Enanta Pharmaceuticals, Inc. Annual Report 2013

FY2013 Annual Report · Enanta Pharmaceuticals, Inc.

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From Chemistry to Cures

2013 Annual Report

To our Shareholders,

I’m pleased to provide you with an update of Enanta’s progress and to welcome the new shareholders
of Enanta.

2013 was truly a transformational year for Enanta. We completed our initial public offering in March
and made significant progress with our partners, AbbVie and Novartis, as they continued to advance
our three clinical-stage, collaborative compounds for the treatment of hepatitis C virus (HCV).

Our IPO provided us with $59.9 million in net proceeds, and the company ended the year with
approximately $112 million in cash and no debt.

AbbVie and Enanta announced positive top-line results from two Phase 3 clinical trials, SAPPHIRE-I
and SAPPHIRE-II, demonstrating sustained virologic response (SVR) rates of 96% following twelve
weeks of therapy in treatment-naïve and treatment-experienced genotype 1 (GT1) HCV patients using
a regimen containing ABT-450, Enanta’s lead protease inhibitor. ABT-450 is part of AbbVie’s
investigational three direct-acting antiviral (3D) regimen. Our partner AbbVie expects to announce
results of additional Phase 3 trials and file a New Drug Application (NDA) in the first half of 2014, which
would position Enanta to be one of just a few companies with the potential to benefit from the new all-
oral, interferon-free regimens for HCV expected to come to market by early 2015. Enanta is poised to
receive an additional $195 million in pre-commercialization milestones from AbbVie assuming our
continued success.

In our Novartis collaboration for NS5A inhibitors to the HCV virus, a Phase 1 study has been
completed and proof of concept studies are now ongoing in GT1 HCV patients. We have approximately
$395 million in aggregate potential milestone payments remaining in this collaboration, with the next
milestone of $15 million due at the start of a Phase 2 combination study.

Our contract with the National Institutes of Health and Infectious Diseases (NIAID) is focused on
Enanta’s lead Bicyclolide antibiotic candidate, EDP-788. Under the contract NIAID has agreed to fund
preclinical and early clinical development. Enanta is focused on the potential use of EDP-788 for the
treatment of MRSA (methicillin-resistant Staphylococcus aureus) infections.

We look forward to the potential commercial regulatory filings for the ABT-450 program and the
continued advancement of our other partnered and proprietary programs.

I would like to thank our shareholders and employees for their continued support, and I look forward to
updating you on our progress in the coming months.

Sincerely,

Jay R. Luly, Ph.D.
President and Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2013

‘ 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
(State or other jurisdiction of
incorporation or organization)

2834
(Primary Standard Industrial
Classification Code Number)

04-3205099
(I.R.S. Employer
Identification Number)

500 Arsenal Street
Watertown, Massachusetts 02472
(617) 607-0800
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:
Common Stock, $0.01 Par Value

Name of each exchange on which registered:
The NASDAQ Stock Market LLC (NASDAQ Global Select Market)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ‘ No È

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ‘ No È

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files): Yes È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and

will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. È

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act:
Large accelerated filer ‘
Non-accelerated filer È (Do not check if a smaller reporting company)

Accelerated filer
Smaller reporting company ‘

‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act): Yes ‘ No È

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the last business day of
the registrant’s most recently completed second fiscal quarter, March 28, 2013, based on the last reported sale price of the registrant’s
common stock of $18.20 per share was $221,157,646. The number of shares of the registrant’s Common Stock, $0.01 par value,
outstanding as of December 16, 2013, was 17,961,713 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement for its 2014 Annual Meeting of Stockholders scheduled to be held

on February 6, 2014, which Definitive Proxy will be filed with the Securities and Exchange Commission not later than 120
days after the registrant’s fiscal year end of September 30, 2013, are incorporated by reference into Part III of this Form 10-K.

As used in this Form 10-K, “Enanta,” “the Company,” “we,” “our,” and “us” refer to Enanta Pharmaceuticals,
Inc., except where the context otherwise requires or as otherwise indicated.

NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements concerning our business, operations and
financial performance and condition, as well as our plans, objectives and expectations for our business operations
and financial performance and condition. Any statements contained herein that are not statements of historical
facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,”
“due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,”
“seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate
future events and future trends, or the negative of these terms or other comparable terminology. These forward-
looking statements include, but are not limited to, statements about:

•

the continued commitment of our collaborators, AbbVie and Novartis, with respect to the development
of product candidates incorporating ABT-450, ABT-493 and EDP-239, respectively;

the completion, success and timing of preclinical studies and clinical trials conducted by AbbVie,
Novartis or us;

our and our collaborators’ abilities to obtain and maintain regulatory approval of therapies involving
our product candidates;

the receipt and timing of any milestone payments or royalties from AbbVie, Novartis or any other
collaborator;

our ability to obtain and maintain collaborators for our development programs or to obtain additional
funding;

the success of competing HCV or MRSA drugs that are now or later become available or other
developments or projections relating to our competitors and our industry;

changes in our or our collaborators’ plans to develop and commercialize our product candidates;

the rate and degree of market acceptance of any of our product candidates and any combination
therapies developed by AbbVie, Novartis or us;

the size and growth of the potential markets for our product candidates and our collaborators’ and our
abilities to serve those markets, including our belief that substantial opportunities exist for improved
treatments in HCV and bacterial infections;

our ability to obtain and maintain intellectual property protection for our product candidates and
operate our business without infringing on the intellectual property rights of others;

the loss of any of our key scientific or management personnel;

regulatory developments in the United States and foreign countries affecting disease indications for our
product candidates or anti-infective drugs generally;

the performance of third-party manufacturers of our product candidates, including our collaborators;

the accuracy of our estimates regarding our expenses, future revenue, capital requirements and needs
for additional financing;

our expectations regarding the time during which we will be an “emerging growth company” under the
JOBS Act; and

our financial performance.

These forward-looking statements are based on our management’s current expectations, estimates, forecasts and
projections about our business and the industry in which we operate and our management’s beliefs and
assumptions. These forward-looking statements are not guarantees of future performance or development and
involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a
result, any or all of our forward-looking statements in this Annual Report on Form 10-K may turn out to be

inaccurate. Factors that may cause actual results to differ materially from current expectations include, among
other things, those listed under “Risk Factors” and discussed elsewhere in this Annual Report on Form 10-K.
These forward-looking statements speak only as of the date of this Annual Report on Form 10-K. Except as
required by law, we assume no obligation to update or revise these forward-looking statements for any reason,
even if new information becomes available in the future. You should, however, review the factors and risks we
describe in the reports we will file from time to time with the SEC after the date of this Annual Report on Form
10-K.

ENANTA PHARMACEUTICALS, INC.

ANNUAL REPORT ON FORM 10-K

For the year ended September 30, 2013

INDEX

PART I

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

PART II
Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Consolidated Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

PART III

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Exhibits, Financial Statement Schedules
Signatures

PART IV

Item No.

1.
1A.
1B.
2.
3.
4.

6.
7.
7A.
8.
9.
9A.
9B.

10.
11.
12.

13.
14.

15.

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31
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ITEM 1. BUSINESS

Overview

PART I

BUSINESS

We are a research and development-focused biotechnology company that uses its robust chemistry-driven
approach and drug discovery capabilities to create small molecule drugs in the infectious disease field. We are
discovering and developing inhibitors designed for use against the hepatitis C virus, referred to as HCV. We
believe that a successful approach to a complete cure for HCV in most patients will likely require treatment with
a combination of drugs that attack different mechanisms necessary for replication and survival of HCV. Further,
as there are many variants of HCV, we are developing inhibitors that may be used in multiple combination
therapies, each designed and tested for effectiveness against one or more of those variants. Our development of
inhibitors for validated HCV target mechanisms, as well as our collaborations with AbbVie (which name refers
to Abbott Laboratories for all periods before January 1, 2013) and Novartis, should allow us to participate in
multiple drug combinations as we and our collaborators seek the best combination therapies for HCV in its
various forms. We estimate that total worldwide sales of HCV therapies were over $4 billion in 2012, and we
expect that sales will continue to grow with the anticipated introduction of new therapies. In addition to our HCV
programs, we have used our internal research capabilities to discover a new class of antibiotics, which we are
developing for the treatment of multi-drug resistant bacteria, including MRSA. We have utilized our internal
chemistry and drug discovery capabilities and our collaborations to generate all of our development-stage
programs, and we have active research efforts to broaden our infectious disease drug pipeline.

Our HCV portfolio includes inhibitors of four fundamental, validated HCV targets:

• NS3 Protease Inhibitors: ABT-450 and ABT-493. Our lead product candidate, ABT-450, is an
inhibitor of NS3 protease, which is a key protein in HCV viral replication. ABT-450 is being
developed as part of our AbbVie collaboration that has yielded ABT-450 and our next-generation
protease inhibitor, ABT-493. ABT-450 co-administered with ritonavir, which we refer to together as
ABT-450/r, is being tested in seven all-oral, interferon-free Phase 3 studies in combination with one of
AbbVie’s non-nucleoside polymerase and one of its NS5A inhibitors, plus ribavirin, for the treatment
of HCV in genotype 1-infected patients. Six of these trials are expected to be part of the initial
registration package designed for a total of at least 2,200 patients using a combination of these three
directing-acting antivirals, or DAAs, plus ribavirin. Three of these Phase 3 trials are using the three-
DAA combination with and without ribavirin.

In November and December 2013 AbbVie released preliminary results from the first two of these
clinical trials, SAPPHIRE-I and SAPPHIRE-II, which were the first announced Phase 3 trial results of
any company for an all-oral, interferon-free therapy in genotype 1 HCV patients. SAPPHIRE-I was a
631-patient trial of previously untreated, or naïve, adult patients and SAPPHIRE-II was a 394-patient
trial of treatment-experienced adult patients who had previously failed pegylated interferon and
ribavirin treatment. Both of these trials demonstrated after 12 weeks of treatment that 96% of patients
treated with the new regimen had no quantifiable virus in their blood 12 weeks after treatment, also
known as SVR12. AbbVie has guided that preliminary results from the remaining four phase 3 trials
will be released during 2013 and into early 2014. AbbVie has publicly projected that its development
plan would support a target commercial launch of a combination HCV therapy in early 2015. We
believe that we, together with AbbVie, will obtain exclusivity in ABT-450 in the United States and
other major market jurisdictions based on pending composition and use patent claims for ABT-450,
which we expect will continue at least into 2029, assuming all such patents issue.

Our Enanta-AbbVie collaboration has also produced ABT-493, a next-generation protease inhibitor for
HCV. In 2013 AbbVie initiated combination studies of ABT-493 with ABT-530 (AbbVie’s next-
generation NS5A inhibitor) in healthy volunteers, and we expect ABT-493 to begin dosing in HCV
patients in late 2013.

• NS5A Inhibitor: EDP-239. We have had a robust drug discovery effort directed at the NS5A protein,

which plays a key role in HCV viral replication. In February 2012, we entered into a collaboration with
Novartis for the worldwide development, manufacture and commercialization of NS5A inhibitors,
including our lead NS5A product candidate, EDP-239. In November 2012, Novartis initiated a Phase 1
clinical trial for EDP-239, and in 2013 initiated a trial testing EDP-239 in HCV patients. We believe
that we, together with Novartis, have exclusivity to EDP-239 in the United States based on issued
patent composition and use claims, which we expect will continue at least into 2030.

• Cyclophilin Inhibitors. Our research activities have also focused on a more recently validated target

against HCV, cyclophilin, which is a protein in the human body that has been shown to be involved in
HCV replication. By focusing on this human, or host, target rather than a viral target, we have selected
a mechanism shown to be less susceptible to the HCV resistance that can occur due to viral mutation in
response to therapy. Using our extensive chemistry expertise with small molecules, we have identified
a series of active cyclophilin binders designed to disrupt the interactions of HCV with cyclophilin. We
expect to advance a lead cyclophilin inhibitor into preclinical drug metabolism, pharmacokinetic, and
safety studies in 2014.

• Nucleotide Polymerase Inhibitor. We have a small-molecule drug discovery effort underway for

inhibitors of nucleotide polymerase in a clinically validated mechanism that is less susceptible to HCV
resistance. Our researchers have identified a promising lead series with significant antiviral potency in
vitro. We expect to select a candidate to advance into preclinical studies on our own in 2014.

In addition to our HCV programs, we have used our internal research capabilities to discover a new class of
antibiotics, called Bicyclolides, which we are developing for the treatment of multi-drug resistant bacteria,
including MRSA. These new antibiotic candidates include intravenous and oral forms for treatment of hospital
and community infections arising from MRSA. EDP-788 is our lead candidate for the treatment of MRSA. Our
preclinical and early clinical development of EDP-788 is funded under a contract with NIAID. We are
conducting IND-enabling studies and plan to initiate a clinical trial in the first quarter of 2014.

In connection with our collaboration efforts, AbbVie has funded all research and development of our protease
inhibitors since we entered into the collaboration in November 2006, and is responsible for obtaining regulatory
approvals and commercializing ABT-450 and any next-generation products worldwide. In 2006, we received
$57.2 million from AbbVie in connection with our entry into the collaboration agreement and AbbVie’s
simultaneous purchase of preferred stock from us. We also received a $40.0 million milestone payment in
December 2010 following AbbVie’s successful completion of a Phase 2a clinical trial and a $15.0 million
milestone payment in December 2012 based on AbbVie’s initiation of dosing in a Phase 3 clinical trial that
includes ABT-450. Assuming AbbVie’s successful development of the first protease inhibitor product, we will
also be eligible to receive $195 million of additional pre-commercialization milestone payments, as well as $80
million of additional milestone payments for each follow-on protease inhibitor product, if any, developed by
AbbVie and tiered royalties per product ranging from the low double digits up to twenty percent, or up to the
high teens on a blended basis, on AbbVie’s net sales, if any, allocable to our collaboration’s protease inhibitors.

Under our collaboration with Novartis, we received a $34.4 million upfront payment in March 2012, and an
$11.0 million milestone payment in January 2013 based on Novartis’ initiation of dosing in a Phase 1 clinical
trial that includes EDP-239. In addition, we are eligible to receive up to $395 million of additional milestone
payments for the first NS5A inhibitor product for which the specified milestones are achieved. We are also
eligible to receive tiered royalties ranging on a blended basis from the low double digits up to the high teens on

Novartis’ net sales, if any, allocable to each of our collaboration’s NS5A inhibitors. Novartis will fund all costs
associated with further development, regulatory approvals and commercialization of any NS5A inhibitor product
candidates in this collaboration and we retain co-detail rights in the United States.

Our Strategy

Our primary objective is to become a leader in the infectious disease field, with a focus on HCV and multi-drug
resistant bacterial infections. Our strategy includes the following key elements:

• Develop compounds against four fundamental, validated HCV targets to give us multiple opportunities
to participate in one or more of the potentially successful combination therapies for HCV. We believe
that a successful approach to a complete cure for HCV in most patients will likely require treatment
with a combination of drugs that attack different mechanisms necessary for replication and survival of
HCV. As there are many variants of HCV, we are developing inhibitors that may be used in multiple
combination therapies, each to be designed and tested for effectiveness against one or more of those
variants, or genotypes. Our HCV portfolio includes inhibitors of four fundamental, validated HCV
targets that we believe will provide the necessary therapeutic compounds for combination therapy, with
the goal of placing one or more of our compounds into the combination or combinations that will
ultimately be approved and accepted as preferred treatments for one or more genotypes of HCV.

• Collaborate with large pharmaceutical partners to accelerate the development and commercialization
of our lead HCV compounds. Our strategic partnerships allow us to join forces with collaborators with
substantially greater resources and late-stage development and commercialization expertise as we seek
the right combination for a cure for one or more genotypes of HCV. After testing ABT-450 in various
combinations in clinical trials, AbbVie is combining ABT-450 with one of AbbVie’s own non-
nucleoside inhibitors and one of its NS5A inhibitors. In addition, AbbVie is conducting combination
studies of our collaboration’s next-generation protease inhibitor, ABT-493, with AbbVie’s next-
generation NS5A inhibitor, ABT-530. At the same time, our own lead NS5A product candidate, EDP-
239, can become part of combination therapies developed by Novartis. The result is that our product
candidates are being tested in multiple regimens using different combinations of mechanisms,
increasing our chances of participating in more than one commercially successful combination therapy
for HCV in its various forms.

• Develop independently our own next generation HCV compounds and combination therapies with

lower susceptibility to viral resistance. We are independently developing a lead cyclophilin inhibitor
and will be selecting a nucleotide polymerase inhibitor for development, both of which we are seeking
to design with lower susceptibility to the viral resistance that is being generated by first-generation
(currently marketed) and second-generation HCV products. We are considering potential development
of a combination of these two types of inhibitors.

• Continue to leverage and fortify our intellectual property portfolio. We believe we have a strong
intellectual property position relating to the development and commercialization of HCV-targeted
therapeutics and antibiotics for the treatment of resistant pathogens.

•

Invest in research and early-stage development of product candidates. We intend to continue to invest
significant resources in research programs and early-stage development of product candidates in an
effort to identify and advance additional compounds that have the potential to address significant
unmet medical needs in the infectious disease field. We will continue to seek further innovations for
the treatment of HCV and other viral infections, as well as antibiotics for the treatment of resistant
bacteria, such as MRSA.

Our Research and Development Pipeline

The following table summarizes our product development pipeline in HCV antivirals as well as MRSA
antibiotics:

As detailed above, our only product candidate that has advanced beyond Phase 2 clinical trials is ABT-450.
Phase 3 trials of ABT-450 in combination therapy started in October 2012, and the full registration program of
six trials involving approximately 2,200 patients has been fully enrolled and the preliminary results of the first
two trials have been reported. We estimate that it may be early 2015 before a New Drug Application, or NDA,
for one of our collaborator’s combination therapies that includes ABT-450 could be approved by the FDA.

Our HCV Programs

Background and Overview of HCV Market

HCV is a virus that is a common cause of viral hepatitis, an inflammation of the liver. HCV is typically
contracted by contact with the blood or other body fluids of another individual infected with HCV. HCV is a
leading cause of chronic liver disease, including cirrhosis, organ failure and cancer, and the leading cause of
death from liver disease in the United States. HCV disease progression occurs over a period of 20 to 30 years,
with the majority of HCV-infected individuals generally exhibiting no major symptoms in the early stages of the
disease. Therefore, until a major symptom is diagnosed, many individuals are unaware they are infected and live

undiagnosed without seeking treatment. For that reason, new guidelines proposed by the United States Centers
for Disease Control and Prevention, or CDC, and currently under review would recommend screening for all
Americans born between the years 1945 and 1965 so that HCV-infected individuals would be aware of their
condition and could consider treatment options.

An estimated 150 million people worldwide are chronically infected with HCV and have an increased risk of
eventually developing liver cirrhosis or liver cancer. More than 350,000 people die every year from HCV-related
liver diseases. As of July 2008, the CDC estimated that approximately 3.2 million people in the United States are
chronically infected with HCV, with an estimated 17,000 new infections each year. We believe that the
chronically infected population remains largely untreated, even with the introduction of new regimens containing
a protease inhibitor in 2011. Currently approved therapies for HCV, which include interferon, ribavirin and the
new protease inhibitors, had aggregate worldwide sales of over $4 billion in 2012. We believe that annual
worldwide sales of these therapies and future approved therapies could increase sales in this market to $10 to $20
billion within the next ten years.

HCV is a small, single-stranded RNA virus. The specific genetic makeup, or genotype, of the virus can vary and
at least six genotypes have been characterized in HCV-infected patients, with over 50 sub-types identified.
Genotypes are designated with numbers (genotypes 1-6) and subtypes with letters (e.g. genotype 1a). HCV
genotypes 1, 2, 3, and 4 are found worldwide, but their prevalence varies among geographic regions. Genotype 1,
including its subtypes 1a and 1b, is the most common genotype globally, accounting for approximately 74% of
all HCV infections. It is estimated that patients with genotype 2 or 3 represent approximately 12% of the
worldwide chronically infected HCV population, with approximately 6% comprised of genotypes 4 through 6
and the remaining 8% of patients in other undesignated categories. The specific genotype and subtype of HCV in
a patient appears to play a significant role in the degree of efficacy of standard of care therapy. Genotype 1 is the
most difficult genotype to treat and the most common in North America and Europe.

Since the discovery of the virus in the late 1980s, considerable progress has been made in the treatment of HCV-
infected individuals. However, a protective vaccine is not yet available and current treatments remain ineffective
in a large percentage of the HCV-treated population. The standard of care for HCV traditionally has consisted of
weekly injections of interferon, a protein that interferes with viral replication, with twice-daily dosing of ribavirin
for 24 to 48 weeks. Ribavirin is a broad-spectrum drug that prevents the replication of a number of DNA and
RNA-based viruses. This regimen has been moderately effective in many patients, resulting in a cure in only
about 50% of genotype 1-infected patients. Medical practice defines a “cure” as the point at which there is no
quantifiable virus in a patient’s blood for a sustained period of time after cessation of therapy, which is often
referred to as a sustained virologic response, or SVR.

Recently introduced treatment regimens contain direct acting antivirals, or DAAs, with initial approval coming
for protease inhibitors. The first two protease inhibitors approved, telaprevir (Incivek™, Vertex Pharmaceuticals)
and boceprevir (Victrelis™, Merck), have shown cure rates of approximately 70% in genotype 1-infected
patients. Telaprevir and boceprevir were approved for use in combination with interferon and ribavirin in patients
infected with genotype 1 virus in 2011, and combination therapy incorporating a protease inhibitor has emerged
as a new standard of care for HCV patients. In November 2013 the FDA approved a new protease inhibitor from
Janssen Therapeutics, simeprevir (Olysio™), for the treatment of genotype 1 chronic hepatitis C in adult patients
with compensated liver disease. Simeprevir has shown cure rates of up to 80% in genotype 1-infected patients.
However, the once-daily treatment must still be combined with pegylated interferon and ribavirin. In December
2013, the FDA approved sofosbuvir (Sovaldi™), a nucleotide analogue inhibitor of the HCV NS5B polymerase
enzyme from Gilead. Sofosbuvir is a once-a-day treatment given in combination with ribavirin for the treatment
of chronic hepatitis C in adult patients with genotype 2 or 3 infection. Sofosbuvir may also be given in
combination with pegylated interferon and ribavirin for the treatment of chronic hepatitis C in treatment-naïve
adult patients with genotype 1 (the predominant genotype in the major world markets) and genotype 4 infection.

These new treatment regimens have several limitations that highlight the need for improved HCV therapies,
particularly for genotype 1 HCV, including:

•

Sub-Optimal Cure Rates. Current approved regimens containing a protease inhibitor lead to a cure rate
of approximately 70%- 80% in previously untreated, genotype 1 patients. Clinical trial participants
taking Sovaldi-based therapy (Sofosbuvir) achieved SVR12 rates of 50-90 percent. The cure rate is on
average lower among patients who did not fully respond to prior treatments with interferon and
ribavirin therapy. There is a need for a cure for the patients who have failed therapy, many of whom
may have developed HCV variants that are resistant to the specific protease inhibitors used in the
protease-based therapies.

• Dependence on Interferon. Current HCV therapy for genotype 1 (the predominant genotype in the
major world markets) still includes injected interferon as part of the treatment regimens, which
produces adverse events in over 50% of patients. Interferon often causes flu-like symptoms, fatigue,
headaches and nausea during treatment, which affects patients’ quality of life and can lead to
abandonment of therapy over the standard 24 to 48 weeks of therapy. We believe this has led to many
patients waiting for the availability of new, interferon-free therapies before undergoing treatment.

•

Side Effects Associated With Currently Approved Protease Inhibitors. Other serious side effects of the
new regimens containing a protease inhibitor include rash, anemia, itching (known as pruritus), and
gastrointestinal effects. Rash is observed in more than a quarter of the patients taking simeprevir and in
approximately half of patients treated with telaprevir and telaprevir-containing therapy and requires
strict adherence to a rash management plan in close collaboration with an experienced dermatologist.
Boceprevir administration can worsen the anemia that is observed with interferon and ribavirin therapy
alone.

Inconvenient Treatment Regimen. Though simeprevir and Sovaldi are once-a-day medicines, the
pharmaceutical properties of telaprevir and boceprevir require that they be dosed approximately every
8 hours, thus resulting in a complex treatment regimen that also includes weekly injections of
interferon. All currently approved protease inhibitors require co-administration with interferon for
treatment of genotype 1 HCV. We believe that demanding dosing requirements such as these can often
lead to poor compliance with the treatment regimen and can accelerate the development of HCV
resistance.

While providing a step forward, we believe these new treatment regimens may only provide sub-optimal cure
rates, will still require treatment with interferon for many patients, including genotype 1 patients, may carry other
undesirable side effect profiles, may require inconvenient dosing regimens, may be ineffective in many patient
populations and may often result in HCV resistance. Accordingly, we believe there remains a significant unmet
medical need in the HCV field, with an urgent need for improved treatments for HCV.

Scientific Background

Many of the new approaches under development targeting HCV focus directly on the viral life cycle and proteins
that are critical to HCV replication. Replication of the HCV genome occurs on intracellular membranes and
requires the participation of multiple viral proteins, some of which have enzymatic activities. Agents, often
referred to as inhibitors, that target viral proteins directly are generally referred to as direct acting antivirals, or
DAAs. Current DAA development efforts typically focus on the NS3 protease, the NS5A protein, and the NS5B
polymerase. In addition to targets in HCV itself, there are human host proteins that are critical to viral
replication. Inhibitors that interfere with host targets resulting in antiviral activity are referred to as host-targeted
antivirals, or HTAs. One of the most promising HTA approaches to HCV treatment focuses on the human host
protein known as cyclophilin A, or cyclophilin.

Key Proteins in the HCV Replication Complex

NS3 Protease. As HCV replicates, it generates long strands of protein that must be processed into many
individual active functional proteins that are referred to as non-structural proteins with the designated
abbreviation NS, including NS3 and NS5A. The NS3 protease is responsible for most of this protein processing
of the newly translated HCV protein, and plays an essential role in the viral life cycle. Inhibition of the protease
prevents these new critical proteins from forming and therefore prevents replication and survival of the virus.
NS3 protease inhibition is the mechanism of action for the two most recently approved HCV drugs, telaprevir
and boceprevir, both of which are DAAs.

