeted toward the discovery and development of novel compounds with an emphasis on treatments for viral infections. As of the date of this report, we are conducting three Phase 2 studies and one Phase 1 study in our RSV program and one Phase 2 study in our SARS-CoV-2 program. We are also progressing other compounds into preclinical development.
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As a result of the timing of our clinical and preclinical development programs, we expect our research and development expenses to fluctuate from period to period. However, in the coming years, we expect our research and development expenses generally to increase as our wholly-owned programs advance.
We are funding our operations primarily through royalty payments received under our collaboration agreement with AbbVie and our existing cash, cash equivalents, and short-term and long-term marketable securities. Our revenue is currently dependent on royalty payments we receive from AbbVie on its sales of MAVYRET/MAVIRET. Absent a significant increase in the level of AbbVie’s MAVYRET/MAVIRET sales that generate our royalty revenue, and given the planned levels of our future expenditures for the advancement of our internally developed compounds, we expect to continue to have net losses in fiscal 2023 and for the foreseeable future.
Revenue
Our revenue is primarily derived from our collaboration agreement with AbbVie and AbbVie’s sales of MAVYRET/MAVIRET, an 8-week treatment regimen for chronic HCV. During the first quarter of fiscal 2023, we also generated $1.0 million of license revenue from an upfront payment related to a license agreement for one of the antibacterial compounds we are no longer developing.
The following table is a summary of revenue recognized for the three months ended December 31, 2022 and 2021:
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|
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Three Months Ended December 31, |
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|
2022 |
|
|
2021 |
|
|
|
(in thousands) |
|
Revenue |
|
|
|
|
|
|
Royalty revenue |
|
$ |
22,585 |
|
|
$ |
27,648 |
|
License revenue |
|
|
1,000 |
|
|
|
— |
|
Total revenue |
|
$ |
23,585 |
|
|
$ |
27,648 |
|
AbbVie Agreement
We currently receive annually tiered, double-digit royalties on our protease inhibitor product glecaprevir included in AbbVie’s net sales of MAVYRET/MAVIRET. Under the terms of our AbbVie agreement, as amended in October 2014, 50% of AbbVie’s net sales of MAVYRET/MAVIRET are allocated to glecaprevir. Beginning with each January 1, the cumulative net sales of MAVYRET/MAVIRET start at zero for purposes of calculating the tiered royalties.
Internal Programs
As our internal product candidates are currently in Phase 1 or Phase 2 clinical development, we have not generated any revenue from our own product sales and do not expect to generate any revenue from product sales derived from these product candidates for at least the next several years.
Operating Expenses
Our operating expenses are comprised of research and development expenses and general and administrative expenses.
Research and Development Expenses
Research and development expenses consist of costs incurred to conduct basic research, such as the discovery and development of novel small molecules as therapeutics, as well as any external expenses of preclinical and clinical development activities. We expense all costs of research and development as incurred. These expenses consist primarily of:
•personnel costs, including salaries, related benefits and stock-based compensation for employees engaged in scientific research and development functions;
•third-party contract costs relating to research, formulation, manufacturing, preclinical study and clinical trial activities;
•allocated facility-related costs; and
•third-party license fees.
Project-specific expenses reflect costs directly attributable to our clinical development candidates and preclinical candidates nominated and selected for further development. Our remaining research and development expenses are reflected in research and drug discovery, which represents early-stage drug discovery programs. At any given time, we typically have several active early-stage research and drug discovery projects. Our internal resources, employees, and infrastructure are not directly tied to any individual
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research or drug discovery project and are typically deployed across multiple projects. As such, we do not report information regarding costs incurred for our early-stage research and drug discovery programs on a project-specific basis. We expect that our research and development expenses will increase in the future as we advance our research and development programs. To date we have not identified any significant impact of inflation on spending in research and development, but it is uncertain whether there will be inflationary impacts in future periods.
