Good afternoon, and welcome to Enanta Pharmaceuticals Fiscal Second Quarter Financial Results Conference Call. [Operator Instructions] There will be a question-and-answer session at the end of the prepared remarks. [Operator Instructions] I would now like to turn the call over to Jennifer Viera, Senior Director, Investor Relations. Thank you. Please go ahead.

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

Thank you, Jennifer. Good afternoon, everyone. I'd like to take a moment to acknowledge the extraordinary times we are experiencing during the COVID-19 pandemic. Our thoughts are with those who are directly affected. And we are grateful for the heroic efforts of caregivers, first responders and many others who are making great sacrifices for the common good, as we navigate through the worst weeks of this crisis. The safety and well-being of our employees is paramount and we will continue to prioritize it as we move forward. I want to thank our employees for their unwavering dedication to our mission during these last several weeks. In a period of great upheaval and uncertainty, their commitment has allowed us to maintain continuous business operations and momentum that will enable us to execute on our business plans and milestone goals to the best possible extent given the circumstances. This global healthcare crisis has strengthened our resolve to advance novel therapies for unmet needs. And our core expertise in both virology and respiratory diseases positions Enanta to be part of the solution for COVID-19, and other emerging viral threats. To that end, I'll start by highlighting the newest disease program in our respiratory virus pipeline, namely, COVID-19. As you know, in mid-March, we announced that we initiated a program to discover direct-acting antiviral drug candidates for the treatment of patients infected with COVID-19. Based on our proven track record in virology and our capabilities in respiratory diseases, we believe we can leverage our core competencies to discover a potential treatment for COVID-19. That said, we are leveraging our experience and taking a two-pronged approach for our COVID-19 Discovery efforts. Not only are we testing compounds from our antiviral compound library for potential activity against the virus, we are using our background and expertise…

Thank you, Jay. I would like to remind everyone that Enanta reports on a September 30th fiscal year schedule. Today, we are reporting results for our second fiscal quarter ended March 31, 2020. For the quarter, total revenue was $27.6 million and consisted entirely of royalty revenue earned on AbbVie's global HCV product sales. This compares to total revenue of $39.6 million for the same period in 2019. AbbVie have stated that it's lower HCV sales were due to a decline in treated patient volumes and select international markets and increased competition affecting pricing and market share within the US Managed Medicaid segment. Royalty revenue for the quarter was calculated on 50% of MAVIRET sales at a royalty rate of 10% after adjustments for certain contractual discounts and rebates, which historically have been approximately 1.6% of AbbVie's total reported HCV product sales. As a reminder, our royalties are calculated on a calendar year basis. Therefore, royalties for our fiscal second quarter ending March 31 are calculated at the lowest royalty rate tier for our fiscal year. You can review our royalty tier schedule in our 2019 Form 10-K. Moving on to our expenses. For the three months ended March 31, 2020, research and development expenses totaled $32.6 million, compared to $34.2 million for the same period in 2019. The decrease was primarily due to a decrease in clinical trial expense due to the timing of costs in the prior year for Phase II studies in NASH and PBC. General and administrative expense for the quarter was $6.9 million compared to $6.8 million for the comparable quarter in 2019. Enanta recorded an income tax benefit of $3.9 million for the three months ended March 31, 2020 compared to an income tax benefit of $3.2 million for the same period in 2019. In the current quarter, we recorded an income tax benefit driven by our pre-tax loss and increased research and development tax credits. In the prior year, Enanta recorded an income tax benefit despite reporting a pretax income due to tax deductions from employee stock award-related activity during the quarter. Net loss for the three months ended March 31, 2020 was $6 million, or a loss of $0.30 per diluted common share, compared to net income of $4.1 million, or $0.20 per diluted common share for the corresponding period in 2019. Enanta ended the quarter with approximately $435 million in cash and marketable securities, an increase of approximately $35 million from our 2019 fiscal year-end balance of $400 million. We expect that these cash resources as well as our continuing royalty revenue will be sufficient to meet our anticipated cash requirements for the foreseeable future. Further financial details are available in our press release and will be available in our quarterly report on Form 10-Q when filed. I'd now like to turn the call back to the operator and open up the lines for questions. Operator?