NS5A. The NS5A protein has key roles in both the RNA replication of HCV and modulation of the physiology of
its host cell in the body. Research has shown that targeting NS5A gives rise to profound antiviral activity, and as
a result, this protein has emerged as an additional important DAA target for anti-HCV drug development.

NS5B Polymerase. HCV is a single-stranded RNA virus, and NS5B is an HCV RNA polymerase responsible for
synthesis of new HCV RNA, allowing the HCV genome to be copied and the virus to survive and replicate. Two
separate classes of DAA inhibitors of NS5B polymerase are in development as treatments for HCV. Nucleoside/
nucleotide inhibitors of NS5B directly inhibit the active site of that enzyme and prevent further elongation of the
RNA, and thus are equally active against all HCV genotypes. A second class, known as non-nucleoside
inhibitors, affects replication of the RNA by altering the shape of the enzyme at remote sites on the enzyme
surface so that any given inhibitor is usually only active against certain HCV genotypes.

Cyclophilin. Viral function requires an interaction of the viral protein NS5A with the human host protein known
as cyclophilin. Inhibitors that interfere with this NS5A-cyclophilin interaction would essentially provide a
treatment that protects the human host cells from infection by the virus. Several studies using the
immunosuppressive drug cyclosporine A, a known cyclophilin inhibitor, support the clinical validation of
cyclophilin as an HTA for treatment of HCV infection. However, the immunosuppressive activity of
cyclosporine A and associated side effects limit its clinical use and thus efforts are now focused on new agents
devoid of immunosuppressive activity. Alisporivir, a nonimmunosuppressive cyclosporine A derivative under
development by Novartis, has demonstrated effectiveness against many HCV genotypes, a high barrier to HCV
resistance and no cross-resistance with several DAAs.

The ultimate goal in HCV treatment is complete cure with total eradication of the virus, measured by SVR. We
believe that combination therapy will improve overall cure rates and will reduce the probability of resistance
arising to any single antiviral agent. In particular, a combination of target mechanisms that includes those with a

high barrier to resistance (cyclophilin, polymerase) may prove to be the most effective combination against
multiple genotypes of HCV. Unlike treatment for certain viruses, such as HIV, complete clearance of the HCV
virus is possible with effective therapy. This exciting prospect suggests that the ultimate goal of a complete cure
with total eradication of the virus is within reach.

Our Approach to the Treatment of HCV

We are pursuing four fundamental, validated targets within the HCV field that represent a broad approach to the
disease and specifically address the urgent unmet medical needs in current HCV therapies. Our approach
incorporates the main targets for future HCV therapy. Our DAA approach directly targets three critical proteins
of HCV, incorporating inhibitors of NS3 protease, NS5A protein, and NS5B polymerase. Inhibitors in our HTA
approach protect the human host protein cyclophilin from being co-opted into the viral replication machinery of
HCV. We believe a combination of inhibitors from our programs may provide a truly effective all-oral
interferon-free or interferon/ribavirin-free therapeutic approach to HCV, with complete eradication of virus, low
resistance rates, convenient dosing and acceptable side effect profiles.

ABT-450, a Protease Inhibitor for HCV Infection

Our protease inhibitor, ABT-450, discovered through our collaboration with AbbVie and currently in Phase 3
clinical trials, is a potent DAA that has demonstrated in vitro potency against known resistant HCV mutants. In
Phase 1 studies, ABT-450 co-administered with ritonavir, a commonly used boosting agent to increase the blood
concentrations of many protease inhibitors, was shown to be safe and well tolerated. Co-administration of ABT-
450 with ritonavir, which we refer to together as ABT-450/r, has enabled once-daily dosing of ABT-450. Phase 2
studies have demonstrated the efficacy of ABT-450/r in patients with chronic HCV, and other interferon-free
Phase 2 studies of ABT-450-containing regimens continue. In addition, AbbVie is conducting Phase 3 trials of
ABT-450/r in combination with AbbVie’s non-nucleoside polymerase and NS5A inhibitors, with and without
ribavirin. While AbbVie and other companies are developing interferon-free and interferon/ribavirin-free HCV
therapies in clinical trials, the efficacy of this approach has not yet been proven conclusively, nor has it resulted
yet in any product approved by the FDA.

We believe that a treatment regimen containing ABT-450/r may have significant advantages over currently
approved genotype 1 HCV treatment regimens containing protease inhibitors because of the following key
attributes:

•

Improved Antiviral Activity. Compared to the current leading protease inhibitor, telaprevir, ABT-450
has demonstrated superior antiviral activity against HCV in patients, including genotype1.

• No Interferon. Current genotype 1 HCV therapy still includes injected interferon. Interferon is often

associated with flu-like symptoms, fatigue, headaches and nausea during treatment. ABT-450/r is being
developed for use in one or more interferon-free regimens.

•

Tolerability. As noted above, serious side effects of current regimens for genotype 1 HCV that contain
protease inhibitors include rash, anemia, pruritus, or itchy skin, and gastrointestinal effects. In contrast,
most side effects in clinical trials including ABT-450/r to date were mild to moderate.

Shorter Treatment Regimen. ABT-450/r is being tested in various treatment combinations that are only
12 weeks in duration, as compared to the 24 to 48 weeks of treatment required with some of the current
interferon-containing regimens.

• More Convenient Treatment Regimen. ABT-450/r is being developed for oral, once-daily dosing. All of
the combinations including ABT-450/r that AbbVie is testing include only orally administered drugs
dosed either once or twice daily without the use of interferon. By comparison, current treatment
regimens containing a protease inhibitor require weekly interferon injections.

Under the AbbVie collaboration, we have granted AbbVie an exclusive worldwide royalty-bearing license,
including a right to grant sublicenses, to our intellectual property position for NS3 protease inhibitors. We also
granted AbbVie access to our drug discovery capabilities in the NS3 protease inhibitor field. AbbVie is
responsible for and funds all costs associated with the development, manufacturing and commercialization of
ABT-450 and other compounds under this collaboration agreement. We will be eligible to receive milestone
payments and royalties with respect to these compounds if such products are successfully commercialized by
AbbVie.

In November 2013, AbbVie announced preliminary results of its SAPPHIRE-I trial, and in December 2013 it
announced preliminary results of its SAPPHIRE-II trial. These are the first of six Phase 3 trials for an ABT-450-
containing regimen for treating genotype 1 infected patients. Results of the other four trials are expected to
continue to be reported through the end of 2013 and into the first calendar quarter of 2014. These six trials are
expected to be part of the initial registration package designed for a total of 2,200 patients using a combination of
three DAAs, including ABT-450/r, one of AbbVie’s non-nucleoside polymerase inhibitors and one of AbbVie’s
NS5A inhibitors, plus ribavirin. Three of these Phase 3 trials are using the same three-DAA (3D) combination,
with and without ribavirin. In addition, in November 2013 AbbVie announced topline results of a Phase 2 clinical
study, known as PEARL-I, in genotype 1a- and 1b-infected patients using a two-DAA (2D) dosing regimen
containing a combination of ABT-450/r and ABT-267 dosed once daily. In PEARL-I, 95% of treatment-naïve
patients with genotype 1b and 90% of treatment-experienced patients who had been null responders had
sustained viral response 12 weeks after treatment. AbbVie is also conducting a Phase 2 study of the 2D regimen
in Japan in genotype 1b and genotype 2-infected patients.

AbbVie has announced that it expects regulatory filings in the second calendar quarter of 2014 for an ABT-450-
containing treatment regimen for genotype 1 HCV patients. In addition, in May 2013 AbbVie announced that its
investigational direct-acting antiviral (DAA) combination with and without ribavirin for the treatment of
genotype 1 hepatitis C virus (HCV) infection was designated as a “breakthrough therapy” by the U.S. Food and
Drug Administration, or FDA. According to the FDA, breakthrough therapy designation is intended to expedite
the development and review of drugs for serious or life-threatening conditions. For a breakthrough therapy, once
a New Drug Application, or NDA, is accepted by the FDA, the agency in its discretion can grant it “priority
review” status, which would set a date for regulatory action within six months of the NDA filing.

AbbVie has also announced that its development plan would support a target commercial launch of such a
combination therapy in early 2015. AbbVie projects that there will be a potential worldwide market opportunity
of $12-14 billion for HCV therapies by 2016 based upon an assumed treatment rate of 300,000 to 350,000
patients per year across all genotypes of HCV in the U.S., Japan, Canada and four major European countries, or
the G7 countries. In addition, AbbVie had previously projected that peak sales for the combination therapies
AbbVie is developing could reach $2 billion or more worldwide. AbbVie’s projections are subject to risks and
uncertainties. The actual market opportunity may vary and there is no guarantee what portion, if any, of the
resulting market opportunity will be captured by an ABT-450-containing regimen, assuming that AbbVie obtains
approval of such a regimen. One or more Phase 3 trials containing ABT-450/r could take longer than anticipated
to complete or could have unexpected results, the FDA could find that the results of these trials are not adequate
to support marketing approval, the FDA could require additional clinical trials as a condition for approval, or
other HCV products could come to market sooner or achieve greater market acceptance than any for which
AbbVie ultimately obtains approval.

Clinical Development

Phase 1. An Investigational New Drug Application, or IND, was filed for ABT-450 in December 2008 and
clinical testing began in early 2009. ABT-450 was evaluated in a Phase 1a single ascending dose trial in doses
ranging from 25 mg to 900 mg, with and without ritonavir. Data from this trial showed that ritonavir co-
administration significantly boosted the ABT-450 plasma concentrations. ABT-450 is being developed with low

dose ritonavir to enhance exposure and allow once-daily dosing of ABT-450. A 14-day multiple dose study
showed that ABT-450/r was well tolerated and demonstrated pharmacokinetics consistent with once-daily
dosing.

Phase 2. In the first quarter of 2010, we and AbbVie announced the advancement of ABT-450/r into Phase 2
clinical trials. The objective of the initial Phase 2 study was to assess the safety, tolerability, pharmacokinetics
and antiviral activity of multiple dose strengths of ABT-450/r in treatment-naïve adults (i.e., those who have not
previously received treatment for HCV) infected with HCV genotype 1. These initial studies with ABT-450/r
paved the way for additional Phase 2a and 2b combination studies that use interferon-free regimens. The Pilot
and Co-Pilot trials, which were initiated in late 2010 and early 2011, respectively, included combination trials of
ABT-450/r with one or the other of two of AbbVie’s non-nucleoside polymerase inhibitors. The Aviator study,
which was initiated in 2011, was a trial of ABT-450/r and various combinations of two or three of the following:
one of AbbVie’s non-nucleoside polymerase inhibitors, one of its NS5A inhibitors and ribavirin.

All of the Phase 2 combination regimens tested by AbbVie were interferon-free, with a significantly shorter
treatment duration (12 weeks) and a simpler treatment paradigm compared to the currently approved protease
inhibitor regimens for genotype 1, all of which include weekly injections of interferon, and some of which
require daily oral doses of ribavirin for 24 to 48 weeks.

AbbVie Aviator Study. The Aviator study consisted of HCV genotype 1 non-cirrhotic patients enrolled in an
open-label trial of a 12-week interferon-free regimen consisting of three DAAs, with and without ribavirin. One
combination in the study consisted of ABT-450/r once daily, plus ABT-267 (AbbVie’s NS5A inhibitor), plus
ABT-333 (AbbVie’s non-nucleoside polymerase inhibitor) twice daily, plus weight-based ribavirin twice daily,
which is the same combination now being tested in Phase 3 trials. As reported in an initial data abstract from the
ongoing study, ABT-450/r was evaluated in treatment-naïve patients and treatment-experienced patients who had
little or no decrease in HCV during prior treatment with the standard of care, known as null responders. Results
from this ongoing trial demonstrated SVR12 in 99% of treatment-naïve HCV genotype 1-infected patients and in
93% of previous null responders (as compared with 47% SVR12 seen in the Co-Pilot study). The most common
AEs were fatigue (28% and 27%) and headache (28% and 31%) for treatment-naïve and previous null
responders, respectively. Initial results from the Aviator Phase 2 studies provided compelling support for the
potential development of an interferon-free combination containing ABT-450 for treatment of HCV.

Other Studies: AbbVie has announced that it is conducting additional exploratory clinical studies to determine if
a combination of ABT-450/r and ABT-267 dosed once daily can provide high cure rates in specific HCV
populations, including a Phase 2 study, known as PEARL-I, in genotype 4-, 1a- and 1b-infected patients and a
study in Japan in genotype 1b- and 2-infected patients. Preliminary results announced in November 2013 from
the PEARL-I study demonstrated SVR12 rates of 95% (40/42) in HCV genotype1b, treatment-naïve patients and
90% (36/40) among prior null responders.

Phase 3. In November 2013, AbbVie announced preliminary results of its SAPPHIRE-I trial, the first of six
Phase 3 trials for an all-oral, interferon-free, ABT-450-containing regimen for treating genotype 1-infected
patients. Results of SAPPHIRE-I, SAPPHIRE-II and of the other four Phase 3 trials are expected to be part of the
initial registration package designed for a total of at least 2,200 patients using a combination of the same three
DAAs, including ABT-450/r, one of AbbVie’s non-nucleoside polymerase inhibitors and one of AbbVie’s NS5A
inhibitors, plus ribavirin. The trials are designed to produce placebo-controlled results for treatment-naïve
patients (SAPPHIRE-I) and treatment-experienced patients (SAPPHIRE-II), as well as separate results for
genotype 1a (PEARL-IV) and 1b (PEARL-II and PEARL-III) patients, and patients with compensated cirrhosis
(TURQUOISE-II). Three of these Phase 3 trials (PEARL-II, PEARL-III and PEARL-IV) are using the three-
DAA combination, with and without ribavirin.

SVR12
d
GT1a = 95%
GT1b = 98%

GT1a = 96%
GT1b = 97%

Study Name

SAPPHIRE-I

Genotype/(Number of)
Patients

GT1, treatment-naïve
(631)

SAPPHIRE-II

GT1, treatment-
experienced (394)

PEARL-II

GT1b, treatment-
experienced (210 a)

PEARL-III

GT1b, treatment-
naïve (400 a)

PEARL-IV

GT1a, treatment-
naïve (300 a)

TURQUOISE-II

GT1, treatment-naïve
and treatment-
experienced
(with compensated
cirrhosis) (380 a)

Treatment Regimen

Treatment Duration

12 weeks

12 weeks, then
active treatment for
12 weeks

12 weeks

12 weeks, then
active treatment for
12 weeks

12 weeks

24 weeks

•

•
•

ABT-450/rb
+ABT-267c
ABT-333
Ribavirin

• Placebo

•

•
•

ABT-450/r
+ABT-267
ABT-333
Ribavirin

• Placebo

•

•
•

•

•
•

•

•
•

•

•
•

•

•
•

•

•
•

•

•
•

ABT-450/r
+ABT-267
ABT-333
Ribavirin

ABT-450/r
+ABT-267
ABT-333

ABT-450/r
+ABT-267
ABT-333
Ribavirin

ABT-450/r
+ABT-267
ABT-333
Placebo

ABT-450/r
+ABT-267
ABT-333
Ribavirin

ABT-450/r
+ABT-267
ABT-333
Placebo

ABT-450/r
+ABT-267
ABT-333
Ribavirin

a projected study population
b ABT-450/ritonavir
c ABT-267 is co-formulated with ABT-450/r, administered as two pills once daily
d SVR12 (Sustained Virological Response at 12 weeks after treatment completion): Continued HCV virus RNA
below lower limit of measurable quantitation (LLOQ) 12 weeks after end of treatment (EOT)

AbbVie SAPPHIRE-I Trial. The SAPPHIRE-I Phase 3 trial used a three-DAA, or 3D, regimen, consisting of
boosted protease inhibitor ABT-450/ritonavir, NS5A inhibitor ABT-267, and non-nucleoside polymerase
inhibitor ABT-333. The SAPPHIRE-I study used this 3D regimen plus ribavirin. Results from the 631-patient
SAPPHIRE-I trial demonstrated a sustained virologic response at 12 weeks post-treatment (SVR12) of 96% in
treatment-naïve adult patients chronically infected with genotype 1 HCV. The majority of patients were genotype
1a, which is considered the more difficult-to-treat subtype. The SVR12 rates of genotype 1a and genotype 1b were
95% and 98%, respectively. These results were based on an intent-to-treat analysis and were achieved after 12
weeks of treatment. The rate of virologic relapse or breakthrough was low, occurring in 1.7 percent of patients
receiving the 3D regimen. The treatment regimen was well tolerated, with an equal percentage of patients in the
active and placebo arms (0.6 percent) discontinuing treatment due to adverse events.

AbbVie SAPPHIRE-II Trial. The SAPPHIRE-II Phase 3 trial used the same 3D regimen as in SAPPHIRE-I,
including ribavirin. Results from the 394-patient SAPPHIRE-II trial demonstrated a sustained virologic response
at 12 weeks post-treatment (SVR12) in 96% of the treatment-experienced adult patients in the trial, all of whom
were chronically infected with genotype 1 HCV and had previously failed pegylated interferon and ribavirin
treatment. The majority of patients were genotype 1a, which is considered the more difficult-to-treat subtype and
approximately 49% of the patients were prior null responders, namely patients defined as not achieving a
significant reduction in the HCV virus during their prior treatment. The SVR12 rates of genotype 1a and genotype
1b were 96% and 97%, respectively. These results were based on an intent-to-treat analysis and were achieved
after 12 weeks of treatment. The rate of virologic relapse or breakthrough was low, occurring in 2 percent of
patients receiving the 3D regimen plus ribavirin. The treatment regimen was well tolerated, with 1 percent of
patients in the active arm and no patients in the placebo arm discontinuing treatment due to adverse events.

Additional information about AbbVie’s Phase 3 studies can be found on www.clinicaltrials.gov.

Next-Generation HCV Protease Inhibitor

AbbVie is also developing a next-generation protease inhibitor, ABT-493, discovered within the Enanta-AbbVie
collaboration. AbbVie has announced that this protease inhibitor has demonstrated activity in preclinical in vitro
testing against a broad range of HCV genotypes, including variants that have shown strong resistance to first
generation protease inhibitors. AbbVie has also announced that this next-generation protease inhibitor was
designed to enable once-daily dosing without ritonavir and to be co-formulated with AbbVie’s next-generation
NS5A inhibitor, ABT-530. AbbVie initiated a Phase 1 clinical trial of this next-generation protease inhibitor in
November 2012, and is expected to begin dosing ABT-493 in HCV patients late in 2013.

EDP-239, an NS5A Inhibitor for HCV Infection

EDP-239, another DAA, is our lead NS5A inhibitor. The EDP-239 compound has demonstrated potent activity
against major genotypes in the replicon assay, which is a common in vitro test for determining potency of an
active compound in reducing HCV replication.

In addition, EDP-239 has additive to synergistic antiviral activity when used in combination with other anti-HCV
therapeutics (DAA and HTA) in reducing HCV replication. Preclinical studies support excellent permeability and
absorption potentials in humans. The compound has preferential penetration to the liver, which is the target site
of infection, across all preclinical models tested. Human pharmacokinetic and pharmacodynamic modeling
suggests a low, once-daily clinical dose for future testing. Novartis has completed Phase 1 trials with EDP-239
and has initiated proof-of-concept studies in HCV patients.

We discovered EDP-239 internally at Enanta and entered into a collaboration with Novartis in February 2012,
granting Novartis exclusive, worldwide rights to develop, manufacture and commercialize EDP-239. Novartis
will fund all costs associated with the development, manufacture and commercialization of EDP-239 and related
NS5A products. In addition, through August 2013, Novartis was responsible for funding our drug discovery
efforts on additional selected compounds targeting NS5A. Under the agreement, we received an upfront payment
of $34.4 million, and in January 2013 we received an $11.0 million milestone payment based on Novartis’
initiation of dosing in a Phase 1 clinical trial that includes EDP-239. We are eligible to receive up to $395 million
of additional payments if Novartis achieves specified clinical, regulatory, and commercial milestones. We are
also eligible to receive tiered royalties ranging on a blended basis from the low double digits up to the high teens
on worldwide net sales of products, and retain co-detail rights, which would allow us to staff up to a specified
percentage of the sales force for a designated product in the United States.

In addition to EDP-239, we have developed other NS5A inhibitors in the discovery stage under our Novartis
collaboration, which may become candidates to be follow-on NS5A inhibitors.

Cyclophilin (Cyp) Inhibitors for HCV Infection

In anticipation of resistance arising to DAA HCV therapy that targets viral proteins, we have been developing an
alternative HTA approach that targets the human host protein, cyclophilin, which is essential for replication of
HCV.

Interruption of Viral Replication of HCV RNA by Cyclophilin Inhibitor

Abbreviation:

CypA refers to cyclophilin A

We have demonstrated in replicon assays that multiple lead cyclophilin targeting inhibitors are potent inhibitors
of HCV replication and are more potent than the clinical stage cyclophilin inhibitor alisporivir. Typically,
cyclophilin inhibitors are based on the structures of cyclosporine A, which is known to be immunosuppressant
with associated side effects that limit its clinical use. Based on our understanding of the structural elements of
cyclosporine A that contribute to immunosuppressive activity, we have designed those elements out of our
cyclophilin inhibitors and have confirmed a lack of in vitro immunosuppressive activity. We are advancing our
lead candidates in preclinical studies and are continuing to generate and characterize a number of additional
cyclophilin inhibitors in the discovery phase. We plan to select the most promising candidate and conduct IND-
enabling studies in 2014.

Nucleotide Polymerase Inhibitor Program for HCV Infection

We also have a program to develop inhibitors to HCV polymerase, which is another DAA mechanism considered
to have a high barrier to resistance. Our researchers have identified a promising nucleotide lead series with
significant antiviral potency in vitro. One of our lead compounds has demonstrated better in vitro potency than a
reference clinical stage nucleotide inhibitor, GS-7977 (Sofosbuvir), under development by Gilead Sciences. We
have an ongoing discovery effort in this inhibitor class and are considering a number of compounds for further
development. We plan to select a candidate in 2014 that is suitable for advancement into preclinical studies.

Our MRSA Antibacterial Program

Background of MRSA Antibiotics

The past three decades have witnessed a dramatic change in the epidemiology of resistant Gram-positive
bacterial infections all over the world. Families of common Gram-positive organisms include Streptococcus, or
Strep, Staphylococcus, or Staph, and Enterococcus. Among the conditions associated with these pathogens are
skin infections, bacteremia and endocarditis. One of these pathogens, known as methicillin-resistant Staph
aureus, or MRSA, was principally identified when resistance was observed to methicillin, an early antibiotic
used for Staph aureus and other bacterial infections. Increasingly, strains of MRSA have been identified that are
also resistant to many other antibiotics.

The recognition and spread of MRSA, as well as Enterococci resistant to the antibiotic vancomycin, referred to
as VRE, in the community and in healthcare facilities represents a major healthcare challenge. Widespread
reports of emerging bacterial resistance to existing antibiotics emphasize the need for continued research and
development of novel antimicrobials to address possible life-threatening infections caused by Gram-positive
resistant pathogens. MRSA was responsible for approximately 94,000 reported infections that resulted in over
19,000 deaths in the United States in 2005, compared to approximately 16,000 deaths from AIDS.

In addition to the high potential for large hospital outbreaks, MRSA and Gram-positive resistance are moving out
from hospitals into the community. During the past decade, rates of MRSA in the community have increased
rapidly. Thus, an urgent need exists for the development of new antibiotics that will be effective against Gram-
positive organisms that are resistant to current antibiotics in the macrolide class, such as clarithromycin
(BiaxinTM), azithromycin (ZithromaxTM) and telithromycin (KetekTM), as well as VRE and Enterococci that
are resistant to the oxazolidinone class of antibiotics, such as linezolid (Zyvox™). In addition, there exists a
significant need for agents that would allow step-down dosing, wherein MRSA patients being treated in a
hospital setting with intravenous treatment could be sent home on the same drug to be taken orally.

EDP-788 and Our Bicyclolide Antibiotics

Through our internal chemistry efforts, we have created a new family of macrolide antibiotics called Bicyclolides
that overcomes resistance and possesses a significantly improved product profile compared to existing macrolides
such as Zithromax™ and BiaxinTM. The main focus of our antibiotic work is on new mechanisms targeting resistant
Gram-positive pathogens, including MRSA and other Staph aureus bacteria resistant to currently marketed
macrolides. Our initial therapeutic focus is on skin infections, namely Acute Bacterial Skin and Skin Structure
Infections, or ABSSSI. Examples of ABSSSI are cellulitis/erysipelas, wound infection, major cutaneous abscess and
burn infections. Major pathogens involved in skin infections are Strep pyogenes and Staph aureus.

Our lead Bicyclolide antibiotic product candidate is EDP-788, which we are developing for use as an intravenous
drug in the hospital setting and for oral dosing in a home setting. EDP-788 is a prodrug, which means that it is
inactive until it is converted in the body into an active compound. EDP-788 is a highly water-soluble molecule
which, when administered, is cleanly and rapidly converted into the active compound.

The active compound generated from EDP-788 is EDP-322, a Bicyclolide we developed that demonstrates a
broad spectrum of activity against many bacterial organisms, including MRSA. In vitro, EDP-322 had either

comparable or superior activity to vancomycin (VancocinTM) or linezolid (ZyvoxTM) in MRSA clinical isolates.
A prominent advantage of EDP-322 is activity against isolates with resistance, in comparison to vancomycin,
linezolid and daptomycin (CubicinTM), the three therapies most often utilized as a “last stand” against resistant
bacteria. EDP-322 has also shown good activity against linezolid-resistant Enterococci. Finally, EDP-322
demonstrates excellent efficacy in a number of preclinical in vivo infection models.

Preclinical safety studies performed with EDP-322 presented no significant concerns. EDP-322 was evaluated in
normal healthy volunteers in two double-blind, randomized, placebo-controlled Phase 1 trials, evaluating
pharmacokinetic and safety parameters. EDP-322 showed good pharmacokinetics and was well tolerated in all
dose groups, with no findings of clinical significance in vital signs, physical exams, electrocardiograms or
clinical chemistry. Adverse events were limited to gastrointestinal effects that we believe were attributable to
inadequate water solubility of the drug, which we would not expect when dosing with the water-soluble EDP-
788.