Our research and drug discovery and development programs are at early stages; therefore, the successful development of our product candidates is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict. Given the uncertainty associated with clinical trial enrollments, particularly in the context of the COVID-19 pandemic, and the risks inherent in the development process, we are unable to determine the duration and completion costs of the current or future clinical trials of our product candidates or if, or to what extent, we will generate revenue from the commercialization and sale of any of our product candidates. We anticipate that we will make determinations as to which development programs to pursue and how much funding to direct to each program on an ongoing basis in response to the preclinical and clinical success and prospects of each product candidate, as well as ongoing assessments of the commercial potential of each product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, which include salaries, related benefits, and stock-based compensation, of our executive, finance, business and corporate development, and other administrative functions. General and administrative expenses also include travel expenses, allocated facility-related costs not otherwise included in research and development expenses, directors’ and officers’ liability insurance premiums, professional fees for auditing, tax, and legal services and patent expenses.
We expect that general and administrative expenses will continue to increase in the future primarily due to the ongoing expansion of our operating activities in support of our own research and development programs, as well as our patent litigation seeking damages for infringement of one of our COVID-19 patents. To date we have not experienced a significant impact of inflation on spending in general and administrative, but we anticipate inflation may impact future periods.
Other Income (Expense)
Other income (expense) consists of interest and investment income, net and the change in fair value of our outstanding Series 1 nonconvertible preferred stock. Interest income consists of interest earned on our cash equivalents and short-term and long-term marketable securities balances and interest earned for any refunds received from tax authorities. Investment income consists of the amortization or accretion of any purchased premium or discount, respectively, on our short-term and long-term marketable securities. The change in fair value of our Series 1 nonconvertible preferred stock relates to the remeasurement of these financial instruments from period to period as these instruments may require a transfer of assets because of the liquidation preference features of the underlying instrument.
Income Tax Benefit
Income tax benefit is based on our best estimate of taxable net income (losses), applicable income tax rates, net research and development tax credits, net operating loss carrybacks, changes in valuation allowance estimates and deferred income taxes.
Results of Operations
Comparison of the Three Months Ended December 31, 2022 and 2021
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Three Months Ended December 31, |
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2022 |
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2021 |
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|
(in thousands) |
|
Royalty revenue |
|
$ |
22,585 |
|
|
$ |
27,648 |
|
License revenue |
|
|
1,000 |
|
|
|
— |
|
Research and development |
|
|
40,902 |
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|
|
48,549 |
|
General and administrative |
|
|
12,696 |
|
|
|
9,508 |
|
Interest and investment income, net |
|
|
993 |
|
|
|
258 |
|
Income tax benefit |
|
|
34 |
|
|
|
36 |
|
Net loss |
|
$ |
(28,986 |
) |
|
$ |
(30,115 |
) |
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Royalty Revenue
We recognized royalty revenue of $22.6 million during the three months ended December 31, 2022 as compared to $27.6 million during the three months ended December 31, 2021. The $5.0 million decrease in royalty revenue was due to AbbVie’s lower reported HCV sales as compared to the comparable period in 2021. HCV patient volumes continue to remain below pre-COVID-19 levels.
Our royalty revenues eligible to be earned in the future will depend on AbbVie’s HCV market share, the pricing of the MAVYRET/MAVIRET regimen and the number of patients treated. In addition, at the beginning of each calendar year (the second quarter of our fiscal year), our royalty rate resets to the lowest tier for each of our royalty-bearing products licensed to AbbVie.
License Revenue
We also recognized $1.0 million of license revenue during the three months ended December 31, 2022 related to an up front payment received for a license agreement for one of the antibacterial compounds we are no longer developing.
Research and development expenses
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Three Months Ended December 31, |
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2022 |
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2021 |
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(in thousands) |
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R&D programs: |
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Virology |
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$ |
38,758 |
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$ |
42,522 |
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Liver disease (non-viral) |
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|
851 |
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|
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5,554 |
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Other |
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|
1,293 |
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|
|
473 |
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Total research and development expenses |
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$ |
40,902 |
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|
$ |
48,549 |
|
The level of research and development expenses for the three months ended December 31,2022 decreased by $7.6 million compared to the same period in 2021. The decrease in costs of $3.8 million in our virology program was primarily due to a decrease in manufacturing and clinical trial costs due to the timing and scope of clinical trials. The costs in our non-viral liver disease program decreased by $4.7 million as we wound down our non-alcoholic steatohepatitis, or NASH, program, which is now substantially complete.
We expect our research and development expenses will increase in the future as we conduct more clinical development activities.
