In a May 17 research note, ROTH Capital Partners analyst Yasmeen Rahimi reviewed possible data readout scenarios of Enanta Pharmaceuticals Inc.'s (ENTA:NASDAQ) Phase 2 respiratory syncytial virus (RSV) challenge and their potential resulting stock reaction. The study results are expected within the next two weeks.
Rahimi outlined that the most likely scenario according to ROTH is that Enanta's EDP-938 performs superiorly to Johnson & Johnson's ALS-008176 in terms of reducing viral load and improving symptoms, and thus Enanta's shares rise 30%.
The reasons for this outcome are that Enanta's EDP-938, with its mechanism of action, attacks the infection's root cause, which is replication, thereby allowing for more flexibility in the ideal treatment window. Also, EDP-938's safety profile affords higher dosing and thus attainment of efficacy. Further, EDP938 pushes for an efficacy at a higher level than other products, leading the virus to clear more quickly and avoid drug resistance.
"We are confident EDP-938 will set the highest efficacy bar in an RSV challenge study, with 90%-plus reduction in viral load compared to placebo (ALS-008176 showed only 73–88% and [Gilead's] GS-5806 showed 38–67%).
In a second case, Rahimi indicated, results are mixed, in other words viral load is reduced but symptoms do not improve by Day 12. Likely confusing to the Street, this would result in the share price remaining the same or dropping by up to 10%. "We view the bar of EDP-938 is to achieve 10x fold reduction in symptoms," the analyst wrote.
A third possibility is that EDP-938 fails in either efficacy or safety, the latter being unlikely, the analyst purported.
Rahimi noted that as of March 31, 2019, Enanta had $386.7 million in cash, cash equivalents and short- and long-term marketable securities, "enough to fund business and development programs for the foreseeable future."
ROTH has a Buy rating and a $130 per share target price on Enanta, whose stock is currently trading at around $90.96 per share.
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Disclosures from ROTH Capital Partners, Enanta Pharmaceuticals Ltd., Company Note, May 17, 2019
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
ROTH makes a market in shares of Enanta Pharmaceuticals, Inc. and as such, buys and sells from customers on a principal basis.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.