Owing to its high water solubility, EDP-788 has the significant benefit of allowing for an intravenous, or IV,
formulation that has met the initial safety requirements for IV dosing. Preclinical testing has also demonstrated
that oral dosing of the prodrug EDP-788 results in higher blood levels of the active compound EDP-322 than
when EDP-322 is dosed orally itself. This makes EDP-788 ideally suited for stepdown dosing from IV
administration in the hospital to oral administration in the home setting. Neither EDP-322, nor any other
compound in the class of Bicyclolides, has yet been shown to be effective in pivotal clinical trials or resulted in
any product approved by the FDA.

All current Bicyclolide development activities are focused on EDP-788 with additional IND-enabling studies in
progress and the initiation of clinical trials planned for the first quarter of 2014. Our preclinical and early clinical
development of EDP-788 is funded under our contract with NIAID.

Drug Discovery and Chemical Development

We have internally developed all of the initial compounds in our research programs, and have participated in the
early development of these programs with our collaborators using our own internal research capabilities. Our
scientists have expertise in the areas of medicinal chemistry, molecular virology and pharmacology, with highly
developed sets of skills in compound generation, target selection, screening and pharmacology, preclinical
development and lead optimization. We are utilizing these skills and capabilities in our discovery and
development of antiviral and antibacterial product candidates.

We focus on infectious diseases representing large and growing market opportunities with significant unmet
medical needs. Our selection of a particular therapeutic target within those infectious diseases takes into
consideration the experience and expertise of our scientific team. The final selection is based on the possibility of
being able to generate robust medicinal chemistry structure-activity relationships to assist lead optimization and
secure relevant intellectual property rights. Once we have identified lead compounds, they are tested using in
vitro and in vivo pharmacology studies and in vivo research models of antiviral or antibacterial efficacy.

Collaboration and License Agreements

AbbVie

We entered into a Collaborative Development and License Agreement with Abbott Laboratories in November
2006 to develop and commercialize HCV NS3 and NS3/4A protease inhibitors. The agreement, which was
amended in January and December 2009, was assigned to AbbVie Inc. on January 1, 2013 in connection with
Abbott’s transfer of its research-based pharmaceuticals business to AbbVie. Under the agreement, we have
granted AbbVie an exclusive, worldwide, royalty-bearing license, including a right to grant sublicenses, to
specified intellectual property, including several issued U.S. patents, relating to protease inhibitors. We also
granted AbbVie access to our drug discovery capabilities in the HCV NS3 and NS3/4A protease inhibitor field.

AbbVie granted us a co-exclusive (together with AbbVie), royalty-free, fully paid license, without the right to
grant sublicenses, to certain of AbbVie’s intellectual property, AbbVie’s interest in joint intellectual property and
improvements discovered by AbbVie, for the purpose of allowing us to conduct certain development and
commercialization activities in the United States relating to protease inhibitors. AbbVie is responsible for and
funds all costs associated with the development, manufacturing and commercialization of ABT-450 and other
compounds under this agreement. We are eligible to receive milestone payments and royalties with respect to
these compounds. So long as a product candidate is being developed or commercialized under the agreement, we
undertake not to conduct any activity, or grant licenses to a third party, relating to protease inhibitors.

A joint steering committee was established under the agreement with review and oversight responsibilities for all
research, development and commercialization activities. The joint steering committee is comprised of three of
our senior personnel and three senior personnel from AbbVie; however, AbbVie has final authority to make all
decisions regarding development and commercialization activities.

The research program and the evaluation period, which was performed by both parties, ended in June 2011. The
lead compound is ABT-450, and additional compounds are under development. The first clinical milestone for
ABT-450 was achieved in 2010. To date, we have received upfront license payments, research funding, and
milestone payments totaling $107.5 million from AbbVie, and additionally we have received an equity
investment of $12.5 million from AbbVie.

We are eligible to receive future milestone payments totaling up to $40 million (exclusive of $55.0 million of
milestone payments already received) upon AbbVie’s achievement of regulatory filing milestones for the first
protease inhibitor product resulting from our collaboration, as well as additional milestone payments totaling up
to $155 million upon AbbVie’s achievement of commercial regulatory approval milestones for such product in
selected world markets. We are also eligible to receive additional milestone payments totaling up to $80 million
upon AbbVie’s achievement of similar commercial regulatory approval milestones for each additional product
containing a protease inhibitor.

We are eligible to receive tiered royalties ranging from the low double digits up to twenty percent, or up to the
high teens on a blended basis, based on the annual net sales of each product developed under the agreement.
However, if a product is determined to be a combination product under our agreement, the royalties will be
adjusted on a country-by-country and product-by-product basis to reflect a good faith determination of the
relative value of each pharmaceutically active ingredient, based on a fair market value calculation.

Royalties owed to us under the agreement can be reduced by AbbVie in certain circumstances, including (i) if
AbbVie exercises its right to license or otherwise acquire rights to intellectual property controlled by a third party
where a product could not be legally developed or commercialized in a country without the third-party
intellectual property right, (ii) where a product developed under the collaboration agreement is sold in a country
and not covered by a valid patent claim in such country, and (iii) where sales of a generic product are equal to at
least a specified percentage of AbbVie’s market share of a product in a country.

AbbVie’s obligation to pay royalties on a product developed under the agreement expires on a country-by-
country basis upon the later of (i) the last date upon which the manufacture, use or sale of a product would
infringe one of the licensed patents, and (ii) ten years after the first commercial sale of the product in the
applicable country.

Under the agreement, we hold an option to fund 40% of U.S. development costs and U.S. commercialization
efforts (sales and promotion costs), in exchange for 40% of any U.S. profits, allocable to any product candidate
that ultimately achieves regulatory approval and commercialization. We did not exercise our option right with
respect to ABT-450, but we retain our option right for any next-generation products developed under the
agreement, which must be exercised within a specified period after the successful completion of a Phase 2a trial
of the next-generation product. If we exercise our co-development option right, we would be eligible for a
different schedule of milestones and milestone payments than those described above, but would not be eligible to

receive royalties on U.S. sales. If the first collaboration product that is approved is not ABT-450 and is instead a
co-developed product, we would be eligible to receive future milestone payments totaling up to $120 million for
clinical development and regulatory and reimbursement approval milestones. If any additional collaboration
product containing a protease inhibitor is co-developed, we would be eligible to receive future milestone
payments totaling up to $40 million for similar regulatory and reimbursement approval milestones.

Our intellectual property existing as of the effective date of the agreement remains our property. Any intellectual
property jointly developed will be jointly owned. We will have unilateral right to enforce Enanta patent rights on
any covered product following the first commercial sale of such product, as will AbbVie. In the event of
infringement related to any Enanta patents, we will have the first right and option to initiate legal proceedings or
take other actions. In the event of infringement related to any AbbVie patents, AbbVie will have the first right and
option to initiate legal proceedings or take other actions. In the event of infringement of a joint patent right, we will
discuss with AbbVie whether to initiate legal proceedings or take other actions. AbbVie will have the obligation to
defend at its sole expense any actions brought against either party alleging infringement of third-party rights by
reason of the activities conducted under the agreement and we will have the right to obtain separate counsel at our
own expense. Additionally, AbbVie, at its sole expense, will be responsible for all trademark prosecution.

Subject to the exceptions described above, a party’s rights and obligations under the agreement continue until:
(i) such time as AbbVie is no longer developing a product candidate or (ii) if, as of the time AbbVie is no longer
developing any product candidates, AbbVie is commercializing any other protease inhibitor product, such time as
all royalty terms for all covered products and all co-development terms for all co-developed products have ended.
Accordingly, the final expiration date of the agreement is currently indeterminable.

Either party may terminate the agreement for cause in the event of a material breach, subject to prior notice and
the opportunity to cure, or in the event of the other party’s bankruptcy. Additionally, AbbVie may terminate the
agreement for any reason upon specified prior notice.

If we terminate the agreement for cause or AbbVie terminates without cause, any licenses and other rights
granted to AbbVie will terminate and AbbVie will be deemed to have granted us (i) a non-exclusive, perpetual,
fully paid, worldwide, royalty-free license, with the right to sublicense, under AbbVie’s intellectual property
used in any product candidate and (ii) an exclusive (even as to AbbVie), perpetual, fully paid, worldwide,
royalty-free license, with the right to sublicense, under AbbVie’s interest in joint intellectual property rights to
develop product candidates resulting from covered compounds and to commercialize any products derived from
such compounds. Upon our request, AbbVie will also transfer to us all right, title and interest in any related
product trademarks, regulatory filings and clinical trials.

If AbbVie terminates the agreement for our uncured breach, the milestone and royalty payments payable by
AbbVie may be reduced, the licenses granted to AbbVie will remain in place, we will be deemed to have granted
AbbVie an exclusive license under our interest in joint intellectual property, AbbVie will continue to have the
right to commercialize any covered products, and all rights and licenses granted to us by AbbVie will terminate.

Novartis

In February 2012, we entered into a Collaboration and License Agreement with Novartis granting Novartis
exclusive, worldwide rights to develop, manufacture and commercialize EDP-239, our lead compound from our
NS5A inhibitor program, and other NS5A inhibitor compounds. Under the agreement, we received an upfront
payment of $34.4 million and an $11.0 million milestone payment in January 2013 based on Novartis’ initiation
of dosing in a Phase 1 clinical trial that includes EDP-239. We are eligible to receive up to $395 million of
additional milestone payments for the first NS5A inhibitor for which Novartis achieves specified clinical,
regulatory, and commercial milestones, including a payment of $15 million upon Novartis’ initiation of the first
Phase 2 trial using a combination containing any NS5A inhibitor from our collaboration.

We are also eligible to receive tiered royalties ranging on a blended basis from the low double digits up to the high
teens on net sales allocable to our collaboration’s NS5A inhibitors, subject to reduction in certain circumstances,
and we retain an option for co-detail rights in the United States, which would allow us to staff up to a specified
percentage of the sales force for a designated product. Under our agreement we must exercise these co-detail rights
for a collaboration product before its expected commercial launch and then negotiate and finalize a co-detailing
agreement with Novartis on reasonable and customary terms. During the term of the collaboration agreement we
agree not to research, develop, manufacture or commercialize competing products, either alone or with other parties.

Novartis will fund all costs associated with the development, manufacture and commercialization of EDP-239,
EDP-239-containing combinations and any follow-on NS5A inhibitors. Novartis was also responsible for funding
our efforts to discover follow-on NS5A inhibitors through August 2013.

A joint steering committee was established under the agreement with review and oversight responsibilities for all
research, development and commercialization activities. The joint steering committee is comprised of three of
our senior personnel and three senior personnel from Novartis. However, Novartis has ultimate decision making
authority with respect to the research, development and commercialization of collaboration products.

Our patents and know-how existing as of the effective date of the agreement remain our property. Any know-
how or inventions jointly developed will be jointly owned, subject to the exclusive rights we grant to Novartis,
and subject to such exclusive right may be licensed to any third party. Neither party will assign to any third party
its interest in any jointly owned patent rights without the other party’s prior written consent. Novartis will be
responsible for filing, prosecuting and maintaining patents, at Novartis’ expense, relating to our intellectual
property which is subject to the license, and all joint intellectual property. Novartis will also have the first right to
prosecute any third-party infringement.

Subject to certain exceptions, on a country-by-country and product-by-product basis, a party’s rights and
obligations under the agreement continue until the later of: (i) the expiration of the last to expire patent rights of a
covered product in the applicable country or (ii) ten years from the first commercial sale of a covered product in
the applicable country. As a result, the final expiration date of the Novartis license is indeterminable at this time.
Upon expiration of the agreement with respect to a particular product and country, the licenses granted to
Novartis in the agreement with respect to such product and country will remain in effect and convert to a non-
exclusive, perpetual, unrestricted, fully-paid, royalty-free, worldwide license.

We may terminate the agreement (i) in the event of a material breach by Novartis, subject to prior notice and the
opportunity to cure, (ii) in the event Novartis fails to use commercially reasonable efforts to develop and
commercialize covered products in its territory or (iii) in the event Novartis is subject to an insolvency event.
Novartis may terminate the agreement (i) in the event of a material breach by us, subject to prior notice and the
opportunity to cure, (ii) in the event we are subject to an insolvency event or (iii) for any reason upon 120 days
prior written notice. In the case of a termination for cause by us or a termination without cause by Novartis, any
licenses and other rights granted by either party to the other will terminate and revert back to the granting party
and we will regain control of the prosecution of the patents relating to our intellectual property. If such
termination occurs prior to the second anniversary of the end of the research term, we retain exclusive worldwide
rights, with the right to sublicense under all collaboration intellectual property owned in whole or in part by
Novartis, to research, develop and commercialize compounds and products contemplated by the collaboration. If
such termination occurs after the second anniversary of the end of the research term, then Novartis agrees to
negotiate with us to grant us a worldwide, exclusive, field-limited, royalty-bearing license, with right to
sublicense, under all collaboration intellectual property owned in whole or in part by Novartis.

Royalties and milestones owed to us under the agreement can be reduced by Novartis in certain circumstances,
including (i) where a product could not be legally developed or commercialized in a country without obtaining
third-party intellectual property rights, (ii) where it is decided that it would be useful to license or otherwise acquire
a third-party intellectual property right to develop or commercialize the product, (iii) where the net sales of a

product in a country in one year decrease by a specified percentage when compared to the preceding year because of
generic product competition, and (iv) where a product is not covered by a valid patent claim in the country of sale.

NIAID Contract

In September 2011, we were awarded a contract from NIAID to fund preclinical and early clinical development
of a new class of bridged bicyclic antibiotics known as Bicyclolides. The Bicyclolides are to be used as medical
countermeasures against multiple biodefense bacteria found in anthrax, plague and tularemia.

The contract has an initial term of 30 months ending on March 30, 2014. NIAID has the option to extend the
contract up to 6 times. If each option period is exercised, the contract would be extended until September 29,
2016. The initial award under the initial term was $14.3 million, with the possibility of up to a total of $42.7
million if each option period is exercised by NIAID. In August 2013 NIAID exercised two such options which
increased the contract amount awarded to date to $23.5 million.

Under the contract, all intellectual property rights held by us and any inventions, know-how or other intellectual
property rights derived as a result of this contract will be our property, subject to certain rights of the United States
federal government. See “Risk Factors—We could be unsuccessful in obtaining or maintaining adequate patent and
other intellectual property protection for one or more of our product candidates.” We also retain the right to use any
data developed under the contract to enter into commercial transactions that are unrelated to the biodefense field.

Competition

We are engaged in segments of the pharmaceutical industry that are highly competitive and rapidly changing.
Many large pharmaceutical and biotechnology companies, academic institutions, governmental agencies and
other public and private research organizations are commercializing or pursuing the development of products that
target viral diseases, including the same diseases we are targeting.

We expect our licensed product candidates and our future product candidates to face intense and increasing
competition as new products enter the HCV and antibacterial markets and advanced technologies become
available, particularly in the case of HCV therapies in combinations with existing products and other new
products. Two drug products, Incivek™ (telaprevir) of Vertex and Victrelis™ (boceprevir) of Merck, were
approved in 2011 by the FDA for the treatment of HCV in combination with the previous standard of care
consisting of interferon in combination with ribavirin. A third protease inhibitor, simeprevir (Olysio™) from
Janssen Therapeutics was approved by the FDA in November 2013 for use in genotype 1 HCV patients only
when used in combination with pegylated interferon and ribavirin. In December 2013, the FDA approved
sofosbuvir (Sovaldi™), a nucleotide analogue inhibitor of the HCV NS5B polymerase enzyme from Gilead for
patients with genotype 2 or 3 HCV or in patients with genotypes 1 or 4 when combined with pegylated interferon
and ribavirin. The evolving standard of care treatment regimens and the cure rates of patients using one of these
approved drugs and future approved combinations of DAAs other than ones we have developed and are
developing may be such that our development and discovery efforts in the area of HCV may be rendered
noncompetitive.

We believe that a significant number of product candidates that are currently under development may become
commercially available in the future for the treatment of HCV. We are aware that many competitors other than
our collaborators have product candidates in Phase 2 or later stage clinical trials, including Achillion, Boehringer
Ingelheim, Bristol-Myers Squibb, Gilead, Hoffman-La Roche, Idenix, Johnson & Johnson, Medivir, Merck and
Vertex. Our competitors’ products may be more effective, have fewer side effects, have lower costs or be better
marketed and sold than any product candidate that includes ABT-450, ABT-493 and EDP-239 or any of our
future compounds or than any of our future product candidates. Additionally, products that our competitors
successfully develop for the treatment of HCV may be marketed prior to any HCV product that our collaborators
or we may successfully develop.

AbbVie has the right to market and sell products that compete with the product candidates that we have licensed
to it and any competition by AbbVie could also have a material adverse effect on our future business.

Our lead antibiotic product candidate, EDP-788, is being developed as a broad-spectrum antibiotic with MRSA
coverage for first line use in the hospital setting. In this treatment setting, if approved, EDP-788 would compete
with a number of currently-marketed antibiotics, including Tygacil™ and Teflaro™, and antibiotics currently in
Phase 3 development, including omadocycline/PTK-0796, a tetracycline under development by Paratek
Pharmaceuticals, as well as delafloxicin being developed by Rib-X Pharmaceuticals. We expect that EDP-788
would also compete with currently marketed antibiotics used for serious, Gram-positive infections, including
vancomycin, a generic drug that is manufactured by a variety of companies, Zyvox™, Cubicin™ and telavancin
(Vibativ™). In addition, a number of Gram-positive anti-infective product candidates currently in Phase 3
development could also compete with EDP-788 if they are approved, including dalbavancin (under development
by Durata Therapeutics, Inc.), oritavancin (under development by The Medicines Company), tedizolid (under
development by Cubist Therapeutics, Inc.) and Taksta (under development by Cempra, Inc.).

Competitive products may render our product candidates licensed to others, as well as any future product
candidates we may develop ourselves for HCV or MRSA treatment, obsolete or noncompetitive. All of these
product candidates will face competition based on their safety and effectiveness, the timing and scope of
regulatory approvals, the availability and cost of supply, marketing and sales capabilities, reimbursement
coverage, price, patent position and other factors. Our competitors may succeed in developing competing
products before we do, obtaining regulatory approval for products or gaining acceptance for the same markets
that we are targeting. If we or our collaborators are not “first to market” with one of our product candidates for a
given disease indication or a given product profile, our competitive position could be compromised because it
may be more difficult for us to obtain marketing approval for that product candidate and/or successfully market
that product candidate as a second competitor.

Many of our competitors have substantially greater commercial infrastructures and financial, technical and
personnel resources than we have. We will not be able to compete successfully unless we are able to:

•

design and develop products that are superior to other products in the market;

attract qualified scientific, medical, sales and marketing and commercial personnel;

obtain patent and/or other proprietary protection for our processes and product candidates;

obtain required regulatory approvals; and

collaborate with others in the development and commercialization of new products.

Established competitors may invest heavily to quickly discover and develop novel compounds that could make
our product candidates obsolete. In addition, any new product that competes with an approved product must
demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price
competition and to be commercially successful. If we and our collaborators are not able to compete effectively
against current and future competitors for our product candidates, our business will not grow and our financial
condition will be adversely affected.

Intellectual Property

As part of our business strategy, we actively seek patent protection for our product candidates in the United
States and certain major foreign jurisdictions and file additional patent applications, when appropriate, to cover
improvements to our compounds. We also rely on trade secrets, internal know-how, technological innovations
and agreements with third parties to develop, maintain and protect our competitive position. Our ability to be
competitive will depend on the success of this strategy.

Each of our major programs typically has several issued patents and pending patent claims in the program area
containing claims to compounds, methods of use and processes for synthesis, but only a few of the issued patents
and/or pending patent applications cover the lead product candidate in the program.

HCV NS3 Protease Inhibitor Program. The patent portfolio directed to the HCV protease inhibitor program with
AbbVie included as of September 30, 2013 more than 35 issued U.S. patents, with 13 U.S. non-provisional
applications pending, as well as approximately 50 issued foreign patents with more than 225 non-provisional
applications pending in foreign jurisdictions. The issued United States patents and the applications, if granted,
will expire between 2023 and 2031 before taking into account any extensions that may be obtained through
patent term extension or adjustment, or term reduction due to filing of terminal disclaimers. AbbVie is a joint
owner of a number of these patent applications. AbbVie also has rights to some or all of these patents and patent
applications pursuant to its collaboration agreement with us.

HCV NS5A Inhibitor Program. Our patent portfolio directed to our HCV NS5A inhibitor program with Novartis
included as of September 30, 2013 eight issued U.S. patents, 17 U.S. non-provisional applications, one
provisional U.S. application, one issued foreign patent as well as more than 75 non-provisional applications in
foreign jurisdictions and five PCT applications pending. The issued United States patents and the applications, if
granted, will expire between 2030 and 2032 before taking into account any extensions that may be obtained
through patent term extension or adjustment, or term reduction due to filing of terminal disclaimers. Novartis has
rights to some or all of these patents and patent applications pursuant to its collaboration agreement with us.

Cyclophilin Inhibitor Program. Our ongoing research activities include identifying compounds that inhibit
cyclophilin, a protein in the human body that has been shown to be involved in HCV replication. Our current
portfolio directed to cyclophilin binders for the treatment of HCV included as of September 30, 2013 at least five
issued U.S. patents, three U.S. non-provisional applications, two U.S. provisional applications along with two
granted patents and 16 non-provisional applications pending in foreign jurisdictions. The issued United States
patents and patent applications, if granted, will expire between 2030 and 2031 before taking into account any
extensions that may be obtained through patent term extension or adjustment, or term reduction due to filing of
terminal disclaimers.

HCV Nucleotide Polymerase Inhibitor Program. Our patent portfolio directed to our HCV nucleotide polymerase
inhibitor program, which is in the early stages of development, includes one issued patent with three pending
U.S. non-provisional applications and one provisional application, and one pending PCT application.

Antibacterial Program. Our patent portfolio directed to antibacterials included as of September 30, 2013 more
than 20 issued U.S. patents, and approximately five U.S. non-provisional applications, one U.S.provisional
application pending, as well as more than 50 issued foreign patents and more than a dozen non-provisional
foreign applications. These patents and patent applications, if granted, will expire between 2020 and 2032 before
taking into account any extension that may be obtained through patent term extension or adjustment, or term
reduction due to filing of terminal disclaimers.

We may obtain patents for certain compounds many years before we obtain marketing approval for products
containing such compounds. Because patents have a limited life, which may begin to run prior to the commercial
sale of the related product, the commercial value of the patent may be limited. However, we may be able to apply
for patent term extensions in the United States and in a number of European countries, compensating in part for
delays in obtaining marketing approval, but we cannot be certain we will obtain such extensions.

It is also very important that we do not infringe patents or other proprietary rights of others. If we do infringe
such patents or other proprietary rights, we could be prevented from developing or selling products or from using
the processes covered by those patents, could be required to pay substantial damages, or could be required to
obtain a license from the third party to allow us to use their technology, which may not be available on
commercially reasonable terms or at all. If we were not able to obtain a required license or develop alternative
technologies, we may be unable to develop or commercialize some or all of our products, and our business could
be adversely affected.

In addition, we jointly own patent applications, together with AbbVie, that claim ABT-450 as a chemical entity.
However, there is no guaranty that such applications will issue. We also own one issued patent that claims EDP-

239 as a chemical entity. Further, the existence of issued patents does not guarantee our right to practice the
patented technology or commercialize the patented product. Third parties may have or obtain rights to patents
that could be used to prevent or attempt to prevent us from commercializing our product candidates. If these
other parties are successful in obtaining valid and enforceable patents, and establishing our infringement of those
patents, we could be prevented from commercializing our product candidates unless we were able to obtain a
license under such patents, which may not be available on commercially reasonable terms or at all.

Much of our scientific capabilities depend upon the knowledge, experience and skills of key scientific and
technical personnel. To protect our rights to our proprietary know-how and technology, we endeavor to require
all employees, as well as our consultants and advisors when feasible, to enter into confidentiality agreements that
require disclosure and assignment to us of ideas, developments, discoveries and inventions made by these
employees, consultants and advisors in the course of their service to us.

We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our
business, and we may be subject to claims that we infringe or otherwise violate the intellectual property rights of
others, which could materially harm our business. For more information, see “Risk Factors—Risks Related to
Our Intellectual Property Rights.”

Government Regulation

Government authorities in the United States, at the federal, state and local level, and in other countries
extensively regulate, among other things, the research, development, testing, manufacture, quality control,
approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval
monitoring and reporting, marketing and export and import of products such as those we are developing. Any
pharmaceutical candidate that we develop must be approved by the FDA before it may be legally marketed in the
United States and by the appropriate foreign regulatory agency before it may be legally marketed in foreign
countries.

United States Drug Development Process

In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or FDCA, and
implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The
process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local
and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to
comply with the applicable United States requirements at any time during the product development process,
approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA
sanctions could include refusal to approve pending applications, withdrawal of an approval, a clinical hold,
warning letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any
agency or judicial enforcement action could have a material adverse effect on us.

The process required by the FDA before a drug may be marketed in the United States generally involves the
following:

• Completion of preclinical laboratory tests, animal studies and formulation studies according to GLPs or

other applicable regulations;

•

Submission to the FDA of an Investigational New Drug Application, or an IND, which must become
effective before human clinical trials may begin;

Performance of adequate and well-controlled human clinical trials according to the FDA’s current
Good Clinical Practices, or GCPs, to establish the safety and efficacy of the proposed drug for its
intended use;

Submission to the FDA of a New Drug Application, or an NDA, for a new drug product;

•

Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the drug
is to be produced to assess compliance with the FDA’s current Good Manufacturing Practice standards,
or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,
strength, quality and purity;

Potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the
NDA; and

FDA review and approval of the NDA.

The lengthy process of seeking required approvals, which can often take anywhere from six months from the
time the NDA is filed if there is a priority review for a breakthrough therapy to twelve months for a standard
review, and the continuing need for compliance with applicable statutes and regulations require the expenditure
of substantial resources. There can be no certainty that approvals will be granted.