General and administrative expenses
General and administrative expenses increased by $3.2 million for the three months ended December 31,2022 compared to the same period in 2021. The increase was due to an increase in stock-based compensation expense and an increase in headcount in support of expansion of our research and development operations.
Interest and investment income, net
Interest and investment income, net, increased $0.7 million for the three months ended December 31, 2022, as compared to the same period in 2021. The increase was due to changes in interest rates year over year.
Liquidity and Capital Resources
We fund our operations with cash flows from our royalty revenue and our existing financial resources. At December 31, 2022, our principal sources of liquidity were cash, cash equivalents and short-term and long-term marketable securities totaling $241.4 million.
The following table shows a summary of our cash flows for the three months ended December 31, 2022 and 2021:
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Three Months Ended December 31, |
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2022 |
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2021 |
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(in thousands) |
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Cash provided by (used in): |
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Operating activities |
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$ |
(35,641 |
) |
|
$ |
(13,271 |
) |
Investing activities |
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|
33,569 |
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|
|
45,501 |
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Financing activities |
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|
301 |
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|
|
9,632 |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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$ |
(1,771 |
) |
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$ |
41,862 |
|
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Net cash used in operating activities
Cash used in operating activities was $35.6 million for the three months ended December 31, 2022 as compared to cash used in operating activities of $13.3 million for the same period in 2021. Our cash used in operating activities increased $22.4 million, driven by timing of our research and development payments year-over-year as well as a federal tax refund of $8.5 million received in 2021.
For the foreseeable future, we expect to continue to incur substantial costs associated with research and development for our internally developed programs.
Net cash provided by investing activities
Cash provided by investing activities was $33.6 million for the three months ended December 31, 2022 as compared to cash provided by investing activities of $45.5 million for the same period in 2021. Our cash provided by investing activities decreased $11.9 million, driven by timing of purchases, sales and maturities of marketable securities in 2022 compared to 2021 and increased capital expenditures in 2022 for the buildout of our 400 Talcott Avenue expansion.
Net cash provided by financing activities
Cash provided by financing activities was $0.3 million for the three months ended December 31, 2022 as compared to cash provided by financing activities of $9.6 million for the same period in 2021. Our cash provided by financing activities decreased $9.3 million, driven by an decrease in proceeds from stock option exercises.
Funding requirements
As of December 31, 2022, we had $241.4 million in cash, cash equivalents and short-term and long-term marketable securities. We believe that our existing cash, cash equivalents and short-term and long-term marketable securities as of December 31, 2022, and cash flows from our continuing HCV royalties, will be sufficient to meet our anticipated cash requirements into approximately the fourth quarter of fiscal 2024. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.
Our future capital requirements are difficult to forecast and will depend on many factors, including:
•the amount of royalties generated from MAVYRET/MAVIRET sales under our existing collaboration with AbbVie, including any continuing impact of COVID-19 on the number of treated HCV patients;
•the scope, progress, results and costs of researching and developing our product candidates on our own, including conducting advanced clinical trials;
•the number and characteristics of our research and development programs;
•the cost of manufacturing our product candidates for clinical development and any products we successfully commercialize independently;
•our ability to establish new collaborations, licensing or other arrangements, if any, and the financial terms of such arrangements;
•opportunities to in-license or otherwise acquire new technologies and therapeutic candidates;
•costs associated with prosecuting our patent infringement suit regarding use of a coronavirus 3CL protease inhibitor in Paxlovid, Pfizer's antiviral treatment for COVID-19;
•the timing of, and the costs involved in, obtaining regulatory approvals for any product candidates we develop independently;
•the cost of commercialization activities, if any, of any product candidates we develop independently that are approved for sale, including marketing, sales and distribution costs;
•the timing and amount of any sales of our product candidates, if any, or royalties thereon;
•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents, including any litigation costs and the outcomes of any such litigation; and
•potential fluctuations in foreign currency exchange rates.
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Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financing activities. We do not have any interest in entities referred to as variable interest entities, which include special purpose entities and other structured finance entities.
Contractual Obligations and Commitments
There have been no material changes to the contractual obligations reported in our 2022 Form 10-K.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See our 2022 Form 10-K for information about critical accounting policies as well as a description of our other significant accounting policies.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is set forth in Note 2 to the consolidated financial statements included in this Form 10-Q.