[Operator Instructions] Your first question is from the line of Yasmeen Rahimi with Roth Capital Partners.

Hi, team. Thank you for all the updates. Two questions for you. The first one is, can you kindly shed some light on why the INTREPID study may have missed on its primary endpoint? Is there any reason that maybe you could have recruited more severe PBC patients that could contribute or we also noticed that the placebo response was higher than we had hoped for. Any color in that regards could be helpful for us. And then the second question is, can you give us an update on where you are in regards to your antiviral development against SARS-CoV-2? How much progress has been made just since the announcement -- announcement was made a few weeks ago? And thank you so much for taking our question.

Thanks, Yas. This is Jay. Why don't I take the COVID question, and I'll ask Nathalie to talk about the INTREPID question. So on the COVID side of things, as you know, we announced our program in the March timeframe after kind of watching the coronavirus start to pick-up and it became pretty clear that it was very different than other coronaviruses, which we hadn't paid that much attention to SARS1 sort of burned out on its own and MERS really substantially went away. It still pops up now and then, but only in regions and in people who have close proximity to camel. So it isn't really a sort of a global threat. But as we all know now, in Spain [Phonetic] COVID seems to be behaving very differently. So we mobilized the team just several weeks ago and have been taking as -- as some have a multipronged approach, our first approach is just getting key things from our library up and ready for testing. As you know, we've worked on lots of different viruses over the years. Within each virus, we worked on lots of different mechanisms. Against each virus and within each mechanism, we often have multiple different structural classes of molecules and so forth. And so we've got a pretty robust library for selection molecules for testing in many different tumor types. So, we've mobilized that external effort. And I would say it's certainly still -- it's still going on. There is a backlog of testing at a lot of these facilities who can handle the BL-3 conditions required for SARS-CoV-2, but we're going through that. So that's a little bit more of a passive activity we hope we might find an interesting chemical launching point if we do it, it saves us that much time. But also not leaving anything to chance we're taking on sort of a direct targeted approach, just like we do with all of our viruses where we unpack the virus figure out where key vulnerabilities might be. And then we learn about to identify certain targets and then optimize highly -- ideally highly potent, safe, convenient to use in this case oral drugs for treatment. So that is more classical, if you will, drug discovery initiative has started -- it started on multiple different targets. Among them, we like protease, that's probably not a surprise based on our legacy and hepatitis C and chemistry and biology has ensued. So, it's been just a short number of weeks and under sort of difficult constraints of the COVID backdrop. But the teams are again highly mobilized on effort. [Phonetic] So we don't have any breaking results to report this quarter, but we'll be giving updates as the year progresses. Nathalie, do you want to comment on the INTREPID?

Sure. Thank you for your question, Yasmeen. So, maybe a few consideration I can point you out. The choice of the endpoint, as you can notice, we use the proportion of patients with more than 20% reduction, which for proof-of-concept study of 12 weeks was setting up primary endpoint as a high bar. So I think it's important just to notice that. If we look at the change over time for ALP, we had a nice reduction over time that was statistically significant. So I believe that there is a few consideration that I can comment on missing the endpoint here. There is probably a lack of power of the study, we decided while back to [indiscernible] the recruitment, because we figure that that point that we had sufficient data that could help us to meet the endpoint with the number of 68 subject. You are right to absolutely point out the fact that we have a higher placebo effect than other studies. And I think the other consideration in a small sample size was the fact that we have a little bit higher rate of discontinuation that we anticipated because we calculated our sample size and power. That could have also contributed to missing the endpoint. From a numerical standpoint, we have a nice difference even from the placebo. And I think given the small sample size and the randomization ratio that we had for 3 to 1, one subject can make a huge difference as far as expressing significant P value. So this is what I can share today. We obviously we'll be looking further to the entire data set, and I hope to bring more color to the result.

Thank you, Nathalie, and thank you, Jay, for the color.

You're welcome.

Your next question is from the line of Brian Skorney with Baird.

Hi, how is it going? Thanks for -- this is Luke [ph] on for Brian. Thanks for taking the call. We were wondering, looking at the COVID clinical planned on the road have other programs and there multi-patients severity level with prophylactic, mild to moderate and severe patients. How does that frames your outlook on entering clinical development in the future? Thanks.