Before testing any compounds with potential therapeutic value in humans, the product candidate enters the
preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and
formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The
conduct of the preclinical tests must comply with GLP and other federal regulations and requirements. The
sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data,
any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. The IND
automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on a
clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any
outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a drug at any
time before or during clinical trials due to safety concerns or non-compliance. Accordingly, we cannot assure that
submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not
arise that suspend or terminate such trial.

Clinical trials involve the administration of the product candidate to healthy volunteers or patients having the
disease being studied under the supervision of qualified investigators, generally physicians not employed by or
under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the
objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to
be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND. Clinical trials
must be conducted in accordance with the FDA’s GCP requirements. Further, each clinical trial must be
reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at
which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial
participants and considers such items as whether the risks to individuals participating in the clinical trials are
minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent
form that must be provided to each clinical trial subject or his or her legal representative and must monitor the
clinical trial until it is completed.

Human clinical trials prior to approval are typically conducted in three sequential phases that may overlap or be
combined:

• Phase 1. The drug is initially introduced into healthy humans and tested for safety, dosage tolerance,
absorption, metabolism, distribution and excretion. In the case of some products for severe or life-
threatening diseases, especially when the product may be too inherently toxic to ethically administer to
healthy volunteers, the initial human testing is often conducted only in patients having the specific
disease.

• Phase 2. The drug is evaluated in a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to
determine dosage tolerance, optimal dosage and dosing schedule for patients having the specific
disease.

• Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an

expanded patient population at geographically dispersed clinical trial sites. These clinical trials, which
usually involve more patients than earlier trials, are intended to establish the overall risk/benefit ratio of
the product and provide an adequate basis for product labeling. Generally, at least two adequate and
well-controlled Phase 3 clinical trials are required by the FDA for approval of an NDA.

Post-approval studies, or Phase 4 clinical trials, may be conducted after initial marketing approval. These studies
are used to gain additional experience from the treatment of patients in the intended therapeutic indication and
may be required by the FDA as part of the approval process.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and
written IND safety reports must be submitted to the FDA by the investigators for serious and unexpected AEs or
any finding from tests in laboratory animals that suggests a significant risk for human patients. Phase 1, Phase 2
and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA, or
the sponsor or its data safety monitoring board, may suspend a clinical trial at any time on various grounds,
including a finding that the research patients are being exposed to an unacceptable health risk. Similarly, an IRB
can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in
accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to
patients.

Concurrent with clinical trials, companies usually complete additional animal studies and develop additional
information about the chemistry and physical characteristics of the drug as well as finalize a process for
manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches of the product candidate and, among other
things, must include methods for testing the identity, strength, quality and purity of the final drug. Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the
product candidate does not undergo unacceptable deterioration over its shelf life.

U.S. Review and Approval Processes

The results of product development, preclinical studies and clinical trials, along with descriptions of the
manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other
relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The
submission of an NDA is subject to the payment of substantial user fees by the applicant; a waiver of such fees
may be obtained under certain limited circumstances.

In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain
data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric
subpopulations and to support dosing and administration for each pediatric subpopulation for which the product
is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers.

The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information
rather than accepting an NDA for filing. Once the submission is accepted for filing, the FDA begins an in-depth
review of the NDA. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee
Act, or PDUFA, the FDA has twelve months in which to complete its initial review of a standard NDA and
respond to the applicant, and six months for a priority NDA. The FDA does not always meet its PDUFA goal
dates for standard and priority NDAs.

After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things,
whether the proposed product is safe and effective for its intended use, and whether the product is being
manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality and
purity. In addition to its own review, the FDA may refer applications for novel drug products or drug products
that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes

clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be
approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee,
but it considers such recommendations carefully when making decisions. During the approval process, the FDA
also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe
use of the drug. If the FDA concludes that a REMS is needed, the sponsor of the NDA must submit a proposed
REMS; the FDA will not approve the NDA without a REMS, if required.

Before approving an NDA, the FDA will inspect the facilities at which the product is to be manufactured. The
FDA will not approve the product unless it determines that the manufacturing processes and facilities are in
compliance with cGMP requirements and adequate to assure consistent production of the product within required
specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites
to assure compliance with GCP. If the FDA determines that the application, manufacturing process or
manufacturing facilities are not acceptable it will outline the deficiencies in the submission and often will request
additional testing or information.

The NDA review and approval process is lengthy and difficult, and the FDA may refuse to approve an NDA if
the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and
information. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does
not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and may be
susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA will
issue a “complete response” letter if the agency decides not to approve the NDA. The complete response letter
usually describes all of the specific deficiencies in the NDA identified by the FDA. The deficiencies identified
may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials.
Additionally, the complete response letter may include recommended actions that the applicant might take to
place the application in a condition for approval. If a complete response letter is issued, the applicant may either
resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product receives regulatory approval, the approval may be limited to specific diseases and dosages or the
indications for use may otherwise be limited, which could restrict the commercial value of the product. Further,
the FDA may require that certain contraindications, warnings or precautions be included in the product labeling.
In addition, the FDA may require Phase 4 testing, which involves clinical trials designed to further assess a
product’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of
approved products that have been commercialized.

Expedited Development and Review Programs

The FDA has four programs intended to expedite the development and review of new drugs addressing unmet
medical needs or treating serious or life-threatening conditions: fast track, breakthrough therapy, priority review,
and accelerated approval.

The FDA “fast track” program is intended to expedite or facilitate the process for reviewing new products to treat
serious or life-threatening conditions and address unmet medical needs. Fast track designation applies to the
combination of the product and the specific indication for which it is being studied. Under the fast track program,
the sponsor will have more frequent interactions with the FDA during drug development, and may also submit
sections of the NDA on a rolling basis to the FDA for review before submitting the complete application. Fast
track does not guarantee that a product will be reviewed more quickly or receive FDA approval.

The FDA “breakthrough therapy” program is intended to expedite the development and review of drugs for
serious or life-threatening conditions. Preliminary clinical evidence must show that the drug may have substantial
improvement over existing therapies on one or more clinically significant endpoints. Although the drug need not
address an unmet medical need, designation of breakthrough therapy status carries all the “fast track” program
features. Additionally, the breakthrough therapy program entitles the sponsor to earlier and more frequent

interaction with the FDA review team regarding development of nonclinical and clinical data, and allows the
FDA to offer product development and regulatory advice necessary to shorten the time for product approval. The
breakthrough therapy status does not guarantee a quicker development or review of the product, and does not
ensure FDA approval.

The FDA also has a “priority review” program for products offering significant improvement in the treatment,
diagnosis or prevention of a disease. The goal of the priority review program is to shorten the review period to
six months from the ten months required for standard review. Any drug with breakthrough therapy, accelerated
approval designation, or fast track can be granted priority review if it meets the necessary criteria.

The FDA “accelerated approval” program is intended to expedite the development and review of products with
the potential to treat serious or life-threatening illnesses and provide meaningful therapeutic benefit over existing
treatments. The program allows approval of a product on the basis of adequate and well-controlled clinical
studies establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a
clinical benefit, or on the basis of an effect on a clinical endpoint that can be measured earlier than survival or
irreversible morbidity. As a condition of approval, the FDA generally requires that a sponsor of the product
perform adequate and well-controlled post-marketing clinical studies to establish safety and efficacy for the
approved indication. Failure to conduct such studies or failure of the studies to establish required safety and
efficacy may result in revocation of approval. The FDA also requires, as a condition for accelerated approval,
pre-approval of promotional materials, which could adversely impact the timing of the commercial launch or
subsequent marketing of the product.

Post-Approval Requirements

Any drug products for which we receive FDA approvals are subject to continuing regulation by the FDA. Certain
requirements include, among other things, record-keeping requirements, reporting of adverse experiences with
the product, providing the FDA with updated safety and efficacy information on an annual basis or more
frequently for specific events, product sampling and distribution requirements, complying with certain electronic
records and signature requirements and complying with FDA promotion and advertising requirements. These
promotion and advertising requirements include, among others, standards for direct-to-consumer advertising,
prohibitions against promoting drugs for uses or in patient populations that are not described in the drug’s
approved labeling (known as “off-label use”), rules for conducting industry-sponsored scientific and educational
activities and promotional activities involving the internet. Failure to comply with FDA requirements can have
negative consequences, including the immediate discontinuation of noncomplying materials, adverse publicity,
enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or
criminal penalties. Although physicians may prescribe legally available drugs for off-label uses, manufacturers
may not market or promote such off-label uses.

We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities
of our product candidates. Manufacturers of our product candidates are required to comply with applicable FDA
manufacturing requirements contained in the FDA’s cGMP regulations. These regulations require, among other
things, quality control and quality assurance as well as the corresponding maintenance of comprehensive records
and documentation. Drug manufacturers and other entities involved in the manufacture and distribution of
approved drugs are also required to register their establishments and list any products they make with the FDA
and to comply with related requirements in certain states. These entities are further subject to periodic
unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws.
Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain cGMP compliance. Discovery of problems with a product after approval may result in serious
and extensive restrictions on a product, manufacturer or holder of an approved NDA. These restrictions may
include suspension of a product until the FDA is assured that quality standards can be met, continuing oversight
of manufacturing by the FDA under a “consent decree,” which frequently includes the imposition of costs and
continuing inspections over a period of many years, as well as possible withdrawal of the product from the

market. In addition, changes to the manufacturing process generally require prior FDA approval before being
implemented. Other types of changes to the approved product, such as adding new indications and additional
labeling claims, are also subject to further FDA review and approval.

The FDA also may require post-marketing testing, known as Phase 4 testing, as well as risk minimization action
plans and surveillance to monitor the effects of an approved product or place conditions on an approval that
could otherwise restrict the distribution or use of the product.

U.S. Patent Term Restoration and Marketing Exclusivity

Drug Price Competition and Patent Term Restoration Act of 1984

Depending upon the timing, duration and specifics of the FDA approval of the use of our product candidates,
some of our United States patents may be eligible for limited patent term extension under the Drug Price
Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman
Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as
compensation for patent term lost during federal regulatory review preceding the FDA regulatory review process.
However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from
the product’s approval date. The patent term restoration period is generally one-half the time between the
effective date of an IND and the submission date of an NDA plus the time between the submission date of an
NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the
extension and the application for the extension must be submitted within 60 days of approval, prior to the
expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews
and approves the application for any patent term extension or restoration. In the future, we may apply for
restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current
expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of
the relevant NDA. However, there is no guarantee that any such application will be approved.

Federal Food, Drug and Cosmetic Act (“FDCA”)

Market exclusivity provisions under the FDCA, which are independent of patent status and any patent related
extensions, can also delay the submission or the approval of certain applications of other companies seeking to
reference another company’s NDA. If the new drug is a new chemical entity subject to an NDA, the FDCA
provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to
obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not
previously approved any other new drug containing the same active moiety, which is the molecule or functional
group of a molecule responsible for the action of the drug substance. During the exclusivity period, the FDA may
not accept for review an abbreviated new drug application, or ANDA, or a so-called Section 505(b)(2) NDA,
submitted by another company for another version of such drug where the applicant does not own or have a legal
right of reference to all the data required for approval. However, such an application may be submitted after four
years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the
FDA by the innovator NDA holder. The FDCA also provides three years of marketing exclusivity for an NDA, or
supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were
conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the
application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity
covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from
approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not
delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required
to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical
trials necessary to demonstrate safety and effectiveness.

Other U.S. Healthcare Laws and Compliance Requirements

In the United States, our activities are potentially subject to regulation by various federal, state and local
authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services (formerly the
Health Care Financing Administration), other divisions of the United States Department of Health and Human
Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United
States Attorney offices within the Department of Justice, state attorney generals and state and local governments.
For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and
abuse provisions of the Social Security Act, the False Claims Act, the privacy and security provisions of the
Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended. Pricing
and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation
Act of 1990 and the Veterans Health Care Act of 1992, each as amended. If products are made available to
authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and
requirements apply. Under the Veterans Health Care Act, or VHCA, drug companies are required to offer certain
pharmaceutical products at a reduced price to a number of federal agencies including the United States
Department of Veterans Affairs and United States Department of Defense, the Public Health Service and certain
private Public Health Service—designated entities in order to participate in other federal funding programs
including Medicare and Medicaid. Recent legislative changes purport to require that discounted prices be offered
for certain United States Department of Defense purchases for its TRICARE program via a rebate system.
Participation under the VHCA requires submission of pricing data and calculation of discounts and rebates
pursuant to complex statutory formulas, as well as the entry into government procurement contracts governed by
the Federal Acquisition Regulations.

In order to distribute products commercially, we must comply with state laws that require the registration of
manufacturers and wholesale distributors of pharmaceutical products in a state, including, in certain states,
manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no
place of business within the state. Some states also impose requirements on manufacturers and distributors to
establish the pedigree of product in the chain of distribution, including some states that require manufacturers
and others to adopt new technology capable of tracking and tracing product as it moves through the distribution
chain. Several states have enacted legislation requiring pharmaceutical companies to establish marketing
compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing,
pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit
pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical
companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our
activities are potentially subject to federal and state consumer protection and unfair competition laws.

Europe / Rest of World Government Regulation

In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions
governing, among other things, clinical trials and any commercial sales and distribution of our products.

Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory
authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those
countries. Certain countries outside of the United States have a similar process that requires the submission of a
clinical trial application much like the IND prior to the commencement of human clinical trials. In the European
Union, for example, a clinical trial application, or CTA, must be submitted to each country’s national health
authority and an independent ethics committee, much like the FDA and IRB, respectively. Once the CTA is
approved in accordance with a country’s requirements, clinical trials may proceed.

The requirements and process governing the conduct of clinical trials, product licensing, pricing and
reimbursement vary from country to country. In all cases, the clinical trials are conducted in accordance with
International Conference on Harmonisation (ICH) / WHO Good Clinical Practice standards and the applicable
regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

To obtain regulatory approval of an investigational drug under European Union regulatory systems, we must
submit a marketing authorization application to the European Medicines Agency, or the EMA. The application
used to file an NDA in the United States is similar to that required in the European Union, with the exception of,
among other things, country-specific document requirements.

For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia,
the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from
country to country. In all cases, again, the clinical trials are conducted in accordance with GCPs and the
applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things,
fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution.

Pharmaceutical Coverage, Pricing and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which
we obtain regulatory approval. In the United States and markets in other countries, sales of any products for
which we receive regulatory approval for commercial sale will depend in part on the availability of
reimbursement from third-party payors. Third-party payors include government health administrative authorities,
managed care providers, private health insurers and other organizations. The process for determining whether a
payor will provide coverage for a drug product may be separate from the process for setting the price or
reimbursement rate that the payor will pay for the drug product. Third-party payors may limit coverage to
specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drug
products for a particular indication. Third-party payors are increasingly challenging the price and examining the
medical necessity and cost-effectiveness of medical products and services, in addition to their safety and
efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals.
Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to
provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.
Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product development.

In 2003, the United States government enacted legislation providing a partial prescription drug benefit for
Medicare recipients, which became effective at the beginning of 2006. Government payment for some of the
costs of prescription drugs may increase demand for any products for which we receive marketing approval.
However, to obtain payments under this program, we would be required to sell products to Medicare recipients
through prescription drug plans operating pursuant to this legislation. These plans will likely negotiate
discounted prices for our products. Federal, state and local governments in the United States continue to consider
legislation to limit the growth of healthcare costs, including the cost of prescription drugs. Future legislation
could limit payments for pharmaceuticals such as the product candidates that we are developing.

In March 2010, the President signed one of the most significant healthcare reform measures in decades. The
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act,
collectively known as the Affordable Care Act, substantially changes the way healthcare will be financed by both
governmental and private insurers, and significantly impacts the pharmaceutical industry. The comprehensive
$940 billion dollar overhaul is expected to extend coverage to approximately 32 million previously uninsured
Americans. The Affordable Care Act contains a number of provisions, including those governing enrollment in
federal healthcare programs, reimbursement changes and fraud and abuse, which will impact existing
government healthcare programs and will result in the development of new programs, including Medicare

payment for performance initiatives and improvements to the physician quality reporting system and feedback
program. Additionally, the Affordable Care Act, as limited by the United States Supreme Court’s decision in
June 2012:

•

increases the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from
15.1% to 23.1%;

requires collection of rebates for drugs paid by Medicaid managed care organizations;

requires manufacturers to participate in a coverage gap discount program, under which they must agree
to offer 50 percent point-of-sale discounts off negotiated prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to
be covered under Medicare Part D, beginning January 2011; and

imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded
prescription drugs” to specified federal government programs.

There have been proposed in Congress a number of legislative initiatives regarding healthcare, including possible
repeal of the Affordable Care Act. At this time, it remains unclear whether there will be any changes made to the
Affordable Care Act, whether to certain provisions or its entirety. The full impact that the Affordable Care Act
and other new laws will have on our business is uncertain. Nor is it clear whether other legislative changes will
be adopted, if any, or how such changes would affect the demand for our product candidates once
commercialized.

Different pricing and reimbursement schemes exist in other countries. In the European Community, governments
influence the price of pharmaceutical products through their pricing and reimbursement rules and control of
national healthcare systems that fund a large part of the cost of those products to consumers. Some jurisdictions
operate positive and negative list systems under which products may only be marketed once a reimbursement
price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the
completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently
available therapies. Other member states allow companies to fix their own prices for medicines, but monitor and
control company profits. The downward pressure on healthcare costs in general, particularly prescription drugs,
has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In
addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on
pricing within a country.

The marketability of any drug candidates for which we receive regulatory approval for commercial sale may
suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition,
emphasis on managed care in the United States has increased and we expect will continue to increase the
pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any
time. Even if favorable coverage and reimbursement status is attained for one or more products for which we
receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the
future.

Manufacturing

We do not have our own manufacturing capabilities, except with respect to limited amounts of active
pharmaceutical ingredients needed for preclinical development. In the past we have relied on third-party
manufacturers for supply of active pharmaceutical ingredients, and we expect that in the future we will rely on
such manufacturers for supply of ingredients that will be used in clinical trials of our product candidates that we
are developing ourselves. Manufacturing for each of our two lead product candidates, namely ABT-450 and
EDP-239, is being conducted by our collaborator for the respective product candidate. We do not expect to
establish our own manufacturing facilities and we will continue to rely on third-party manufacturers to produce
commercial quantities of any product candidates that we commercialize ourselves. We believe that all of the
materials required for the manufacture of those product candidates could be obtained from more than one source.

Sales and Marketing

We currently do not have any commercialization or sales and marketing capabilities, and currently have no fixed
plans to invest in or build such capabilities internally. We have already partnered our two lead candidates with
AbbVie and Novartis, respectively. We may also partner or collaborate with, or license commercial rights to,
other larger pharmaceutical or biopharmaceutical companies to support the development of our cyclophilin and
nucleotide polymerase inhibitor product candidates through late-stage clinical development and, if successful,
commercialization. However, we still retain all commercial rights to our independent programs and we will
continue to evaluate our alternatives for commercializing them once they are more advanced in their clinical
development.

Employees

As of September 30, 2013, we had 44 full-time employees, 23 of whom hold Ph.D. degrees. None of our
employees is subject to a collective bargaining agreement or represented by a trade or labor union. We consider
our relations with our employees to be good.

ITEM 1A. RISK FACTORS

RISK FACTORS

Our business faces significant risks and uncertainties. Certain factors may have a material adverse effect on our
business prospects, financial condition and results of operations, and you should carefully consider them.
Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors, in
its entirety, in addition to other information contained in or incorporated by reference into this Annual Report on
Form 10-K and our other public filings with the SEC. Other events that we do not currently anticipate or that we
currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

Risks Related to Our Business

Our financial prospects for the next several years are substantially dependent upon the development and
marketing efforts of AbbVie for combination therapies incorporating ABT-450 or ABT-493 for the treatment
of HCV. AbbVie may act in its best interest rather than in our best interest, which could adversely affect our
business.

We rely on AbbVie to fund and conduct the clinical development and commercialization of ABT-450, ABT-493
(a next-generation protease inhibitor in clinical development) and any other protease inhibitors we develop, over
which AbbVie has complete control. Our ability to generate significant revenue in the near term will depend
primarily on the successful development, regulatory approval, marketing and commercialization by AbbVie of
combination therapies incorporating ABT-450 or ABT -493. Such success is subject to significant uncertainty,
and we have limited control over the resources, time and effort that AbbVie may devote to ABT-450 or ABT-
493. Any of several events or factors could have a material adverse effect on our ability to generate revenue from
AbbVie’s potential commercialization of ABT-450 or ABT-493 in combination therapies. For example, AbbVie:

• may be unable to successfully complete the clinical development of an ABT-450-containing regimen;

• may have to comply with additional requests and recommendations from the FDA, including additional

clinical trials;

• may not make all regulatory filings and obtain all necessary approvals from the FDA and similar

foreign regulatory agencies;

• may not commit sufficient resources to the development, regulatory approval, marketing and

distribution of an ABT-450 (or ABT-493)-containing regimen, whether for strategic reasons or
otherwise due to a change in business priorities;

• may cease to perform its obligations under the terms of our collaboration agreement;

• may unilaterally terminate our collaboration agreement on specified prior notice without any reason
and without any further commitment to continue development of any of our product candidates;

• may not be able to manufacture our product candidate in compliance with requirements of the FDA and
similar foreign regulatory agencies and in commercial quantities sufficient to meet market demand;

• may not achieve market acceptance of combination therapies incorporating our product candidate by

physicians, patients and third-party payors;

• may not compete successfully with any such combination therapies against alternative products and

therapies for HCV; and

• may independently develop products that compete with our product candidate in the treatment of HCV.

We will not have access to all information regarding the products being developed and potentially
commercialized by AbbVie, including information about clinical trial design and execution, safety reports from
clinical trials, spontaneous safety reports if the product is later approved and marketed, regulatory affairs, process
development, manufacturing, marketing and other areas known by AbbVie. Thus, our ability to keep our
stockholders informed about the status of product candidates under our collaboration will be limited by the
degree to which AbbVie keeps us informed. If AbbVie does not perform in the manner we expect or fulfill its
responsibilities in a timely manner, or at all, the clinical development, regulatory approval and commercialization
efforts related to ABT-450 or ABT-493 could be delayed or terminated or be commercially unsuccessful. In
addition, AbbVie has the right to make decisions regarding the development and commercialization of product
candidates without consulting us, and may make decisions with which we do not agree. Conflicts between us and
AbbVie may arise if there is a dispute about the progress of the clinical development of a product candidate, the
achievement and payment of a milestone amount, or the ownership of intellectual property developed during the
course of our collaboration agreement. It may be necessary for us to assume responsibility at our own expense
for the development of ABT-450, ABT-493 or other protease inhibitors. In that event, we would likely be
required to limit the size and scope of one or more of our independent programs or increase our expenditures and
seek additional funding which may not be available on acceptable terms or at all, and our business would be
materially and adversely affected.

Our prospects for successful development of EDP-239 or any other NS5A inhibitor are dependent upon the
development and marketing efforts of Novartis. Novartis may act in its best interest rather than in our best
interest, which could adversely affect our business.

We rely on Novartis to fund and conduct the clinical development of EDP-239 and any other NS5A inhibitor
product candidates under our collaboration, and for the successful regulatory approval, marketing and
commercialization of one or more of them. Such success will be subject to significant uncertainty, and we have
limited control over the resources, time and effort that Novartis may devote to our NS5A inhibitors. Moreover,
Novartis may terminate the collaboration without any reason on 120 days notice to us. As with our AbbVie
collaboration, any of several events or factors could have a material adverse effect on our ability to generate
revenue from Novartis’ development and commercialization of EDP-239, including ones similar to those
described in the preceding risk factor regarding our AbbVie collaboration.

If Novartis does not perform in the manner we expect or fulfill its responsibilities in a timely manner, or at all,
the clinical development, regulatory approval and commercialization efforts related to EDP-239 could be
delayed, terminated or be commercially unsuccessful. Conflicts between us and Novartis may arise if there is a
dispute with Novartis similar to potential disputes with AbbVie about any of the matters mentioned in the
preceding risk factor. It may become necessary for us to assume the responsibility at our own expense for the
development of EDP-239 or other NS5A inhibitors. In that event, we would likely be required to limit the size
and scope of one or more of our independent programs or increase our expenditures and seek additional funding
which may not be available on acceptable terms or at all, and our business would be materially and adversely
affected.

We and our collaborators face substantial competition in the market for HCV drugs and for anti-infectives
generally, which may result in others discovering, developing or commercializing products before us or doing
so more successfully than we and our collaborators.

The pharmaceutical and biotechnology industries are intensely competitive and rapidly changing. Many large
pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and
private research organizations are commercializing or pursuing the development of products that target HCV,
MRSA and other infectious diseases that we may target in the future.

We expect our current and future product candidates to face intense and increasing competition as new products
enter the HCV and antibacterial markets and advanced technologies become available, particularly in the case of
HCV in combinations with existing products and other new products. Two drug products, Incivek™ (telaprevir)
of Vertex and Victrelis™ (boceprevir) of Merck, were approved in 2011 by the FDA for the treatment of HCV in
combination with interferon and ribavirin, which in combination were the previous standard of care. A third
protease inhibitor, simeprevir (Olysio™) from Janssen Therapeutics was approved by the FDA in November 2013
for use in genotype 1 HCV patients only when used in combination with pegylated interferon and ribavirin. In
December 2013, the FDA approved sofosbuvir (Sovaldi™), a nucleotide analogue inhibitor of the HCV NS5B
polymerase enzyme from Gilead for patients with genotype 2 or 3 HCV or in patients with genotypes 1 or 4
when combined with pegylated interferon and ribavirin. Other all-oral treatment regimens are under development
and may obtain regulatory approvals for some forms of HCV before any combination including one of our
compounds is approved. These other potential new treatment regimens may render our HCV product candidates
noncompetitive. In particular, our HCV product candidates may not be able to compete successfully with other
products in development in multiple classes of inhibitors of HCV, including protease inhibitors, polymerase
inhibitors (nucleoside and non-nucleoside), NS5A inhibitors and cyclophilin inhibitors, under development by
companies such as Achillion, Astra-Zeneca, Boehringer Ingelheim, Bristol-Myers Squibb, Gilead,
GlaxoSmithKline, Idenix, Johnson & Johnson, Medivir, Merck, Pfizer, Presidio, Roche and Vertex, as well as by
our collaborators.

