Enanta, No Longer Obscure, Seeks Slice of Big Hepatitis C Market

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an overhaul. The company had more than 80 employees—far too big when considering how much cash it had in the bank and how fast it was being burned up. So just as Luly came onboard, Enanta downsized to roughly 50 people and changed its direction. Luly says Sun Or had planted the “seeds” for both a hepatitis C and an antibiotics program, so Enanta could hedge its bets in both areas and not rely solely on one thing. Even so, it really branded itself as an antibiotics company with a single hepatitis C program in its back pocket, Luly says.

It’s a good thing Enanta went that route, too, because it ended up saving the company. Enanta, in 2003, needed to sell a new story to investors that had poured millions into a company that was now going in a different direction. To get that cash, it needed to hit some milestones, like unearthing an actual drug candidate and finding a partner to help move it forward, according to Luly. Fortunately, Enanta found both in an antibiotic candidate for community-acquired pneumonia that it called EDP-013420.

The candidate was promising enough that Japanese pharma giant Shionogi, then the largest antibiotic company in Asia, bought in. The two signed a licensing deal in 2004, through which Enanta gave up Asian rights to the product. It was huge for Enanta. The company has never disclosed the financial numbers tied to the deal (Luly will only say Enanta got a “very good” up front payment), but Enanta hit a number of milestone triggers to add much needed cash to its bank account. Enanta also got the chance to “learn and to build” in other ways. It ran the first clinical trials for EDP-013420 on its own, manufactured the drug in-house for the studies, and supplied it to Shionogi for early studies in Japan.

“When you’ve gone through that process and withstood that rigor, not only did it help build a great relationship with a terrific partner, but I think the investors see that as further validation of, ‘hey these guys know what they’re doing, and maybe there is something there,’” Luly says (Shionogi still owns about 8.9 percent of the company).

Rather than taking that cash and going full bore into antibiotics, Enanta instead invested it elsewhere. It used the Shionogi dollars to start developing its nascent hepatitis C program. At the time, Enanta didn’t even have a drug candidate yet—just some intellectual property for a protease inhibitor, a type of antiviral drug that came into vogue in the 1990s as part of cocktail therapies for HIV.

That decision proved prescient, because Enanta’s antibiotic never made it through clinical trials. EDPT-013420 completed an early Phase II study, but did so at a time when, as Luly says, the FDA’s guidance on antibiotics “moved around a bit.” Some companies with late-stage antibiotics flopped after having to unexpectedly run additional trials that took extra time and money. Pharma’s interest in the area was waning. Further, controversy exploded around telithromycin (Ketek), the antibiotic Enanta was testing its own drug against in Phase II trials, and it was taken off the market. And even though Enanta owned most of the drug’s rights, the company was far too small to ever think of amassing the huge sales force needed to commercialize a drug in primary care. Eventually, Enanta just stopped developing it, Luly says.

Even so, the antibiotic had served its purpose. It kept Enanta afloat for years, enabling it to operate without raising additional rounds of cash that diluted the ownership stakes of early investors. The antibiotic also pulled in enough cash to propel Enanta’s diversification strategy into hepatitis C, right as that market was starting to warm up. Enanta’s intellectual property soon became ultra-valuable as large players all over the biotech and pharma world began … Next Page »

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