Yes, I think like any -- any new indication, this is certainly a new indication for people to confront. It's going to be -- it's going to evolve over time. So, certainly, in early days of crisis mode, people are getting treated at late stages of infection, perhaps too late. By then, COVID has progressed from an upper airway disease into a lower airway disease, we get a lot of inflammation going on cytokine storms and other things in complications, and it's certainly not ideal. And to look at antiviral in late stage disease is asking an awful lot of any regions [Phonetic] including all the ones that have been tested to-date. We can see why people are doing it, that makes good sense. You don't have anything else when you're in the crisis mode. So while people are waiting for other kinds of more optimized products to come along, waiting for the possibility of vaccines, that's about all you can do. We're obviously not participating in vaccine discovery or development. And we're actually not looking toward entering into patients when they're further progressed in their disease. I think we're sort of thinking a little bit about like RSV. And if you sort of imagine where the [Indecipherable] may eventually go. It's really headed toward -- ultimately, it will be great to get to a state where patients present perhaps not unlike they do in our RSVP study that if there is symptomatic for a few days, they come in, they walk into a clinic, they can get tested. There is a rapid diagnostic test available. Obviously, we've been doing this for a while now in our RSVP study. And then if it lights-up [Phonetic] COVID, you would ideally treat in one direction; if it lights up RSV, treat in another direction. If it lights up flu, you treat in another direction. And so we're probably a ways off [Phonetic] we and others before COVID can be managed that way. But I think that's a pretty -- an aspiration in terms of where we would like to ultimately really make an impact if we are able to. So, I think the longer and we've been saying this for quite a while in RSV, it's all about getting patients diagnosed early and getting them on drug early. And if you really want to change the course of human respiratory viral infections, that's the most likely the best way to do it. I think that's appreciated probably now with COVID, the challenge to date has been testing and also just managing the crisis at the back end of the disease. But hopefully we'll get to a more stable plateau where the course of the patient management can shift in a better direction.

Okay. Thank you so much.

You're welcome.

[Operator Instructions] Your next question is from the line of Akash Tewari with Wolfe Research.

Hi. First on RSV, both J&J and ReViral are assessing combo approaches using an F-inhibitor as well as an L or an N-inhibitor due to some synergistic effects and to combat any potential resistance to one MoA. How do you think your monotherapy approach would compare to those kind of results in regards to safety or efficacy? And would you ever consider a combo approach in later trials? And then, secondly, we know Enanta's a history of success with protease inhibitors, and we recently saw Pfizer identified a coronavirus C3-L inhibitor with minimal or affinity. What do you think would be some of the theoretical pros and cons to targeting this protease in COVID versus some of the other antiviral MoAs like NUCs.

Sure. So let me take your first question first. So I think, we -- the very beginning of our RSV program, we had sort of a clean slate [Phonetic]. We could have started with an entry inhibitors or NUCs or -- in our case, we went for the nucleoprotein approach and other mechanisms. The mechanism that we actually pushed to the side initially in favor of one that we're working on with EDP-938, that was the fusion approach or the so-called f approach. So people, obviously, got excited with the F protein approach first with synagis, a monoclonal antibody targeted against that. We think that makes a great deal of sense in prophylaxis where the drug in this case of monoclonal antibody can be present before the virus. And it's perfectly set up to be there on time and to block entry. That said, if you've got an ongoing pretty active infection where virus has already entered a lot of cells, you had a good deal of viral infection involvement. The fear is that may be a little bit late for fusion inhibitors have maximum impact, particularly if you're getting patients as they progress in time from the time of infection. So we targeted a non-fusion approach using an N inhibitor and it turns out that many of the reasons that you want to use a combination is to thwart the possibility of resistance. And it turns out that our molecule EDP-938 and this mechanism has a very high barrier to resistance, super high barrier. So -- and we've demonstrated that preclinically and have shown all the virology data along those lines. So, whereas I could see why the fusion inhibitor, which by the way fusion inhibitors in our hand in contrast to molecule like EDP-938 will actually have an…

Awesome. Thank you.

You're welcome.

There are no further questions. I will turn the call back over to Jennifer.

Thank you, everyone, for joining us today. If you have additional questions, feel free to give us a call in the office. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.