Our MRSA program faces competition from other therapeutic products that address serious Gram-positive
bacterial infections, such as Cubicin®, marketed by Cubist; vancomycin, marketed generically by AbbVie,
Shionogi and others; and Zyvox®, marketed by Pfizer, as well as future competition from drug candidates
currently in clinical development.

Many of our competitors have substantially greater commercial infrastructure and better financial, technical and
personnel resources than we have, as well as drug candidates in late-stage clinical development.

Our competitors may succeed in developing competing products and obtaining regulatory approval before we or our
collaborators do with our product candidates, or they may gain acceptance for the same markets that we are
targeting. If we are not “first to market” with one of our product candidates in one or more disease indications, our
competitive position could be compromised because it may be more difficult for us to obtain marketing approval for
that product candidate and successfully market that product candidate as a second competitor. In addition, any new
product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience,
tolerability and safety in order to overcome price competition and to be commercially successful.

Competitive products in the form of other treatment methods or a vaccine for HCV or MRSA may render our
product candidates licensed to others, as well as any future product candidates we may develop ourselves,
obsolete or noncompetitive. Even if successfully developed and subsequently approved by the FDA, our product
candidates will face competition based on their safety and effectiveness, the timing and scope of the regulatory
approvals, the availability and cost of supply, marketing and sales capabilities, reimbursement coverage, price,
patent position and other factors. If the product candidates developed under our collaboration agreements with

AbbVie and Novartis face competition from generic products, the collaboration agreements provide that the
royalty rate applicable to such product candidates is reduced significantly by a specified percentage on a product-
by-product, country-by-country basis. If we and our collaborators are not able to compete effectively against our
current and future competitors, our business will not grow and our financial condition, operations and stock price
will suffer.

We have no approved products and no clinical development experience, which makes it difficult to assess our
ability to develop and commercialize our future product candidates.

To date, AbbVie has been and will continue to be responsible for all of the clinical development of our ABT-450,
ABT-493 and other protease inhibitor product candidates, and Novartis is responsible for all future clinical
development of our EDP-239 and other NS5A product candidates. We have not yet demonstrated an ability to
successfully overcome many of the risks and uncertainties associated with late stage clinical development,
regulatory approval and commercialization of therapeutic products such as the ones we plan to develop
independently. For example, to execute our business plan for development of our independent programs for
cyclophilin inhibitors and nucleotide polymerase inhibitors for HCV and antibiotics for MRSA, we will need to
successfully:

•

execute clinical development of our future product candidates;

obtain required regulatory approvals for the development and commercialization of our future product
candidates;

develop and maintain any future collaborations we may enter into for any of these programs;

build and maintain robust sales, distribution and marketing capabilities, either independently or in
collaboration with future collaborators;

gain market acceptance for our future product candidates; and

• manage our spending as costs and expenses increase due to clinical trials, regulatory approvals and

commercialization.

If we are unsuccessful in accomplishing these objectives, we may not be able to successfully develop and
commercialize our future product candidates and expand our business or continue our operations.

We may require substantial additional financing to achieve our goals if the development and commercialization
of ABT-450, ABT-493 or EDP-239 is delayed or terminated. A failure to obtain this necessary capital when
needed could force us to delay, limit, reduce or terminate our product development efforts.

Since our inception, most of our resources have been dedicated to the discovery and preclinical development of
our product candidates. In particular, we have expended, and believe that we will continue to expend for the
foreseeable future, substantial resources discovering and developing our proprietary preclinical product
candidates. These expenditures will include costs associated with research and development, preclinical
manufacturing of product candidates, conducting preclinical experiments and clinical trials and obtaining
regulatory approvals, as well as commercializing any products later approved for sale. In our fiscal year ending
September 30, 2014, we expect to incur substantial costs associated with research and development for our
internally developed programs, exclusive of costs incurred by our collaborators in developing our licensed
product candidates ABT-450, ABT-493 and EDP-239.

Because the outcome of planned and anticipated clinical trials of our product candidates by our collaborators is
highly uncertain, we cannot reasonably estimate the timing or amounts, if any, of future milestone payments we
will receive from these collaborators. If we do not continue to receive substantial milestone payments from the
continued development of our product candidates, we may require substantial additional financing.

Our future capital requirements depend on many factors, including:

• whether our existing collaborations continue to generate substantial milestone payments, and ultimately

royalties, to us;

•

the number and characteristics of the future product candidates we pursue;

the scope, progress, results and costs of researching and developing any of our future product
candidates on our own, and conducting preclinical research and clinical trials;

the timing of, and the costs involved in, obtaining regulatory approvals for any future product
candidates we develop independently;

the cost of commercialization activities, if any, of any future product candidates we develop
independently that are approved for sale, including marketing, sales and distribution costs;

the cost of manufacturing our future product candidates and any products we successfully
commercialize independently, including manufacturing for clinical development;

our ability to maintain existing collaborations and to establish new collaborations, licensing or other
arrangements and the financial terms of such agreements;

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents,
including litigation costs and the outcome of such litigation; and

the timing, receipt and amount of sales of, or royalties on, ABT-450, ABT-493, EDP-239 and our
future product candidates, if any.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. Our
ability to raise funds will depend on financial, economic and market conditions and other factors, many of which
are beyond our control. If adequate funds are not available to us on a timely basis, we may be required to delay,
limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for one
or more of our product candidates.

If we are not successful in discovering further product candidates in addition to ABT-450, ABT-493 and
EDP-239, our ability to expand our business and achieve our strategic objectives may be impaired.

Research programs designed to identify product candidates require substantial technical, financial and human
resources, whether or not any product candidates are ultimately identified. Our research programs may initially
show promise in identifying additional potential product candidates, yet fail to yield product candidates for
clinical development or commercialization for many reasons, including the following:

•

the research methodology used may not be successful in identifying additional potential product
candidates; competitors may develop alternatives that render our future product candidates obsolete;

a future product candidate may, on further study, be shown to have harmful side effects or other
characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable
regulatory criteria; and

a future product candidate may not be capable of being produced in commercial quantities at an
acceptable cost, or at all.

If we are unable to identify additional compounds suitable for preclinical and clinical development, we may not
be able to obtain sufficient product revenue in future periods, which likely would result in significant harm to our
financial position and adversely impact our stock price.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to
successfully develop our product candidates, conduct our clinical trials and commercialize our product
candidates.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management,
clinical and scientific personnel. We are highly dependent upon our senior management, particularly Jay R. Luly,
Ph.D., our Chief Executive Officer and President, and Yat Sun Or, Ph.D., our Senior Vice President, Research
and Development and Chief Scientific Officer, as well as other employees and consultants. Although none of
these individuals has informed us to date that he intends to retire or resign in the near future, the loss of services
of any of these individuals or one or more of our other members of senior management could delay or prevent the
successful development of our future product candidates.

Although we have not historically experienced unique difficulties attracting and retaining qualified employees,
we could experience such problems in the future. For example, competition for qualified personnel in the
biotechnology and pharmaceutical field is intense. In addition, we will need to hire additional personnel as we
expand our clinical development and commercial activities. We may not be able to attract and retain quality
personnel on acceptable terms.

We have incurred a substantial cumulative net loss since our inception and anticipate that we may incur
substantial operating losses in one or more years in the future. To date, our principal sources of revenue have
been our collaboration agreements, including our current agreements with AbbVie and Novartis, and future
payments under these agreements are uncertain. We have had no products approved for commercial sale. As a
result, our ability to achieve sustained profitability is unproven.

We have incurred cumulative net losses since our inception, and as of September 30, 2013, we had an
accumulated deficit of $107.5 million. Our net income in the fiscal year ended September 30, 2010 resulted
primarily from the conclusion of a previous collaboration which accelerated $16.2 million of deferred revenue
into fiscal 2010 that was related to cash received and spent in prior years, and our net income in the fiscal year
ended September 30, 2011 resulted primarily from a substantial milestone payment from AbbVie. In the fiscal
year ended September 30, 2012, our net income resulted primarily from a substantial upfront license payment
from Novartis. In the fiscal year ended September 30, 2013, our net income resulted primarily from milestone
payments we earned from AbbVie and Novartis of $15.0 million and $11.0 million, respectively. There is no
assurance, however, that we will recognize any collaboration revenue during fiscal 2014 or report net income in
fiscal 2014 or subsequent years. To date, we have not commercialized any products or generated any revenue
from product sales, directly or through any collaborator.

Our principal source of revenue has been our collaboration agreements, including our current agreements with
AbbVie and Novartis. Future milestone payments are uncertain because our collaborators may choose not to
continue research or development activities for one or more potential product candidates. For example, under a
prior collaboration for the development of an antibiotic product candidate in Japan, our collaborator decided in
2010 not to pursue further development of the licensed product candidate due to its limited potency against
Haemophilus influenzae in clinical trials of community-acquired pneumonia, which then resulted in our
collaboration being terminated. In addition, we may not achieve the specified milestones, our product candidates
may not be approved by the FDA or other regulatory authorities or, if they are approved, may not be accepted in
the market. If we are unable to develop and commercialize one or more of our product candidates, either alone or
with our collaborators, or if any such product candidate does not achieve market acceptance, we may never
generate sufficient product royalties or product sales. Even if we do generate product royalties or product sales,
we may never achieve or sustain profitability on a quarterly or annual basis. Our failure to sustain profitability
would depress the market price of our common stock and could impair our ability to raise capital, expand our
business, diversify our product offerings or continue our operations. A decline in the market price of our
common stock also could cause you to lose all or a part of your investment.

We may encounter difficulties in managing our growth and expanding our operations successfully.

As we seek to advance our product candidates through clinical trials, we will need to expand our development,
regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these
capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with
various strategic partners, suppliers and other third parties. Future growth will impose significant added
responsibilities on members of management. Our future financial performance and our ability to commercialize
our product candidates and to compete effectively will depend, in part, on our ability to manage any future
growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively
and hire, train and integrate additional management, administrative and sales and marketing personnel. We may
not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from
successfully growing our company.

Our government funded contract for our antibiotic program is subject to termination and uncertain future
funding and there is no certainty that we will be able to enter into new agreements to provide these funds.

Under our agreement with the National Institute of Allergy and Infectious Diseases, or NIAID, a division of the
National Institutes of Health, an agency of the United States Department of Health and Human Services, to
support our antibiotic program, NIAID has the option to make future payments to fund our early clinical
development of EDP-788. If NIAID exercises each remaining option under the agreement, the aggregate funding
commitment will be $42.7 million. On August 29, 2013, NIAID exercised the first two options under the
agreement, pursuant to which is has agreed to provide an additional $9.2 million in funding for preclinical and
early clinical development of EDP-788. To date only $23.5 million has been committed for our work under the
agreement. NIAID has several remaining options to decide whether it wants to continue the program in its sole
discretion. In addition, the ability of government agencies such as NIAID to perform under these types of
agreements is dependent upon adequate continued funding of the agencies and their programs. We have no
control over the resources and funding NIAID may devote to our agreement, which may be subject to periodic
renewal and which generally may be terminated by NIAID at any time. For example, in accordance with the
spending cuts, known as sequestration, to implement the Budget Control Act of 2011, NIAID notified us on
March 4, 2013 of the possibility that NIAID may not exercise the options on our contract or may negotiate lower
prices or other terms via a bilateral modification. And again in September 2013 NIAID notified of possible
reductions in funding due to the budget impasse and government shut-down at the commencement of the U.S.
government’s fiscal year beginning October 1, 2013. Any significant reductions in the funding of U.S.
government agencies or in the funding areas targeted by our business could materially and adversely affect our
antibiotic program and our results of operations and financial condition. If we fail to satisfy our contractual
obligations under the agreement, the applicable Federal Acquisition Regulations allow the government to
terminate the agreement in whole or in part, and we may be required to perform corrective actions, including but
not limited to delivering to the government any incomplete work. If NIAID does not exercise future funding
options under the agreement, terminates the agreement or fails to perform its responsibilities under the
agreement, it could materially impact our antibiotic program and our financial results.

In addition, our contract related costs and fees, including allocated indirect costs, are subject to audits and
adjustments by negotiation between us and the U.S. government. As part of the audit process, the government
audit agency verifies that all charges made by a contractor against a contract are legitimate and appropriate.
Audits may result in recalculation of contract revenues and non-reimbursement of some contract costs and fees.
Any audits of our contract related costs and fees could result in material adjustments to our revenue. In addition,
U.S. government contracts are conditioned upon the continuing availability of Congressional appropriations.
Congress usually appropriates funds on a fiscal year basis even though contract performance may take several
years. Consequently, at the outset of a major program, the contract is usually incrementally funded and additional
funds are normally committed to the contract by the procuring agency as appropriations are made by Congress
for future fiscal years. Any failure of NIAID to continue to fund our contract could have a material adverse effect
on our business, results of operations and financial condition.

Risks Related to Development, Clinical Testing and Regulatory Approval of Our Product Candidates

Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain
outcomes. If clinical trials are prolonged or delayed, we or our collaborators may be unable to commercialize
our product candidates on a timely basis.

Clinical testing is expensive and, depending on the stage of development, can take a substantial time period to
complete. Its outcome is inherently uncertain, and failure can occur at any time during clinical development. The
first top-line results of a Phase 3 trial of ABT-450 in combination therapy was reported in November 2013, but
none of the other product candidates in our pipeline has yet advanced beyond Phase 2 clinical trials. The
ABT-450 Phase 3 trials or any future Phase 3 trials may fail to demonstrate sufficient safety and efficacy.
Moreover, regulatory and administrative delays may adversely affect our or our collaborators’ clinical
development plans and jeopardize our or our collaborators’ ability to attain product approval, commence product
sales, compete successfully against other HCV therapies and generate revenues.

Clinical trials can be delayed for a variety of reasons, including delays related to:

•

reaching agreement on acceptable terms with prospective contract research organizations, or CROs,
and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary
significantly among different CROs and trial sites;

failure of third-party contractors, such as CROs, or investigators to comply with regulatory
requirements;

delay or failure in obtaining the necessary approvals from regulators or institutional review boards, or
IRBs, in order to commence a clinical trial at a prospective trial site, or their suspension or termination
of a clinical trial once commenced;

difficulty in recruiting suitable patients to participate in a trial;

difficulty in having patients complete a trial or return for post-treatment follow-up;

clinical sites deviating from trial protocol or dropping out of a trial;

problems with drug product or drug substance storage and distribution;

adding new clinical trial sites;

our inability to manufacture, or obtain from third parties, adequate supply of drug product sufficient to
complete our preclinical studies and clinical trials;

governmental or regulatory delays and changes in regulatory requirements, policy and guidelines; or

varying interpretations of data by the FDA and similar foreign regulatory agencies.

The results of any Phase 3 clinical trial may not be adequate to support marketing approval. These clinical trials
are lengthy and usually involve from many hundreds to thousands of patients. In addition, if the FDA disagrees
with our or our collaborator’s choice of the key testing criteria, or primary endpoint, or the results for the primary
endpoint are not robust or significant relative to the control group of patients not receiving the experimental
therapy or are subject to confounding factors, or are not adequately supported by other study endpoints, the FDA
may refuse to approve our or our collaborator’s product candidate. The FDA also may require additional clinical
trials as a condition for approving any of these product candidates. We estimate that it will likely be 2015 before
an NDA for one of our collaborator’s product candidates could be approved by the FDA.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions
in which such trial is being conducted, by any Data Safety Monitoring Board, or DSMB, for such trial, or by the
FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a
number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or
our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory

authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to
demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of
adequate funding to continue the clinical trial. In addition, delays can occur due to safety concerns arising from
trials or other clinical data regarding another company’s product candidate in the same compound class as one of
ours. For example, Novartis’ drug candidate that is a cyclophilin inhibitor had been placed on clinical hold by the
FDA based on a small number of cases of pancreatitis in clinical trial patients, one of which resulted in a
patient’s death. While Novartis obtained a revision of the clinical hold and has initiated a Phase 2 drug-drug
interaction study, the clinical hold has the potential to result in delays in development of other similar inhibitors,
including delays due to additional preclinical or clinical testing protocols for all similar inhibitors. If we or our
collaborators experience delays in the completion of, or termination of, any clinical trial of one of our product
candidates, the commercial prospects of the product candidate will be harmed, and our or our collaborators’
ability to commence product sales and generate product revenues from the product candidate will be delayed. In
addition, any delays in completing our clinical trials will increase our costs and slow down our product candidate
development and approval process. Any of these occurrences may harm our business, financial condition and
prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or
completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product
candidates.

If we or our collaborators are required to suspend or discontinue clinical trials due to side effects or other
safety risks associated with our product candidates, or if we or our collaborators are required to conduct
studies on the long-term effects associated with the use of our product candidates, efforts to commercialize our
product candidates could be delayed or halted.

Clinical trials involving our product candidates may be suspended or terminated at any time for a number of
safety-related reasons. For example, we or our collaborators may voluntarily suspend or terminate clinical trials
if at any time one of our product candidates, or a combination therapy including any of them, presents an
unacceptable safety risk to the clinical trial patients. In addition, IRBs or regulatory agencies may order the
temporary discontinuation or termination of clinical trials at any time if they believe that the clinical trials are not
being conducted in accordance with applicable regulatory requirements, including if they present an unacceptable
safety risk to patients. Administering any product candidate to humans may produce undesirable side effects. The
existence of undesirable side effects resulting from any of our product candidates, or a combination therapy
including any of them, could cause us, our collaborators or regulatory authorities, such as the FDA, to interrupt,
delay or halt clinical trials of our product candidates and could result in the FDA or other regulatory agencies
denying further development or approval of our product candidates for any or all targeted indications. This, in
turn, could prevent us or our collaborators from commercializing our product candidates.

Our Bicyclolide product candidates are in a novel class of antibiotics. Regulatory authorities may require more
extensive studies of the long-term effects for regulatory approval, which could delay development of EDP-788 or
our other future antibiotic product candidates. These studies could also be required at any time after regulatory
approval of any of our product candidates. Some or all of our product candidates may prove to be unsafe for
human use.

Results of earlier clinical trials may not be predictive of the results of later-stage clinical trials.

The results of preclinical studies and early clinical trials of our product candidates, whether ABT-450, ABT-493,
EDP-239, EDP-788 or any of our future product candidates, may not be predictive of the results of later-stage
clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy
results despite having progressed through preclinical studies and initial clinical trials. Many companies in the
biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to adverse safety
profiles or lack of efficacy, notwithstanding promising results in earlier studies. Similarly, future clinical trial
results may not be successful for these or other reasons.

This product candidate development risk is heightened by any changes in the planned clinical trials compared to
the completed clinical trials. As product candidates are developed through preclinical to early to late stage
clinical trials towards approval and commercialization, it is customary that various aspects of the development
program, such as manufacturing and formulation, are altered along the way in an effort to optimize processes and
results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes
could make the results of planned clinical trials or other future clinical trials we or our collaborators may initiate
less predictable and could cause our product candidates to perform differently, which could delay completion of
clinical trials, delay approval of our product candidates and/or jeopardize our or our collaborators’ ability to
commence product sales and generate revenues.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-
consuming and inherently unpredictable, and if we or our collaborators are ultimately unable to obtain timely
regulatory approval for our product candidates, our business will be substantially harmed.

The regulatory approval process is expensive and, while the time required to gain FDA and foreign regulatory
approval is uncertain, it may take years. Regulatory approval is unpredictable and depends upon numerous
factors, including the substantial discretion of the regulatory authorities. In addition, approval policies,
regulations, or the type and amount of preclinical and clinical data necessary to gain approval may change during
the course of a product candidate’s clinical development and may vary among jurisdictions. We or our
collaborators may be required to undertake and complete certain additional preclinical studies to generate toxicity
and other data required to support the submission of a New Drug Application, or NDA, to the FDA or other
regulatory authority. Neither we nor our collaborators have obtained regulatory approval for any of our product
candidates and it is possible that none of our existing product candidates or any of our future product candidates
will ever obtain regulatory approval. Furthermore, approval in the United States by the FDA does not ensure
approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory
authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA.

Our product candidates could fail to receive regulatory approval for many reasons, including the following:

•

the FDA or comparable foreign regulatory authorities may disagree with the design or implementation
of our or our collaborators’ clinical trials;

• we or our collaborators may be unable to demonstrate to the satisfaction of the FDA or comparable

foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

•

the results of clinical trials may not meet the level of statistical significance required by the FDA or
comparable foreign regulatory authorities for approval;

• we or our collaborators may be unable to demonstrate that a product candidate’s clinical and other

benefits outweigh its safety risks;

•

the FDA or comparable foreign regulatory authorities may disagree with our or our collaborators’
interpretation of data from preclinical studies or clinical trials;

the data collected from clinical trials of our product candidates may not be sufficient to support the
submission of an NDA or other submission or to obtain regulatory approval in the United States or
elsewhere;

the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes
or facilities of third-party manufacturers with which we or our collaborators contract for clinical and
commercial supplies; and

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may
significantly change in a manner rendering our or our collaborators’ clinical data insufficient for
approval.

We and our collaborators cannot be assured that after spending substantial time and resources, we or our
collaborators will obtain regulatory approval. Even if we or our collaborators were to obtain approval, regulatory
authorities may grant approval contingent on the performance of costly post-marketing clinical trials, or may
approve a product candidate with a label that does not include the labeling claims necessary or desirable for the
successful commercialization of that product candidate. Significant clinical trial delays could allow our competitors
to obtain marketing approval before we or our collaborators do or could shorten the patent protection period during
which we may have the exclusive right to commercialize our product candidates. In addition, we or our
collaborators may not be able to ultimately achieve the prices intended for our products. In many foreign countries,
a product candidate must be approved for reimbursement before it can be approved for sale in that country. Any of
the foregoing scenarios could materially harm the commercial prospects for our product candidates.

Even if we receive regulatory approval for any of our product candidates we develop independently, we will be
subject to ongoing FDA obligations and continued regulatory review, which may result in significant
additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other
restrictions and market withdrawal and we may be subject to penalties if we or our collaborators fail to comply
with regulatory requirements or experience unanticipated problems with our products.

Any regulatory approvals that we receive for our product candidates we develop independently may be subject to
limitations on the approved indicated uses for which the product may be marketed or subject to certain conditions
of approval, or may contain requirements for potentially costly post-marketing testing, including Phase 4 clinical
trials, and surveillance to monitor the safety and efficacy of the product candidate.

In addition, if the FDA approves any of our product candidates, the manufacturing processes, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the
product will be subject to extensive and ongoing regulatory requirements. These requirements include
submissions of safety and other post-marketing information and reports, as well as continued compliance with
current good manufacturing practices, or cGMP, and good clinical practices, or GCP, for any clinical trials that
we or our collaborators conduct post-approval. Later discovery of previously unknown problems with a product,
including adverse events of unanticipated severity or frequency, or with third-party manufacturers or
manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

•

restrictions on the marketing or manufacturing of the product, withdrawal of the product from the
market or voluntary or mandatory product recalls;

fines, warning letters or holds on any post-approval clinical trials;

refusal by the FDA to approve pending applications or supplements to approved applications filed by
us or our collaborators, or suspension or revocation of product license approvals;

product seizure or detention, or refusal to permit the import or export of products; and

injunctions or the imposition of civil or criminal penalties.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation
or administrative action, either in the United States or abroad. If we or our collaborators are slow or unable to
adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our
collaborators are not able to maintain regulatory compliance, our product candidate may lose any marketing
approval that may have been obtained and we may not achieve or sustain profitability, which would adversely
affect our business.

We or our collaborators may delay or terminate the development of a product candidate at any time if we or
our collaborators believe the perceived market or commercial opportunity does not justify further investment,
which could materially harm our business.

Even though the results of preclinical studies and clinical trials that we or our collaborators have conducted or
may conduct in the future may support further development of one or more of our product candidates, we, or our

collaborator in the case of our partnered product candidates, may delay, suspend or terminate the future
development of a product candidate at any time for strategic, business, financial or other reasons, including the
determination or belief that the emerging profile of the product candidate is such that it may not receive FDA
approval, gain meaningful market acceptance, otherwise provide any competitive advantages in its intended
indication or market or generate a significant return to stockholders. Such a delay, suspension or termination
could materially harm our business, results of operations or financial condition. In addition, our collaborators
may have the right to make decisions regarding the development and commercialization of product candidates
without consulting us, and may make decisions with which we do not agree.

Our internal computer systems, or those of our collaborators, CROs or other contractors or consultants, may
fail or suffer security breaches, which could result in a material disruption of development programs for our
product candidates.

Despite the implementation of security measures, our internal computer systems and those of our collaborators,
CROs, and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized
access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not
experienced any such system failure, accident or security breach to date, if such an event were to occur and cause
interruptions in our operations, it could result in a material disruption of our independent drug development
programs or those of our collaborators. For example, the loss of clinical trial data from ongoing or future clinical
trials for any of our product candidates could result in delays in regulatory approval efforts and significantly
increase costs to recover or reproduce the data. To the extent that any disruption or security breach were to result
in a loss of or damage to data or applications, or inappropriate disclosure of confidential or proprietary
information, we or our collaborators could incur liability and the further development of our product candidates
could be delayed.

Risks Related to Commercialization of Our Product Candidates

If, in the future, we are unable to establish our own sales, marketing and distribution capabilities or enter into
licensing or collaboration agreements for these purposes, we may not be successful in commercializing any
future product candidates.

We do not have a sales or marketing infrastructure and have no sales, marketing or distribution experience. We
will seek to either build our own commercial infrastructure to commercialize any future products if and when
they are approved, or enter into licensing or collaboration agreements where our collaborator is responsible for
commercialization, like in the case of our collaborations with Novartis and AbbVie, or where we have the right
to assist in the future development and commercialization of such products. For example, we have a co-detail
option with respect to any product that may be developed under our Novartis collaboration, which would allow
us to establish a limited sales force in the United States for a portion of the product’s sales.

To develop internal sales, distribution and marketing capabilities, we will have to invest significant amounts of
financial and management resources, some of which will be committed prior to any confirmation that any of our
proprietary product candidates will be approved. For product candidates for which we decide to perform sales,
marketing and distribution functions ourselves, we could face a number of additional risks, including:

•

our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

the inability of sales personnel to obtain access to physicians or persuade adequate numbers of
physicians to prescribe any future products;

the lack of complementary products to be offered by sales personnel, which may put us at a
competitive disadvantage relative to companies with more extensive product lines; and

unforeseen costs and expenses associated with creating an independent sales and marketing
organization.

Where and when appropriate, we may elect to utilize contract sales forces or distribution partners to assist in the
commercialization of our product candidates. If we enter into arrangements with third parties to perform sales,
marketing and distribution services for our products, the resulting revenues or the profitability from these
revenues to us are likely to be lower than if we had sold, marketed and distributed our products ourselves. In
addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute
our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little
control over such third parties, and any of these third parties may fail to devote the necessary resources and
attention to sell, market and distribute our products effectively.

If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in
collaboration with third parties, we will not be successful in commercializing our product candidates.

Our commercial success depends upon significant market acceptance among physicians, patients and
healthcare payors of our product candidates licensed to AbbVie and Novartis, if approved, as well as of any
future product candidates we plan to develop independently or in collaboration with others.

Even if ABT-450, ABT-493 or EDP-239 or any other product candidate that we may develop in the future
obtains regulatory approval, whether as part of a combination therapy or as a monotherapy, the product may not
gain market acceptance among physicians, healthcare payors, patients and the medical community. For example,
the standard of care in HCV is likely to evolve rapidly as many new product candidates are being developed and
tested. The degree of market acceptance of any products for which we receive approval for commercial sale
depends on a number of factors, including:

•

the efficacy and safety of our partnered product candidates, as demonstrated in clinical trials, and the
degree to which these product candidates represent a clinically meaningful improvement in care as
compared with other available therapies;

the clinical indications for which any product candidates become approved;

acceptance among physicians, major operators of clinics and patients of any of our product candidates
as safe, effective and preferred treatments;

the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;

the potential and perceived advantages of our product candidates over alternative treatments;

the cost of treatment in relation to alternative treatments;

the availability of adequate reimbursement and pricing by third parties and government authorities;

the continued projected growth of the HCV drug market;

the relative convenience and ease of administration of any combination therapies including our product
candidates;

the prevalence and severity of adverse side effects, whether involving the use of our products
candidates or similar, competitive products; and

the effectiveness of our or our collaborators’ sales and marketing efforts.

If our product candidates are approved and then fail to achieve market acceptance, we would not be able to
generate significant revenue. Further, if new, more favorably received therapies are introduced after our product
candidates achieve market acceptance, then we may not be able to maintain that market acceptance over time.

Even if we or our collaborators are able to commercialize any product candidates, the resulting products may
become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform
initiatives in the United States, which would harm our business.

The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely
from country to country. In the United States, the Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Affordability Reconciliation Act of 2010, collectively referred to as the ACA, may
significantly change the way healthcare is financed by both governmental and private insurers. While we cannot
predict what impact on federal reimbursement policies this law will have in general or specifically on any
product that we or any of our collaborators commercializes, the ACA may result in downward pressure on
pharmaceutical reimbursement, which could negatively affect market acceptance of new products. In addition,
although the United States Supreme Court has upheld the constitutionality of most of the ACA, some states have
indicated that they intend not to implement certain sections of the ACA, and some members of the U.S. Congress
are still working to repeal the ACA. We cannot predict whether these challenges will continue or other proposals
will be made or adopted, or what impact these efforts may have on us or any of our collaborators. Our or any
collaborators’ ability to commercialize any products successfully also will depend in part on the extent to which
reimbursement for these products and related treatments will be available from government health administration
authorities, private health insurers and other organizations. Government authorities and third-party payors, such
as private health insurers and health maintenance organizations, decide which medications they will pay for and
establish reimbursement levels. A primary trend in the U.S. healthcare industry is cost containment. Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of
reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies
provide them with predetermined discounts from list prices and are challenging the prices charged for medical
products. We cannot be sure that reimbursement will be available for any product that we or any collaborator
commercialize and, if reimbursement is available, the level of reimbursement. In addition, reimbursement may
impact the demand for, or the price of, any product candidate for which we or a collaborator obtains marketing
approval. If reimbursement is not available or is available only to limited levels, we or our collaborators may not
be able to successfully commercialize any product candidate for which marketing approval is obtained.

There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be
more limited than the purposes for which the drug is approved by the FDA. Moreover, eligibility for
reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs,
including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs,
if applicable, may also be insufficient to cover our and any collaborator’s costs and may not be made permanent.
Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may
be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing
payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by
government healthcare programs or private payors and by any future relaxation of laws that presently restrict
imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party
payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement
policies. Our or any collaborator’s inability to promptly obtain coverage and profitable payment rates from both
government-funded and private payors for any approved products that we or our collaborators develop could
have a material adverse effect on our operating results, our ability to raise capital needed to commercialize
products and our overall financial condition.

Foreign governments tend to impose strict price controls, which may adversely affect our future profitability.

In most foreign countries, particularly in the European Union, prescription drug pricing and/or reimbursement is
subject to governmental control. In those countries that impose price controls, pricing negotiations with
governmental authorities can take considerable time after the receipt of marketing approval for a product. To
obtain reimbursement or pricing approval in some countries, we or our collaborators may be required to conduct
a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies.

Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the
pricing review period begins after marketing or product licensing approval is granted. In some foreign markets,
prescription pharmaceutical pricing remains subject to continuing governmental control even after initial
approval is granted. As a result, we or our collaborators might obtain marketing approval for a product in a
particular country, but then be subject to price regulations that delay commercial launch of the product, possibly
for lengthy time periods, and negatively impact the revenues that are generated from the sale of the product in
that country. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at
unsatisfactory levels, or if there is competition from lower priced cross-border sales, our profitability will be
negatively affected.

Risks Related to Our Dependence on Third Parties

We may not be successful in establishing new product collaborations, which could adversely affect our ability
to develop and commercialize our future product candidates. If we are unsuccessful in maintaining or
forming alliances on favorable terms, our business may not succeed.

We may seek to enter into additional product collaborations in the future, including alliances with other
biotechnology or pharmaceutical companies, to enhance and accelerate the development and commercialization
of our future product candidates. We face significant competition in seeking appropriate collaborators and the
negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to
establish other product collaborations or other alternative arrangements for any future product candidates and
programs because our research and development pipeline may be insufficient, our product candidates and
programs may be deemed to be at too early of a stage of development for collaborative effort and/or third parties
may not view our product candidates and programs as having the requisite potential to demonstrate safety and
efficacy. Even if we are successful in our efforts to establish product collaborations, the terms that we agree upon
may not be favorable to us and we may not be able to maintain such product collaborations if, for example,
development or approval of a product candidate is delayed or sales of an approved product are disappointing.

If either of our existing collaboration agreements is terminated, or if we determine that entering into other
product collaborations is in our best interest but we either fail to enter into, delay in entering into or fail to
maintain such collaborations:

•

the development of certain of our current or future product candidates may be terminated or delayed;

our cash expenditures related to development of certain of our future product candidates would
increase significantly and we may need to seek additional financing;

• we may be required to hire additional employees or otherwise develop expertise, such as clinical,

regulatory, sales and marketing expertise, which we do not currently have;

• we will bear all of the risk related to the development of any such product candidates; and

•

the competitiveness of any product candidate that is commercialized could be reduced.

We intend to rely on third-party manufacturers to produce our clinical product candidate supplies and any
commercial supplies of any approved future product candidates. Any failure by a third-party manufacturer to
produce acceptable supplies for us may delay or impair our ability to initiate or complete our clinical trials or
sell any resulting product.

We do not currently own or operate any manufacturing facilities. We plan to work with third-party contract
manufacturers to produce sufficient quantities of any future product candidates for preclinical testing, clinical
trials and commercialization. If we are unable to arrange for such a third-party manufacturing source, or fail to do
so on commercially reasonable terms, we may not be able to successfully produce, develop and market our future
product candidates, or we may be delayed in doing so.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product
candidates ourselves, including reliance on the third party for regulatory compliance and quality control and
assurance, volume production, the possibility of breach of the manufacturing agreement by the third party
because of factors beyond our control (including a failure to synthesize and manufacture our product candidates
in accordance with our product specifications) and the possibility of termination or nonrenewal of the agreement
by the third party at a time that is costly or damaging to us. In addition, the FDA and other regulatory authorities
require that our product candidates be manufactured according to cGMP and similar foreign standards.
Pharmaceutical manufacturers and their subcontractors are required to register their facilities and/or products
manufactured at the time of submission of the marketing application and then annually thereafter with the FDA
and certain state and foreign agencies. They are also subject to periodic unannounced inspections by the FDA,
state and other foreign authorities. Any subsequent discovery of problems with a product, or a manufacturing or
laboratory facility used by us or our collaborators, may result in restrictions on the product or on the
manufacturing or laboratory facility, including marketed product recall, suspension of manufacturing, product
seizure, or a voluntary withdrawal of the drug from the market. Any failure by our third-party manufacturers to
comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient
quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory
approval of any of our product candidates.

We plan to rely on third-party manufacturers to purchase from third-party suppliers the materials necessary to
produce our future product candidates for our clinical studies. There are a small number of suppliers for certain
capital equipment and materials that we plan to use to manufacture our drugs. Such suppliers may not sell these
materials to our manufacturers at the times we need them or on commercially reasonable terms. Moreover, we
currently do not have any agreements for the production of these materials. Although we do not intend to begin a
clinical trial unless we believe we have a sufficient supply of a product candidate to complete the clinical trial,
any significant delay in the supply of a product candidate or the material components thereof for an ongoing
clinical trial due to the need to replace a third-party manufacturer could considerably delay completion of our
clinical studies, product testing and potential regulatory approval of our product candidates. If our manufacturers
or we are unable to purchase these materials after regulatory approval has been obtained for our product
candidates, the commercial launch of our product candidates would be delayed or there would be a shortage in
supply, which would impair our ability to generate revenue from the sale of our product candidates.

Contract manufacturers may not be able to manufacture our product candidates at a cost or in quantities or in a
timely manner necessary to develop and commercialize them. If we successfully commercialize any of our
product candidates, to meet our projected needs we may need to find third parties that will increase their scale of
production, or we may have to establish or access large-scale commercial manufacturing capabilities. We may
require additional funds, personnel and other resources to build, lease or operate any manufacturing facility.

Because a portion of our manufacturing of certain key intermediates used in the manufacture of the active
pharmaceutical ingredients for our future product candidates is expected to take place in China through third-
party manufacturers, a significant disruption in the operation of those manufacturers or political unrest in
China could materially adversely affect our business, financial condition and results of operations.

Although manufacturing for each of our lead product candidates, namely ABT-450, ABT-493 and EDP-239, is
being conducted by our collaborators, we have relied on third parties located in China to manufacture and supply
certain key intermediates used in the manufacture of our active pharmaceutical ingredients, or API, for our
research product candidates, and we expect to continue to use such third party manufacturers for such
intermediates for any future product candidates we develop independently, including EDP-788. Any disruption in
production or inability of our manufacturers in China to produce adequate quantities to meet our needs, whether
as a result of a natural disaster or other causes, could impair our ability to operate our business on a day-to-day
basis and to continue our research and development of our future product candidates. Furthermore, since these
manufacturers are located in China, we are exposed to the possibility of product supply disruption and increased
costs in the event of changes in the policies of the Chinese government, political unrest or unstable economic

conditions in China. Any of these matters could materially and adversely affect our business and results of
operations. Any recall of the manufacturing lots or similar action regarding our API used in clinical trials could
delay the trials or detract from the integrity of the trial data and its potential use in future regulatory filings. In
addition, manufacturing interruptions or failure to comply with regulatory requirements by any of these
manufacturers could significantly delay clinical development of potential products and reduce third-party or
clinical researcher interest and support of proposed trials. These interruptions or failures could also impede
commercialization of our future product candidates and impair our competitive position. Further, we may be
exposed to fluctuations in the value of the local currency in China. Future appreciation of the local currency
could increase our costs. In addition, our labor costs could continue to rise as wage rates increase due to
increased demand for skilled laborers and the availability of skilled labor declines in China.

We will rely on third parties to monitor, support, conduct and/or oversee clinical trials of our future product
candidates that we develop independently and, in some cases, to maintain regulatory files for those product
candidates. If we are not able to maintain or secure agreements with such third parties on acceptable terms, if
these third parties do not perform their services as required, or if these third parties fail to timely transfer any
regulatory information held by them to us, we may not be able to obtain regulatory approval for, or
commercialize, our product candidates.

We will rely on academic institutions, CROs, hospitals, clinics and other third-party collaborators who are
outside our control to monitor, support, conduct and/or oversee preclinical and clinical studies of our future
product candidates. We will also rely on third parties to perform clinical trials on our future product candidates
when they reach that stage. As a result, we have less control over the timing and cost of these studies and the
ability to recruit trial subjects than if we conducted these trials wholly by ourselves. If we are unable to maintain
or enter into agreements with these third parties on acceptable terms, or if any such engagement is terminated, we
may be unable to enroll patients on a timely basis or otherwise conduct our trials in the manner we anticipate. In
addition, there is no guarantee that these third parties will devote adequate time and resources to our studies or
perform as required by a contract or in accordance with regulatory requirements, including maintenance of
clinical trial information regarding our future product candidates. If these third parties fail to meet expected
deadlines, fail to timely transfer to us any regulatory information, fail to adhere to protocols or fail to act in
accordance with regulatory requirements or our agreements with them, or if they otherwise perform in a
substandard manner or in a way that compromises the quality or accuracy of their activities or the data they
obtain, then clinical trials of our future product candidates may be extended, delayed or terminated, or our data
may be rejected by the FDA or regulatory agencies.

To the extent we elect to enter into additional licensing or collaboration agreements to partner our future
product candidates, our dependence on such relationships may adversely affect our business.

Our commercialization strategy for some of our future product candidates may depend on our ability to enter into
collaboration agreements with other companies to obtain assistance and funding for the development and
potential commercialization of these product candidates, similar to what we have done with AbbVie and
Novartis. Supporting diligence activities conducted by potential collaborators and negotiating the financial and
other terms of a collaboration agreement are long and complex processes with uncertain results. Even if we are
successful in entering into one or more additional collaboration agreements, collaborations can involve greater
uncertainty for us, as we may have limited or no control over certain aspects of our collaborative programs. We
may determine that continuing a collaboration under the terms provided is not in our best interest, and we may
terminate the collaboration. Our collaborators could delay or terminate their agreements with us, and our product
candidates subject to collaborative arrangements may never be successfully commercialized.

Further, our collaborators may develop alternative products or pursue alternative technologies either on their own
or in collaboration with others, including our competitors, and the priorities or focus of our collaborators may
shift such that our programs receive less attention or resources than we would like, or they may be terminated
altogether. Any such actions by our collaborators may adversely affect our business prospects and ability to earn

revenue. In addition, we could have disputes with our collaborators, such as the interpretation of terms in our
agreements. Any such disagreements could lead to delays in the development or commercialization of any
potential products or could result in time-consuming and expensive litigation or arbitration, which may not be
resolved in our favor.

Even with respect to programs that we intend to commercialize ourselves, we may enter into agreements with
collaborators to share in the burden of conducting clinical trials, manufacturing and marketing our product
candidates or products. In addition, our ability to apply our proprietary technologies to develop proprietary
compounds will depend on our ability to establish and maintain licensing arrangements or other collaborative
arrangements with the holders of proprietary rights to such compounds. We may not be able to establish such
arrangements on favorable terms or at all, and our collaborative arrangements may not be successful.

Risks Related to Our Intellectual Property Rights

We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our
product candidates.

Our commercial success will depend, in large part, on our ability to obtain and maintain patent and other
intellectual property protection with respect to our product candidates. We cannot be certain that patents will be
issued or granted with respect to our patent applications that are currently pending, or that issued or granted
patents will not later be found to be invalid and/or unenforceable, be interpreted in a manner that does not
adequately protect our products, or otherwise provide us with any competitive advantage. The patent position of
biotechnology and pharmaceutical companies is generally uncertain because it involves complex legal and
factual considerations. The standards applied by the United States Patent and Trademark Office and foreign
patent offices in granting patents are not always applied uniformly or predictably. For example, there is no
uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology
and pharmaceutical patents. Consequently, patents may not issue from our pending patent applications. As such,
we do not know the degree of future protection that we will have on our proprietary products and technology, if
any, and a failure to obtain adequate intellectual property protection with respect to our product candidates and
proprietary technology could have a material adverse impact on our business.

In addition, certain of our activities have been funded, and may in the future be funded, by the United States
federal government. For example, the preclinical and early clinical development of EDP-788, our lead candidate
for the treatment of MRSA, is currently funded under a contract with the NIAID, an entity of the United States
federal government. When new technologies are developed with United States federal government funding, the
government obtains certain rights in any resulting patents, including a nonexclusive license authorizing the
government to use the invention for non-commercial purposes. These rights may permit the government to
disclose our confidential information to third parties and to exercise “march-in” rights to use or allow third
parties to use our patented technology. The government can exercise its march-in rights if it determines that
action is necessary because we fail to achieve practical application of the United States government-funded
technology, or because action is necessary to alleviate health or safety needs, to meet requirements of federal
regulations or to give preference to United States industry. In addition, United States government-funded
inventions must be reported to the government and United States government funding must be disclosed in any
resulting patent applications. In addition, our rights in such inventions are subject to certain requirements to
manufacture products in the United States.

Issued patents covering one or more of our product candidates could be found invalid or unenforceable if
challenged in court.

Despite measures we take to obtain patent and other intellectual property protection with respect to our product
candidates and proprietary technology, any of our intellectual property rights could be challenged or invalidated.
For example, if we were to initiate legal proceedings against a third party to enforce a patent covering one of our
product candidates, the defendant could counterclaim that our patent is invalid and/or unenforceable. In patent

litigation in the United States and in some other jurisdictions, defendant counterclaims alleging invalidity and/or
unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of
several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an
unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld
relevant information from the United States Patent and Trademark Office, or the applicable foreign counterpart,
or made a misleading statement, during prosecution. Although we believe that we have conducted our patent
prosecution in accordance with the duty of candor and in good faith, the outcome following legal assertions of
invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for
example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were
unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or
unenforceability, we would lose at least part, and perhaps all, of the patent protection on a product candidate.
Even if a defendant does not prevail on a legal assertion of invalidity and/or unenforceability, our patent claims
may be construed in a manner that would limit our ability to enforce such claims against the defendant and
others. Any loss of patent protection could have a material adverse impact on one or more of our product
candidates and our business.

Enforcing our intellectual property rights against third parties may also cause such third parties to file other
counterclaims against us, which could be costly to defend and could require us to pay substantial damages, cease
the sale of certain products or enter into a license agreement and pay royalties (which may not be possible on
commercially reasonable terms or at all). Any efforts to enforce our intellectual property rights are also likely to
be costly and may divert the efforts of our scientific and management personnel.

Claims that our product candidates or the sale or use of our future products infringe the patent or other
intellectual property rights of third parties could result in costly litigation or could require substantial time
and money to resolve, even if litigation is avoided.

Our commercial success depends upon our ability to develop, manufacture, market and sell our product
candidates and use our proprietary technology without infringing the intellectual property rights of others. We
cannot guarantee that our product candidates or any uses of our product candidates do not and will not in the
future infringe third-party patents or other intellectual property rights. Third parties might allege that we or our
collaborators are infringing their patent rights or that we have misappropriated their trade secrets, or that we are
otherwise violating their intellectual property rights, whether with respect to the manner in which we have
conducted our research or to the composition, use or manufacture of the compounds we have developed or are
developing with our collaborators. Such third parties might resort to litigation against us or other parties we have
agreed to indemnify, which litigation could be based on either existing intellectual property or intellectual
property that arises in the future.

It is also possible that we failed to identify, or may in the future fail to identify, relevant patents or patent
applications held by third parties that cover our product candidates. For example, applications filed before
November 29, 2000 and certain applications filed after that date that will not be filed outside the United States
remain confidential until patents issue. Other patent applications in the United States and several other
jurisdictions are published approximately 18 months after the earliest filing for which priority is claimed, with
such earliest filing date being commonly referred to as the priority date. Furthermore, publication of discoveries
in the scientific or patent literature often lags behind actual discoveries. Therefore, we cannot be certain that we
or our collaborators were the first to invent, or the first to file patent applications on, our product candidates or
for their uses, or that our product candidates will not infringe patents that are currently issued or that are issued in
the future. In the event that a third party has also filed a patent application covering one of our product candidates
or a similar invention, we may have to participate in an adversarial proceeding, known as an interference,
declared by the U.S. Patent and Trademark Office or its foreign counterpart to determine priority of invention.
Additionally, pending patent applications which have been published can, subject to certain limitations, be later
amended in a manner that could cover our products or their use.

In order to avoid or settle potential claims with respect to any patent or other intellectual property rights of third
parties, we may choose or be required to seek a license from a third party and be required to pay license fees or
royalties or both, which could be substantial. These licenses may not be available on acceptable terms, or at all.
Even if we or any future collaborators were able to obtain a license, the rights may be nonexclusive, which could
result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from
commercializing a product, or be forced, by court order or otherwise, to cease some or all aspects of our business
operations, if, as a result of actual or threatened patent or other intellectual property claims, we are unable to
enter into licenses on acceptable terms. Further, we could be found liable for significant monetary damages as a
result of claims of intellectual property infringement. For example, we have received, and may in the future
receive, offers to license and demands to license from third parties claiming that we are infringing their
intellectual property or owe license fees and, even if such claims are without merit, there can be no assurance that
we will successfully avoid or settle such claims.

In addition, if AbbVie and Novartis license or otherwise acquire rights to intellectual property controlled by a
third party in various circumstances, for example, where a product could not be legally developed or
commercialized in a country without the third-party intellectual property right or, in the case of the Novartis
agreement, where it is decided that it would be useful to acquire such third-party right to develop or
commercialize the product, they are entitled under our collaboration agreements to decrease payments payable to
us on a product-by-product basis and, in certain cases, on a country-by-country basis. Any of the foregoing
events could harm our business significantly.

Defending against claims of patent infringement, misappropriation of trade secrets or other violations of
intellectual property rights could be costly and time consuming, regardless of the outcome. Thus, even if we were
to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated
costs. In addition, litigation or threatened litigation could result in significant demands on the time and attention
of our management team, distracting them from the pursuit of other company business. Claims that our product
candidates or the sale or use of our future products infringe, misappropriate or otherwise violate third-party
intellectual property rights could therefore have a material adverse impact on our business.

Unfavorable outcomes in intellectual property litigation could limit our research and development activities
and/or our ability to commercialize certain products.

If third parties successfully assert their intellectual property rights against us, we might be barred from using
certain aspects of our technology, or barred from developing and commercializing certain products. Prohibitions
against using certain technologies, or prohibitions against commercializing certain products, could be imposed by
a court or by a settlement agreement between us and a plaintiff. In addition, if we are unsuccessful in defending
against allegations that we have infringed, misappropriated or otherwise violated patent or other intellectual
property rights of others, we may be forced to pay substantial damage awards to the plaintiff. There is inevitable
uncertainty in any litigation, including intellectual property litigation. There can be no assurance that we would
prevail in any intellectual property litigation, even if the case against us is weak or flawed. If litigation leads to an
outcome unfavorable to us, we may be required to obtain a license from the intellectual property owner in order
to continue our research and development programs or to market any resulting product. It is possible that the
necessary license will not be available to us on commercially acceptable terms, or at all. Alternatively, we may
be required to modify or redesign our products in order to avoid infringing or otherwise violating third-party
intellectual property rights. This may not be technically or commercially feasible, may render our products less
competitive, or may delay or prevent the entry of our products to the market. Any of the foregoing could limit
our research and development activities, our ability to commercialize one or more product candidates, or both.

Most of our competitors are larger than we are and have substantially greater resources. They are, therefore,
likely to be able to sustain the costs of complex intellectual property litigation longer than we could. In addition,
the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds
necessary to conduct our clinical trials, continue our internal research programs, in-license needed technology, or
enter into strategic partnerships that would help us bring our product candidates to market.

In addition, any future intellectual property litigation, interference or other administrative proceedings will result
in additional expense and distraction of our personnel. An adverse outcome in such litigation or proceedings may
expose us or any future strategic partners to loss of our proprietary position, expose us to significant liabilities, or
require us to seek licenses that may not be available on commercially acceptable terms, if at all, each of which
could have a material adverse effect on our business.

Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the
market price of our common stock to decline.

During the course of any intellectual property litigation, there could be public announcements of the results of
hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors
regard these announcements as negative, the perceived value of our products, programs or intellectual property
could be diminished. Accordingly, the market price of our common stock may decline. Such announcements
could also harm our reputation or the market for our future products, which could have a material adverse effect
on our business.

Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade
secrets and other proprietary information.

In addition to patents, we rely on trade secrets, technical know-how and proprietary information concerning our
business strategy and product candidates in order to protect our competitive position in the field of HCV and
anti-infectives. In the course of our research and development activities and our business activities, we often rely
on confidentiality agreements to protect our proprietary information. Such confidentiality agreements are used,
for example, when we talk to vendors of laboratory or clinical development services or potential strategic
partners. In addition, each of our employees is required to sign a confidentiality agreement and invention
assignment agreement upon joining our company. We take steps to protect our proprietary information, and our
confidentiality agreements and invention assignment agreements are carefully drafted to protect our proprietary
interests. Nevertheless, there can be no guarantee that an employee or an outside party will not make an
unauthorized disclosure of our proprietary confidential information. This might happen intentionally or
inadvertently. It is possible that a competitor will make use of such information, and that our competitive
position will be compromised, in spite of any legal action we might take against persons making such
unauthorized disclosures. In addition, to the extent that our employees, consultants or contractors use intellectual
property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-
how and inventions.

Trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our
employees, consultants, contractors, business partners or outside scientific collaborators might intentionally or
inadvertently disclose our trade secret information to competitors or our trade secrets may otherwise be
misappropriated. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is
expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States
sometimes are less willing than United States courts to protect trade secrets. Moreover, our competitors may
independently develop equivalent knowledge, methods and know-how.

Our collaborators may have rights to publish data and other information to which we have rights. In addition, we
sometimes engage individuals or entities to conduct research relevant to our business. The ability of these
individuals or entities to publish or otherwise publicly disclose data and other information generated during the
course of their research is subject to certain contractual limitations. These contractual provisions may be
insufficient or inadequate to protect our confidential information. If we do not apply for patent protection prior to
such publication, or if we cannot otherwise maintain the confidentiality of our proprietary technology and other
confidential information, then our ability to obtain patent protection or to protect our trade secret information
may be jeopardized, which could adversely affect our business.

Intellectual property rights do not necessarily protect us from all potential threats to our competitive
advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual
property rights have limitations, and may not adequately protect our business, or permit us to maintain our
competitive advantage. The following examples are illustrative:

•

others may be able to make compounds that are similar to our product candidates but that are not
covered by the claims of the patents that we or our collaborators own or have exclusively licensed;

• we or our collaborators or any future collaborators might not have been the first to make the inventions

covered by the issued patents or pending patent applications that we own or may in the future
exclusively license, which could result in the patent applications not issuing or being invalidated after
issuing;

• we or our collaborators or any future collaborators might not have been the first to file patent

applications covering certain of our inventions, which could result in the patent applications not issuing
or being invalidated after issuing;

•

the ownership of the intellectual property arising out of our collaborations is subject to complex legal
and factual issues, and in certain circumstances our collaborators may own or jointly own important
intellectual property relating to our product candidates. Although we have rights to such intellectual
property under our collaboration agreements, such rights could potentially be lost or diminished if the
applicable collaboration agreement is terminated, which could affect our ability to commercialize our
product candidates;

others may independently develop similar or alternative technologies or duplicate any of our
technologies without infringing our intellectual property rights;

it is possible that our pending patent applications will not lead to issued patents;

issued patents that we own or have exclusively licensed may not provide us with any competitive
advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
we may obtain patents for certain compounds many years before we obtain marketing approval for
products containing such compounds, and because patents have a limited life, which may begin to run
prior to the commercial sale of the related product, the commercial value of our patents may be limited;

our competitors might conduct research and development activities in countries where we do not have
patent rights and then use the information learned from such activities to develop competitive products
for sale in our major commercial markets;

• we may fail to develop additional proprietary technologies that are patentable;

•

the laws of certain foreign countries may not protect our intellectual property rights to the same extent
as the laws of the United States, or we may fail to apply for or obtain adequate intellectual property
protection in all the jurisdictions in which we operate; and

the patents of others may have an adverse effect on our business, for example by preventing us from
marketing one or more of our product candidates for one or more indications.

Any of the aforementioned threats to our competitive advantage could have a material adverse effect on our
business.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect
our products.

As is the case with many other biopharmaceutical companies, our success is heavily dependent on intellectual
property, particularly patents. Obtaining, maintaining and enforcing patents in the biopharmaceutical industry
involves both technological complexity and legal complexity. Therefore, obtaining, maintaining and enforcing

biopharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, recent legislative and
judicial developments in the United States and elsewhere have in some cases narrowed the protection afforded to
patent owners, made patents more difficult to obtain, or increased the uncertainty regarding the ability to obtain,
maintain and enforce patents. For example, Congress recently passed patent reform legislation, and may pass
patent reform legislation in the future. The United States Supreme Court has ruled on several patent cases in
recent years, and in certain circumstances has narrowed the scope of patent protection available or otherwise
weakened the rights of patent owners. In addition to increasing uncertainty with regard to our ability to obtain
patents in the future, this combination of events has created uncertainty with respect to the value of patents, once
obtained. Depending on decisions and actions by the United States Congress, the federal courts, the United States
Patent and Trademark Office, and their respective foreign counterparts, the laws and regulations governing
patents could change in unpredictable ways that could weaken our ability to obtain new patents or to maintain
and enforce our existing patents and patents that we might obtain in the future.

Risks Related to Industry

Unstable market and economic conditions may have serious adverse consequences on our business, financial
condition and stock price.

As has been widely reported, global credit and financial markets have been experiencing extreme disruptions
over the past several years, including severely diminished liquidity and credit availability, declines in consumer
confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic
stability. There can be no assurance that further deterioration in credit and financial markets and confidence in
economic conditions will not occur. Our general business strategy may be adversely affected by the recent
economic downturn and volatile business environment and continued unpredictable and unstable market
conditions, particularly for securities of biotechnology companies such as our common stock. There is a
possibility that our stock price may decline, due in part to the volatility of the stock market and any general
economic downturn. If the current equity and credit markets become more volatile, deteriorate or do not improve,
it may make any necessary debt or equity financing more difficult to secure, more costly and/or more dilutive.
Failure to secure any necessary financing in a timely manner and on favorable terms could have a material
adverse effect on our growth strategy, financial performance and stock price and could require us to delay or
abandon our business and clinical development plans. In addition, there is a risk that one or more of our current
service providers, manufacturers and other partners may not survive these difficult economic times, which could
directly affect our ability to attain our operating goals on schedule and on budget.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to
limit commercialization of our product candidates.

We face an inherent risk of product liability as a result of the clinical testing of our product candidates, and we
will face an even greater risk if we commercialize any product candidates. For example, we may be sued if any
of our product candidates, including any that are developed in combination therapies, allegedly causes injury or
is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product
liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of
dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be
asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates.
Even successful defense would require significant financial and management resources. There is also risk that
third parties we have agreed to indemnify could incur liability.

Regardless of the merits or eventual outcome, liability claims may result in:

•

decreased demand for our product candidates or any resulting products;

injury to our reputation;

• withdrawal of clinical trial participants;

•

costs to defend the related litigation;

a diversion of management’s time and our resources;

substantial monetary awards to trial participants or patients;

product recalls, withdrawals or labeling, marketing or promotional restrictions;

loss of revenue;

the inability to commercialize our product candidates; and

a decline in our stock price.

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against
potential product liability claims could prevent or inhibit the commercialization of products we develop. We
currently carry product liability insurance covering our clinical studies in the amount of $5.0 million in the
aggregate. Although we maintain such insurance, any claim that may be brought against us could result in a court
judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess
of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be
subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by
a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance,
and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Our relationships with customers and third-party payors in the United States and elsewhere will be subject to
applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us
to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and
future earnings.

Healthcare providers, physicians and third-party payors in the United States and elsewhere play a primary role in
the recommendation and prescription of any product candidates for which we obtain marketing approval. Our
future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse
and other healthcare laws and regulations that may constrain the business or financial arrangements and
relationships through which we market, sell and distribute our products for which we obtain marketing approval.
Restrictions under applicable federal, state and foreign healthcare laws and regulations include the following:

•

the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and
willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in
kind, to induce or reward either the referral of an individual for, or the purchase, order or
recommendation of, any good or service for which payment may be made under federal and state
healthcare programs such as Medicare and Medicaid;

the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui
tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the
federal government, claims for payment that are false or fraudulent or making a false statement to
avoid, decrease or conceal an obligation to pay money to the federal government;

the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health
Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for
executing a scheme to defraud any healthcare benefit program and also imposes obligations, including
mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of
individually identifiable health information;

the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering
up a material fact or making any materially false statement in connection with the delivery of or
payment for healthcare benefits, items or services;

•

the federal transparency requirements under the Patient Protection and Affordable Care Act of 2010
requires manufacturers of drugs, devices, biologics and medical supplies to report to the Department of
Health and Human Services information related to physician payments and other transfers of value and
physician ownership and investment interests;

analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to
sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-
governmental third-party payors, including private insurers, and some state laws require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant compliance guidance promulgated by the federal government in addition to
requiring drug manufacturers to report information related to payments to physicians and other
healthcare providers or marketing expenditures; and

•

analogous anti-kickback, fraud and abuse and healthcare laws and regulations in foreign countries.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws
and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our
business practices may not comply with current or future statutes, regulations or case law involving applicable
fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of
these laws or any other governmental regulations that may apply to us, we may be subject to significant civil,
criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs,
such as Medicare and Medicaid, and the curtailment or restructuring of our operations, which could have a
material adverse effect on our business. If any of the physicians or other providers or entities with whom we
expect to do business, including our collaborators, are found not to be in compliance with applicable laws, they
may be subject to criminal, civil or administrative sanctions, including exclusions from government funded
healthcare programs, which could also materially affect our business.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to
fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing
laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes.
Our operations involve the use of hazardous and flammable materials, including chemicals. Our operations also
produce hazardous waste products. We generally contract with third parties for the disposal of these materials
and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of
contamination or injury resulting from our use of hazardous materials or our or third parties’ disposal of
hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our
resources. We also could incur significant costs associated with civil or criminal fines and penalties.

We may incur substantial costs in order to comply with current or future environmental, health and safety laws
and regulations. These current or future laws and regulations may impair our research, development or
production efforts. Failure to comply with these laws and regulations also may result in substantial fines,
penalties or other sanctions.

We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to
our employees resulting from the use of hazardous materials. This insurance may not provide adequate coverage
against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may
be asserted against us in connection with our storage or disposal of hazardous or radioactive materials.

Risks Related to Our Common Stock

Our executive officers, directors and principal stockholders own a significant percentage of our stock and will
be able to exercise control over all matters submitted to stockholders for approval.

Our executive officers and directors, together with our stockholders that hold more than 5% of our outstanding
common stock, beneficially owned, in the aggregate, outstanding shares representing approximately two-thirds of
our outstanding common stock after giving effect to the shares allocated in our IPO on March 20, 2013. Although
some of our 5% stockholders have sold shares since the IPO, we believe that our officers and directors and their
affiliates and our 5% stockholders beneficially owned, in the aggregate, approximately 55.54% of our
outstanding common stock as of December 1, 2013. As a result, if these stockholders were to choose to act
together, they would be able to control all matters submitted to our stockholders for approval, as well as our
management and affairs. For example, these persons, if they choose to act together, would control the election of
directors and approval of any merger, consolidation or sale of all or substantially all of our assets. The interests
of this group of stockholders may not always coincide with our corporate interests or the interests of other
stockholders, and they may act in a way in which you may not agree with or in a way that may not be in the best
interests of other stockholders. This concentration of voting power could delay or prevent an acquisition of our
company on terms that other stockholders may desire.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us,
which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to
replace or remove our current management.

Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or
other change in control of us that stockholders may consider favorable, including transactions in which they
might otherwise receive a premium for their shares.

These provisions could also limit the price that investors might be willing to pay in the future for shares of our
common stock, thereby depressing the market price of our common stock. In addition, because our board of
directors is responsible for appointing the members of our management team, these provisions may frustrate or
prevent any attempts by our stockholders to replace or remove our current management by making it more
difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

•

establish a classified or staggered board of directors such that not all members of the board are elected
at one time;

allow the authorized number of our directors to be changed only by resolution of our board of directors;

limit the manner in which stockholders can remove directors from the board;

establish advance notice requirements for stockholder proposals that can be acted on at stockholder
meetings and nominations to our board of directors;

require that stockholder actions must be effected at a duly called stockholder meeting and prohibit
actions by our stockholders by written consent;

limit who may call stockholder meetings;

provide our board of directors with the authority to designate the terms of and issue a new series of
preferred stock without stockholder approval, which could be used to institute a “poison pill” that
would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing
acquisitions that have not been approved by our board of directors; and

require the approval of the holders of at least 66 2/3% of the votes that all our stockholders would be
entitled to cast to amend or repeal certain provisions of our charter or bylaws.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the
Delaware General Corporation Law, which prohibit a person who owns 15% or more of our outstanding voting

stock from merging or combining with us for a period of three years after the date of the transaction in which the
person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved
in a prescribed manner. Any provision in our corporate charter or our bylaws or Delaware law that has the effect
of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium
for their shares of our common stock, and could also affect the price that some investors are willing to pay for
our common stock.

Our employment agreements with our named executive officers may require us to pay severance benefits to
any of those persons who are terminated in connection with a change of control of us, which could harm our
financial condition or results.

Our named executive officers are parties to employment agreements that provide for aggregate cash payments of
up to approximately $2.1 million for severance and other benefits and acceleration of vesting of stock options in
the event of a termination of employment in connection with a change of control of our company. Based on the
September 30, 2013 closing price of our common stock at $22.92 per share, the aggregate intrinsic value of
unvested stock options subject to accelerated vesting upon these events was $2.0 million as of September 30,
2013. The accelerated vesting of options could result in dilution to our stockholders and harm the market price of
our common stock. The payment of these severance benefits could harm our financial condition and results. In
addition, these potential severance payments may discourage or prevent third parties from seeking a business
combination with us.

We incur increased costs as a result of operating as a public company, and our management will be required
to devote substantial time to new compliance initiatives.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private
company. We are subject to the reporting and other requirements of the Securities Exchange Act of 1934, as
amended, known as the Exchange Act, portions of the Sarbanes-Oxley Act of 2002, as well as rules subsequently
adopted by the Securities and Exchange Commission, or SEC, and The NASDAQ Stock Market, or NASDAQ.
These rules and regulations require, among other things, that we file annual, quarterly and current reports with
respect to our business and financial condition and establish and maintain effective disclosure and financial
controls and corporate governance practices. These rules and regulations substantially increase our legal and
financial compliance costs and make some activities more time-consuming and costly, and we expect that this
our legal and financial compliance costs will further increase after we are no longer an “emerging growth
company” as defined in the recently enacted Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Our
management and other personnel devote a substantial amount of time to these compliance initiatives. We
estimate that incremental annual compliance costs associated with these reporting obligations will be at least $1.0
million.

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements
applicable to “emerging growth companies” will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an
“emerging growth company,” we may take advantage of exemptions from various reporting requirements that are
applicable to other public companies that are not “emerging growth companies,” including not being required to
comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved. As an “emerging growth
company” we are required to report periodic financial results and selected financial data related to two fiscal
years compared to three and five years, respectively, for comparable data required to be reported by other public
companies in selected SEC reports. We may take advantage of these exemptions until we are no longer an
“emerging growth company.” We could be an “emerging growth company” for up to five years, although
circumstances could cause us to lose that status earlier, including if the market value of our common stock held

by non-affiliates exceeds $700 million as of any March 31 (the end of our second fiscal quarter) before that time,
in which case we would no longer be an “emerging growth company” as of the following September 30 (our
fiscal year end). We cannot predict if investors will find our common stock less attractive because we may rely
on these exemptions. If some investors find our common stock less attractive as a result, there may be a less
active trading market for our common stock and our stock price may be more volatile.

Under the JOBS Act, “emerging growth companies” can also delay adopting new or revised accounting standards
until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves
of this exemption to delay the adoption of new or revised accounting standards and, therefore, will be subject to
adopting new or revised accounting standards at the same time as other public companies that are not “emerging
growth companies.”

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to
accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our
financial and other public reporting, which would harm our business and the trading price of our common
stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and,
together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to
implement required new or improved controls, or difficulties encountered in their implementation could cause us
to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404
of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting
firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material
weaknesses or that may require prospective or retroactive changes to our financial statements or identify other
areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence
in our reported financial information, which could have a negative effect on the trading price of our common
stock.

We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our
management will be required to assess the effectiveness of these controls annually. However, for as long as we
are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will
not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to
Section 404. We could be an “emerging growth company” for up to five years. An independent assessment of the
effectiveness of our internal controls could detect problems that our management’s assessment might not.
Undetected material weaknesses in our internal controls could lead to financial statement restatements and
require us to incur the expense of remediation.

Our stock price is likely to be volatile, and thus our stockholders could incur substantial losses.

Our stock price is likely to be volatile. The stock market in general and the market for biopharmaceutical
companies, and for those developing potential therapies for HCV in particular, have experienced extreme
volatility that has often been unrelated to the operating performance of particular companies. As a result of this
volatility, you may not be able to sell your common stock at or above your purchase price, if at all. The market
price for our common stock may be influenced by many factors, including:

•

actions by any of our collaborators regarding our product candidates they are developing, including
announcements regarding clinical or regulatory developments or our collaboration;

results from or delays of clinical trials of our product candidates, as well as results of regulatory
reviews relating to the approval of our product candidates;

new products, product candidates or new uses for existing products or technologies introduced or
announced by our competitors and the timing of these introductions or announcements;

our or our collaborators’ decision to initiate a clinical trial, not to initiate a clinical trial or to terminate
an existing clinical trial;

•

the results of our efforts to discover or develop additional product candidates;

our dependence on third parties, including our collaborators, CROs, clinical trial sponsors and clinical
investigators;

regulatory or legal developments in the United States or other countries;

developments or disputes concerning patent applications, issued patents or other proprietary rights;

the recruitment or departure of key scientific or management personnel;

our ability to commercialize our future product candidates we develop independently, if approved;

the level of expenses related to any of our product candidates or clinical development programs;

actual or anticipated changes in estimates as to financial results, development timelines or
recommendations by securities analysts;

variations in our financial results or those of companies that are perceived to be similar to us;

sales of common stock by us or our stockholders in the future, as well as the overall trading volume of
our common stock;

changes in the structure of healthcare payment systems;

• market conditions in the pharmaceutical and biotechnology sectors;

•

general economic, industry and market conditions and other factors that may be unrelated to our
operating performance or the operating performance of our competitors, including changes in market
valuations of similar companies; and

the other factors described in this “Risk Factors” section.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

We do not currently intend to pay any cash dividends on our common stock in the foreseeable future. We
currently intend to retain all of our future earnings, if any, to finance the growth and development of our
business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a
result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable
future.

A sale of a substantial number of shares of our common stock in the public market could cause the market
price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These
sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could
reduce the market price of our common stock. As of September 30, 2013, we had outstanding 17,929,781 shares
of common stock. In addition, 2,114,683 shares of common stock that are either subject to outstanding options or
reserved for future issuance under our equity plans are eligible for sale in the public market to the extent
permitted by the provisions of various vesting schedules, and Rules 144 and 701 under the Securities Act. If
these additional shares of common stock are sold, or it is perceived that they will be sold, in the public market,
the trading price of our common stock could decline.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about
our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or
industry analysts publish about us or our business. If too few securities or industry analysts cover our company,
the trading price for our stock would likely be negatively impacted. In the event that one or more of the analysts
who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock

price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish
reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading
volume to decline.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters is located in Watertown, Massachusetts, where we lease approximately 25,000 square
feet of office and laboratory space. The term of our current lease expires on September 30, 2018, with an option
to extend the term for an additional five years.

We believe that our existing facilities are adequate for our current needs, as the facility has sufficient laboratory
space to house additional scientists to be hired as we expand. When our lease expires, we may exercise our
option to extend the term of the lease or we may look for additional or alternate space for our operations and we
believe that suitable additional or alternative space will be available in the future on commercially reasonable
terms.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market and Stockholder Information

Our common stock has been listed on The NASDAQ Global Select Market under the symbol “ENTA” since
March 21, 2013. The following table shows the high and low sales price for our common stock as reported by
The NASDAQ Global Select Market for each quarter in the year ended September 30, 2013:

Second Quarter (beginning March 21, 2013)
Third Quarter
Fourth Quarter

High

Low

$18.20
$21.69
$25.00

$16.81
$16.49
$16.98

As of November 30, 2013, there were approximately 88 stockholders of record of our common stock.

We have never declared or paid cash dividends on our common stock, and we do not expect to declare or pay any
cash dividends in the foreseeable future.

In March 2013, we completed our initial public offering of 4,600,000 shares of our common stock at a public
offering price of $14.00 per share. The offer and sale of the shares in the offering were registered pursuant to a
registration statement on Form S-1 (File No. 333-184779), which was declared effective by the Securities and
Exchange Commission on March 20, 2013.

As of September 30, 2013, we have used approximately $6.0 million of the net proceeds from the initial public
offering to fund our programs for the development of a cyclophilin inhibitor candidate and the development of a

nucleotide polymerase inhibitor candidate and to fund new research and development activities. None of the net
proceeds have been paid directly or indirectly to any of our directors or officers (or their associates) or persons
owning ten percent or more of any class of our equity securities or to any other affiliates. The balance of the net
proceeds from the offering has been invested in cash and cash equivalents and in short-term and long-term
marketable securities, consisting of investment grade, interest bearing instruments and U.S. government
securities, with maturities of no longer than 24 months. These investments are reflected in cash and cash
equivalents, short-term marketable securities and long-term marketable securities on our balance sheet at
September 30, 2013. There has been no material change in the expected use of the net proceeds from our IPO as
described in our registration statement on Form S-1.

Performance Graph(1)

The following graph shows a comparison from March 21, 2013 through September 30, 2013 of cumulative total
return on assumed investments of $100.00 in cash in each of our common stock, the NASDAQ Composite Index
and the NASDAQ Biotechnology Index. Such returns are based on historical results and are not intended to
suggest future performance. Data for the NASDAQ Composite Index and the NASDAQ Biotechnology Index
assume reinvestment of dividends.

COMPARISON OF SIX MONTH CUMULATIVE TOTAL RETURN
Among Enanta Pharmaceuticals, Inc., the NASDAQ Composite Index,
and the NASDAQ Biotechnology Index

Enanta Pharmaceuticals, Inc. (ENTA)

Nasdaq Composite (IXIC)

Nasdaq Biotechnology (NBI)

$140

$130

$120

$110

$100

$90

3/21/2013

3/31/2013

4/30/2013

5/31/2013

6/30/2013

7/31/2013

8/31/2013

9/30/2013

(1)

This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes
of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities
under that Section, and shall not be deemed incorporated by reference into any filing of Enanta
Pharmaceuticals, Inc. under the Securities Act of 1933, as amended.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

We have derived the consolidated statement of operations data for the years ended September 30, 2013, 2012 and
2011 and the consolidated balance sheet data as of September 30, 2013 and 2012 from our audited financial
statements included elsewhere in this Annual Report on Form 10-K. The selected statement of operations data for
the year ended September 30, 2010 and the balance sheet data as of September 30, 2011 are derived from our
audited financial statements not included in this Annual Report on Form 10-K. Our historical results for any prior
period are not necessarily indicative of any results to be expected for any future period.

Consolidated Statement of Operations Data:
Revenue
Operating expenses:

Research and development
General and administrative

Total operating expenses

Income from operations
Other income (expense):
Interest income
Interest expense
Change in fair value of warrant liability
Therapeutic tax credit
Gain on embedded derivative
Other income (expense), net

Total other income (expense), net

Net income before income tax
Income tax benefit

Net income
Accretion of redeemable convertible preferred stock to redemption value
Net income attributable to participating securities

Year Ended September 30,

2013

2012

2011

2010

(in thousands, except per share data)

$ 32,053

$ 41,706

$ 41,882

$22,763

16,841
6,183

23,024

9,029

15,115
5,302

20,417

21,289

11,547
5,036

9,716
6,105

16,583

15,821

25,299

6,942

248
(31)
381
—
—
—

598

118
—

(8)

—
—
—

110

9,627
—

9,627
(2,526)
(13,670)

21,399
—

21,399
(5,367)
(14,663)

83
(3,161)
(686)
750
670
355

(1,989)

23,310
—

23,310
(5,454)
(16,291)

14
—
482
—
—
309

805

7,747
157

7,904
(5,452)
(2,236)

216

0.19
0.18

1,131
1,565

$
$

Net income (loss) attributable to common stockholders

$ (6,569) $ 1,369

$ 1,565

Net income (loss) per share attributable to common stockholders(1):

Basic
Diluted

Weighted average common shares outstanding(1):

Basic
Diluted

$
$

(0.67) $
(0.67) $

1.26
1.13

$
$

1.40
1.32

9,788
9,788

1,089
2,475

1,119
1,857

Consolidated Balance Sheet Data:
Cash, cash equivalents and short- and long-term marketable securities
Working capital(2)
Total assets
Warrant liability
Redeemable convertible preferred stock
Convertible preferred stock
Total stockholders’ equity (deficit)

As of September 30,

2013

2012

2011

(in thousands)

$112,183
100,187
116,973
1,620
—
—
110,468

$ 45,418
41,574
52,162
2,001
158,955
327
(115,353)

$ 23,329
22,950
26,096
1,993
153,588
327
(131,961)

(1) See Note 14 to our financial statements for further details on the calculation of basic and diluted net income per share

attributable to common stockholders.

(2) We define working capital as current assets less current liabilities.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

You should read the following discussion and analysis of financial condition and results of operations together with
the section entitled “Selected Financial Data” and our financial statements and related notes included elsewhere in
this Annual Report on Form 10-K. This discussion and other parts of this prospectus contain forward-looking
statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations,
intentions and projections. Our actual results could differ materially from those discussed in these forward-looking
statements. Factors that could cause or contribute to such differences include, but are not limited to, those
discussed in the “Risk Factors” section of this Annual Report on Form 10-K.

Overview

We are a research and development-focused biotechnology company that uses its robust chemistry-driven
approach and drug discovery capabilities to create small molecule drugs in the infectious disease field. We are
discovering and developing inhibitors designed for use against the hepatitis C virus, referred to as HCV. We
believe that a successful approach to a complete cure for HCV in most patients will likely require treatment with
a combination of drugs that attack different mechanisms necessary for replication and survival of HCV. Further,
as there are many variants of HCV, we are developing inhibitors that may be used in multiple combination
therapies, each designed and tested for effectiveness against one or more of those variants. Our development of
inhibitors for validated HCV target mechanisms, as well as our collaborations with AbbVie (which name refers
to Abbott Laboratories for all periods before January 1, 2013) and Novartis, should allow us to participate in
multiple unique drug combinations as we and our collaboration partners seek the best combination therapies for
HCV in its various forms. We estimate that total worldwide sales of HCV therapies were over $4 billion in 2012.
We believe that annual worldwide sales of these therapies and future approved therapies could increase sales in
this market to $10 to $20 billion within the next ten years. In addition to our HCV programs, we have used our
internal research capabilities to discover a new class of antibiotics which we are developing for the treatment of
multi-drug resistant bacteria, including methicillin-resistant Staphylococcus aureus bacteria, also referred to as
MRSA. We have utilized our internal chemistry and drug discovery capabilities and our collaborations to
generate all of our development-stage programs, and we have active research efforts to broaden our infectious
disease drug pipeline.

The following table summarizes our product development pipeline in HCV antivirals as well as MRSA
antibiotics:

Our HCV portfolio includes five compounds, each of which is an inhibitor of one of four fundamental, validated
HCV targets:

• NS3 Protease Inhibitors: ABT-450 and ABT-493. Our lead product candidate, ABT-450, is a protease

inhibitor being developed by AbbVie in several combination regimens; AbbVie is completing several Phase
3 trials for the most advanced regimen, the first of which reported top-line results in November 2013, with
the results of the other trials expected later in 2013 or the first quarter of calendar 2014. ABT-493, our next-
generation protease inhibitor, is being developed also through our collaboration with AbbVie.

• NS5A Inhibitor: EDP-239. Our lead NS5A product candidate, EDP-239, is being developed through

our collaboration with Novartis.

• Cyclophilin Inhibitors. Our independent research activities are focused on our lead cyclophilin

inhibitor candidates, which are in preclinical development.

• Nucleotide Polymerase Inhibitor. We also have a small-molecule drug discovery effort underway for

nucleotide polymerase inhibitors.

In our HCV programs, AbbVie has funded all research and development of our protease inhibitors since we
entered into the collaboration in November 2006, and is responsible for obtaining regulatory approvals and

commercializing ABT-450, ABT-493 and any follow-on products worldwide. We received $57.2 million from
AbbVie upon signing the collaboration agreement and its simultaneous purchase of preferred stock from us in
2006. We also received a $40.0 million milestone payment in December 2010 following AbbVie’s successful
completion of a Phase 2a clinical trial and a $15.0 million milestone payment in December 2012 following
AbbVie’s initiation of dosing in a Phase 3 clinical trial that includes ABT-450. Assuming AbbVie’s successful
development of the first protease inhibitor product, we will also be eligible to receive $195.0 million of
additional pre-commercialization milestone payments. We are also eligible to receive additional milestone
payments totaling up to $80.0 million upon AbbVie’s achievement of similar commercial regulatory approval
milestones for each additional collaboration product containing a protease inhibitor, as well as tiered royalties per
product ranging from the low double digits up to twenty percent, or on a blended basis from the low double digits
up to the high teens, on net sales, if any, by AbbVie allocable to the collaboration’s protease inhibitors.

Under our collaboration with Novartis, which we entered into in February 2012, Novartis is responsible for all
further development of our NS5A inhibitors. Novartis was also responsible for funding further research that we
conducted through August 2013 to discover additional NS5A compounds. We received an upfront payment of
$34.4 million in March 2012 and an $11.0 million milestone payment in January 2013 based on Novartis’
initiation of dosing in a Phase 1 clinical trial that included EDP–239. We are eligible to receive up to $395
million of additional milestone payments for the first NS5A inhibitor product for which the specified milestones
are achieved.

Our independent research activities are focused on our lead cyclophilin candidates, which are in preclinical
development. We also have a small-molecule drug discovery effort underway for nucleotide polymerase
inhibitors. We are currently funding all research and development for these two programs, and we expect to incur
substantially greater expenses as we seek to advance these programs into clinical development.

In addition to our HCV programs, we have used our internal research capabilities to discover a new class of
antibiotics called Bicyclolides, which we are developing to overcome multi-drug resistant bacteria, including
methicillin-resistant Staphulococcus aureus bacteria, also referred to as MRSA. Up to $23.5 million of the
preclinical development of our lead antibiotic candidate, EDP-788, is funded under a September 2011 contract
with the National Institute of Allergy and Infectious Diseases, a division of the National Institutes of Health, an
agency of the United States Department of Health and Human Services, or NIAID, and there is potential for
further NIAID funding of early clinical development. In August 2013 NIAID agreed to provide additional
funding of $9.2 million under our contract, increasing total funding from NIAID to approximately $23.5 million.

Since commencing our operations in 1995, we have devoted substantially all of our resources to the discovery
and development of novel compounds for the treatment of infectious diseases. We have historically funded our
operations primarily through the sale of convertible preferred stock and payments received under our
collaborations and a government contract. On March 26, 2013, we completed our IPO of 4,600,000 shares of our
common stock at an offering price of $14.00 per share, which included the exercise in full by the underwriters of
their option to purchase up to 600,000 additional shares of our common stock. We received net proceeds of
approximately $59.9 million, after deducting underwriting discounts and commissions. As of September 30,
2013, we had $112.2 million in cash and investments. We are eligible to receive over the next several years an
aggregate of $430 million based on potential future pre-commercialization milestones under our AbbVie and
Novartis collaborations, assuming successful clinical trial results for the respective collaboration programs and
our collaborators’ continued development of our product candidates through successful regulatory and
reimbursement approvals in the United States and other major markets. In addition, we are eligible to receive
tiered royalties ranging on a blended basis from the low double digits up to the high teens on worldwide net sales
of any products containing protease inhibitors or NS5A inhibitors developed pursuant to the collaborations, as
well as up to $160 million of commercialization sales milestones under our Novartis collaboration.

Our revenue from our collaboration agreements has resulted in our reporting net income in fiscal 2013, 2012 and
2011. However, we had an accumulated deficit of $107.5 million as of September 30, 2013 and we have

generated no royalties or other revenue from product sales. We expect that our revenue in the near term will
continue to be substantially dependent on our collaborations with AbbVie and Novartis and their continued
advancement of the related development programs. Given the schedule of potential milestone payments and the
uncertain nature and timing of clinical development, we cannot predict when or whether we will receive further
milestone payments under these collaborations or whether we will continue to report either revenue or net
income in future years.

Financial Operations Overview

Revenue

Since our inception, our revenue has been derived from two primary sources: collaboration agreements with
pharmaceutical companies and one government research and development contract. We have not generated any
revenue from product sales. We have entered into three significant collaboration agreements. In November 2006,
we entered into a collaboration agreement with AbbVie and in February 2012 we entered into a collaboration
agreement with Novartis. In September 2011, we entered into a contract with NIAID, which will fund us for the
preclinical development of our lead product candidate in our new class of Bicyclolide antibiotics.

The following table is a summary of revenue recognized from our collaboration agreements and our government
contract for the years ended September 30, 2013, 2012 and 2011:

AbbVie agreement:

Upfront license payment and research funding
Milestone payments

$ —

15,000

$ —
—

$ 1,882
40,000

Year Ended September 30,

2013

2012

2011

(in thousands)

Novartis agreement:

Upfront license payment and research funding
Milestone payments

NIAID contract

Total revenue

AbbVie Agreement

1,675
11,000
4,378

35,567
—
6,139

—
—
—

$32,053

$41,706

$41,882

Under the terms of the AbbVie agreement, as amended, we received an upfront license payment of $44.7 million
and a commitment for research funding through December 15, 2010, and we granted AbbVie an option to enter
into a six-month evaluation period. We received a total of $8.1 million of research funding and expense
reimbursement from AbbVie through June 15, 2011, the conclusion of the evaluation period. In December 2010,
we received a $40.0 million milestone payment from AbbVie related to AbbVie’s successful completion of a
Phase 2a clinical study of an ABT-450-containing regimen. We recognized revenue from these payments, as well
as from a $1.6 million premium above fair value paid for Series G-1 redeemable convertible preferred stock that
AbbVie purchased concurrently with the execution of the original agreement, over the period from the date of the
original agreement through the end of the evaluation period using the proportional performance model. Under
this revenue recognition model, the revenue we recognized was limited to the amount of nonrefundable payments
received or receivable to date. Related to these payments by AbbVie, we recognized revenue of $41.9 million
during the year ended September 30, 2011. Since all of our research obligations under the agreement were
concluded by June 30, 2011, any future milestone payments received will be recognized as revenue when each
milestone is achieved by AbbVie. During the year ended September 30, 2013, we earned and recognized as
revenue a $15.0 million milestone payment based on AbbVie’s initiation of dosing in a Phase 3 clinical trial that
included ABT-450. Under the terms of the AbbVie agreement, we are eligible to receive future milestone
payments totaling up to $195 million related to the successful development of the first HCV treatment regimen

by AbbVie incorporating one of our collaboration’s protease inhibitors. We are also eligible to receive additional
milestone payments totaling up to $80.0 million upon AbbVie’s achievement of similar commercial regulatory
approval milestones for each additional collaboration product containing a protease inhibitor. We are also
eligible to receive royalties on AbbVie’s net sales, if any, allocable to any one of our collaboration’s protease
inhibitors.

Novartis Agreement

Under the terms of the Novartis agreement, we received an upfront payment of $34.4 million and a commitment
to fund research at an agreed amount for one year. We recognized the upfront license payment upon receipt as we
determined that the license to which the payment related and the research services were separable elements under
the agreement that could be accounted for as each was delivered or provided. During the year ended
September 30, 2012, revenue recognized under this agreement was $35.6 million, which consisted of the upfront
license payment and research funding earned during that period. Our agreement with Novartis initially provided
that we would receive up to $1.8 million in research funding during the first year of the agreement, which ended
in February 2013, and was amended to extend the funding period for an additional six months through August
2013 at the same reimbursement rate. Additionally, our collaboration with Novartis provides for future milestone
payments totaling of up to $406 million if certain goals related to drug development and net product sales are
achieved by Novartis. In January 2013, we received an $11.0 million milestone payment based on Novartis’
November 2012 initiation of dosing in a Phase 1 clinical trial that included EDP-239. During the year ended
September 30, 2013, we recognized $12.7 million of revenue under the Novartis agreement, of which
$11.0 million was attributed to license fees and $1.7 million was attributed to the performance of research
services. An additional milestone payment of $15.0 million will be due upon Novartis’ initiation of a subsequent
Phase 2 trial using a combination treatment regimen containing an NS5A inhibitor. We are also eligible to
receive royalties on Novartis’ net sales, if any, allocable to our collaboration’s NS5A inhibitors.

NIAID Contract

Under the terms of the NIAID contract, NIAID will pay us research and development funding of up to
$14.3 million over an initial period of 30 months. The award also contains six option periods, which in aggregate
could extend the contract at the option of NIAID up to an additional 30 months and provide us additional funding
of up to $28.4 million. In August 2013 NIAID agreed to provide additional funding of $9.2 million under our
contract, which will bring total funding from NIAID to approximately $23.5 million. We recognize revenue
under this contract as the research and development services are performed. We recognized revenue of
$4.4 million and $6.1 million under this agreement during the years ended September 30, 2013 and 2012,
respectively.

As our internal product candidates are currently in preclinical development, we have not generated any revenue
from product sales and do not expect to generate any revenue from product sales for at least the next several
years. We expect that our revenue for the next several years will be derived primarily from payments under our
current collaboration agreements with AbbVie and Novartis, payments under our NIAID contract, and any
additional collaborations or government contracts that we may enter into in the future. We cannot provide
assurance as to the timing of future milestone or royalty payments or that we will receive any of these payments
at all.

Operating Expenses

The following table summarizes our operating expenses for the years ended September 30, 2013, 2012 and 2011:

Research and development
General and administrative

Total operating expenses

Research and Development Expenses

Year Ended September 30,

2013

2012

2011

$16,841
6,183

(in thousands)
$15,115
5,302

$11,547
5,036

$23,024

$20,417

$16,583

Research and development expenses consist of costs incurred to conduct basic research, such as the discovery
and development of novel small molecules as therapeutics. 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;

third-party license fees;

laboratory consumables; and

allocated facility-related costs.

Project-specific expenses reflect costs directly attributable to our clinical development candidates and preclinical
candidates nominated and selected for further development. 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 research or drug discovery project and are
typically deployed across multiple projects. As such, we do not maintain 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
two independent HCV programs and our antibiotic program for MRSA into clinical development.

Our research and drug discovery programs are at an early stage; 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 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 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, consisting of 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, and professional fees for auditing, tax and legal services, including legal expenses to pursue
patent protection of our intellectual property.

We expect that general and administrative expenses will increase in the future as we expand our operating
activities and incur additional costs associated with operating as a public company. These public company related
increases will likely include costs of additional personnel; additional legal fees, accounting and audit fees and
directors’ and officers’ liability insurance premiums; and costs related to investor relations.

Other Income (Expense)

Interest income. Interest income consists of interest earned on our cash and investment balances. In the past our
interest income has not been significant due to nominal cash and investment balances and low interest earned on
invested balances. We anticipate that our interest income will increase in the future due to our higher cash and
investment balances now existing as a result of the $34.4 million upfront payment we received from Novartis in
March 2012, the $15.0 million milestone payment we received from AbbVie in December 2012 and the
$11.0 million milestone payment we received from Novartis in January 2013, as well as our receipt of $59.9
million of cash proceeds, net of underwriting discounts and commissions, from our IPO in March 2013.

Interest expense. Interest expense consisted of cash interest paid on our bridge notes and non-cash interest
expense related to the accretion of debt issuance costs and debt discounts associated with our issuance of bridge
notes in the first quarter of fiscal 2011. We anticipate that we will have little or no interest expense in the future
related to debt as our outstanding bridge notes were fully repaid in the first quarter of fiscal 2011 and we no
longer have any debt outstanding. Presently interest expense consists of non-cash interest expense which is being
accreted to the value of accrued third-party license fees over the term of the obligation.

Change in fair value of warrant liability. We have outstanding warrants for the purchase of our nonconvertible
preferred stock that we believe are financial instruments that may require a transfer of assets because of the
redemption features of the underlying stock. Therefore, we have classified these warrants as liabilities that we
remeasure to fair value at each reporting period and we record the changes in the fair value of the warrants as a
component of other income (expense).

Therapeutic tax credit. We recorded other income for the year ended September 30, 2011 related to the
Qualifying Therapeutic Discovery Project, or QTDP, reimbursement program of the United States government,
which provided for reimbursement in calendar year 2010 of certain costs paid or incurred during calendar years
2009 and 2010 that were directly related to the conduct of a QTDP. We do not anticipate any further income
related to the QTDP program.

Gain on embedded derivative. In connection with the repayment of our bridge financing that we entered into and
fully repaid in the first quarter of fiscal 2011, we settled an embedded derivative at no cost to us and recorded a
gain on settlement consisting of the value of the embedded derivative.

Other income (expense), net. Other income (expense), net consisted primarily of miscellaneous service income
unrelated to our core operations. We do not expect to generate this income in the future as we do not anticipate
providing these services in the future.

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of our 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 believe that the estimates and assumptions involved in the accounting policies described
below may have the greatest potential impact on our financial statements and, therefore, consider these to be our
critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Our actual results
may differ from these estimates under different assumptions and conditions. See also Note 2 of our financial
statements included elsewhere in this Annual Report on Form 10-K for information about these critical
accounting policies as well as a description of our other significant accounting policies.

JOBS Act

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things,
reduce certain reporting requirements for an “emerging growth company.” As an “emerging growth company,”
we are electing not to take advantage of the extended transition period afforded by the JOBS Act for the
implementation of new or revised accounting standards, and as a result, we will comply with new or revised
accounting standards on the relevant dates on which adoption of such standards is required for non-emerging
growth companies. Section 107 of the JOBS Act provides that our decision not to take advantage of the extended
transition period is irrevocable. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth
company”, we are not required to, among other things, (i) provide an auditor’s attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure
that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and
Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report
providing additional information about the audit and the financial statements (auditor discussion and analysis),
and (iv) disclose certain executive compensation-related items such as the correlation between executive
compensation and performance and comparisons of the Chief Executive Officer’s compensation to median
employee compensation. These exemptions will apply for a period of five years following the completion of our
initial public offering in March 2013 or until we no longer meet the requirements of being an “emerging growth
company,” whichever is earlier.

Revenue Recognition

Our revenue is generated primarily through collaborative research and license agreements. The terms of these
agreements contain multiple deliverables which may include (i) licenses, (ii) research and development activities,
and (iii) participation in joint research and development steering committees. The terms of these agreements may
include nonrefundable upfront license fees, payments for research and development activities, payments based
upon the achievement of certain milestones, and royalty payments based on product sales derived from the
collaboration. In all instances, revenue is recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, delivery has occurred or the services have been rendered, collectibility of the
resulting receivable is reasonably assured, and we have fulfilled our performance obligations under the contract.

We apply Accounting Standards Update No. 2009-13, Multiple-Deliverable Revenue Arrangements, or ASU
2009-13 for multiple element arrangements entered into or materially modified on or after October 1, 2011. The
selling prices of deliverables under the arrangement may be derived using third-party evidence, or TPE, or a best
estimate of selling price, or BESP, if vendor-specific objective evidence of fair value, or VSOE, is not available.
The objective of BESP is to determine the price at which we would transact a sale if the element within the
license agreement was sold on a standalone basis. Establishing BESP involves management’s judgment and
considers multiple factors, including market conditions and company-specific factors including those factors
contemplated in negotiating the agreements as well as internally developed models that include assumptions
related to market opportunity, discounted cash flows, estimated development costs, probability of success, and
the time needed to commercialize a product candidate pursuant to the license. In validating our BESP, we
consider whether changes in key assumptions used to determine the BESP will have a significant effect on the
allocation of the arrangement consideration between the multiple deliverables. Deliverables under the
arrangement are separate units of accounting if (i) the delivered item has value to the customer on a standalone

basis and (ii) if the arrangement includes a general right of return relative to the delivered item, delivery or
performance of the undelivered item is considered probable and substantially within our control. The
arrangement consideration that is fixed or determinable at the inception of the arrangement is allocated to the
separate units of accounting based on their relative selling prices. The appropriate revenue recognition model is
applied to each element and revenue is accordingly recognized as each element is delivered. We may exercise
significant judgment in determining whether a deliverable is a separate unit of accounting.

In February 2012, we entered into a license and collaboration agreement with Novartis for the development,
manufacture, and commercialization of our lead development candidate, EDP-239, from our NS5A inhibitor
program for HCV. Under the terms of the Novartis agreement, Novartis agreed to pay us a nonrefundable upfront
fee and reimbursement of manufacturing and quality assurance expenses related to EDP-239 totaling $34.4
million. In addition, Novartis agreed to fund up to $1.8 million of our NS5A research activities through February
2013. In March 2013 the agreement was amended to extend the funding period for an additional six months
through August 2013 at the same reimbursement rate. Under the agreement, we are eligible to receive aggregate
milestone payments of up to $406 million for the first NS5A inhibitor product for which applicable milestones
relating to clinical trials, regulatory approvals, and net sales are achieved by Novartis. We are also eligible to
receive tiered royalties ranging on a blended basis from the low double digits up to the high teens on net product
sales by Novartis, if any, allocable to our collaboration’s NS5A inhibitors.

We determined that the deliverables under the Novartis agreement include the exclusive, royalty-bearing,
sublicensable license to EDP-239 and the research services. We concluded that the EDP-239 license had
standalone value to Novartis and was separable from the research services because the license is sublicensable,
there are no restrictions as to Novartis’ use of the license, and Novartis has the requisite scientific expertise in the
HCV NS5A field. We also concluded that participation on a joint steering committee, as provided for by the
agreement, is protective in nature as we have no decision making authority, there are no penalties or recourse if
we choose not to participate, and the purpose of the steering committee is to keep us apprised of the status of the
development and commercialization efforts. Therefore, no arrangement consideration was allocated to the joint
steering committee participation. We were not able to establish VSOE or TPE for either the license or the
research services and instead allocated the arrangement consideration between the license and research services
based on their relative selling prices using BESP. We developed our estimate of BESP of the license using a
discounted cash flow analysis, taking into consideration assumptions including the development and
commercialization timeline, discount rate, probability of success, and probable treatment combination and
associated peak sales figures which generate royalty amounts. The funding rate for the research services is
consistent with the rate received in our prior collaboration arrangement with AbbVie and is consistent with its
fully burdened cost of service. Therefore, our determination of BESP for the research services is consistent with
the reimbursement rate stated in the contract.

In determining our best estimate of selling price, we considered discounted cash flow models. Our key
assumptions in these models included the following market conditions and entity-specific factors: (a) the specific
rights provided under the license to develop and commercialize EDP-239 worldwide, (b) the stage of
development of EDP-239 and estimated remaining development and commercialization timelines, (c) the
probability of successfully developing and commercializing EDP-239, (d) the probable treatment combination,
(e) the market size for EDP-239 including the associated sales figures which generate royalty revenue, (f) the
expected product life of EDP-239 assuming commercialization, and (g) the competitive environment. We
assumed that royalties from sales of EDP-239 would be based on a drug compound that will be part of a triple
combination drug therapy. The time to commercialization was based on our estimates, which projected the first
sales of EDP-239 in 2018. We utilized a discount rate of 15% in our analysis, representing the weighted average
cost of capital derived from returns on equity for comparable companies.

These assumptions involve judgment and inherent uncertainty; however, significant changes in key assumptions
used to determine the BESP would not have a significant effect on the revenue recognized.

Stock-Based Compensation

We measure stock options granted to employees and directors at fair value on the date of grant and recognize the
corresponding compensation expense of those awards, net of estimated forfeitures, over the requisite service
period, which is generally the vesting period of the respective award. Generally, we issue stock options with only
service-based vesting conditions and record the expense for these options using the straight-line method. We
have historically granted stock options with exercise prices equivalent to the fair value of our common stock as
of the date of grant.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing
model. Prior to March 2013 we were a privately-held company and lacked company-specific historical and
implied volatility information. Therefore, we estimated our expected volatility based on the historical volatility
of our publicly traded peer companies and expect to continue to do so until such time as we have adequate
historical data regarding the volatility of our traded stock price following our March 2013 IPO. The expected
term of our options has been determined utilizing the “simplified” method for awards that qualify as “plain-
vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at
the time of grant of the award for time periods approximately equal to the expected term of the award. Expected
dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash
dividends in the foreseeable future. The assumptions we used to determine the fair value of stock options granted
in each period were as follows, presented on a weighted average basis:

Risk-free interest rate
Expected term (in years)
Expected volatility
Expected dividends

Year Ended September 30,

2013

2012

2011

1.05%
6.09

73%
0%

0.93%
6.00

78%
0%

2.73%
6.25

87%
0%

These assumptions represent our best estimates, but the estimates involve inherent uncertainties and the
application of our judgment. As a result, if factors change and we use significantly different assumptions or
estimates, our stock-based compensation expense could be materially different. We recognize compensation
expense for only the portion of awards that are expected to vest. In developing a forfeiture rate estimate, we have
considered our historical experience to estimate pre-vesting forfeitures. If our actual forfeiture rate is materially
different from the estimate, our stock-based compensation expense could be different from what we have
recorded in the current period.

Valuation of Warrants to Purchase Series 1 Preferred Stock

We classify warrants to purchase 1,999,989 shares of our Series 1 nonconvertible preferred stock as liabilities on
our balance sheets as these warrants are free-standing financial instruments that may require us to transfer assets
upon exercise. The warrants were initially recorded at fair value and are subsequently remeasured to fair value at
each balance sheet date using probability-weighted discounted cash flow. Changes in fair value of the warrants
are recognized as a component of other income (expense) in our statement of operations. We will continue to
adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants.

These warrants issued in October 2010 in connection with a bridge note financing entitled the note holders to
purchase shares of Series 1 nonconvertible preferred at an exercise price of $0.01 per share. Upon issuance of the
warrants, the number of Series 1 nonconvertible preferred shares issuable upon exercise of these warrants was
not fixed. The number of Series 1 nonconvertible preferred shares was one share for each dollar of the original
principal amount of the term note plus, if the milestone payment from the AbbVie agreement was not received on
or before March 31, 2011, an additional share for each dollar of the original principal amount of the note.
Additionally, if a liquidation event occurred, thereby requiring repayment of the term notes, these warrants would

automatically expire and would therefore have no value. Upon our repayment of the term notes in December
2010, the number of shares issuable upon exercise of the Series 1 nonconvertible preferred stock warrants
became fixed at one share for each warrant, and the possibility that the term notes could be redeemed and the
warrants would have no value was eliminated.

As of September 30, 2013, the warrant liability consists solely of the warrants for the purchase of Series 1
nonconvertible preferred stock. As of September 30, 2013, the Company utilized a probability weighted
valuation model which takes into consideration various outcomes that may require the Company to transfer
assets upon exercise. The fair value of these outstanding warrants to purchase our Series 1 nonconvertible
preferred stock as recorded in our balance sheet was $1.6 million and $2.0 million at September 30, 2013 and
2012, respectively. The Series E warrants expired during the year ended September 30, 2013.

Income Taxes

Income taxes are provided for tax effects of transactions reported in the financial statements and consist of
income taxes currently due plus deferred income taxes related to timing differences between the basis of certain
assets and liabilities for financial statement purposes and for income tax reporting purposes. Deferred taxes are
determined based on the difference between the financial statement value and tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation
allowance is provided if, based upon the weight of available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized. Based on our analysis of both positive and negative factors, we
have determined that it is more likely than not that we will not be able to realize our deferred tax assets, and
therefore we have recorded a full valuation allowance against our deferred tax assets. Our analysis included an
assessment of our past profitability and our future projections of forecasted revenue and expense levels. More
specifically, we considered the following factors in determining that it is more likely than not that we will not be
able to realize our deferred tax assets:

• We have incurred cumulative net losses since our inception, and as of September 30, 2013 we had an

accumulated deficit of $107.5 million. We expect that we may incur substantial operating losses in the
future. Our net income for the year ended September 30, 2013 resulted primarily from milestone
payments we received from AbbVie and Novartis of $15.0 million and $11.0 million, respectively. Our
net income in the fiscal year ended September 30, 2012 resulted primarily from an upfront payment of
$34.4 million from our collaborator Novartis. Our net income in the fiscal year ended September 30,
2011 resulted primarily from a milestone payment from our collaborator AbbVie;

• We are a clinical-stage biopharmaceutical company and we have not yet demonstrated an ability to

successfully overcome many of the risks and uncertainties associated with late stage clinical
development, regulatory approval and commercialization of therapeutic products;

• To date, we have not commercialized any products or generated any revenue from product sales,

directly or through any collaborator;

• Our financial prospects and ability to generate revenue for the next several years are substantially

dependent upon the development and marketing efforts of AbbVie and Novartis for our drug product
candidates, and we have limited control over the resources, time and effort that our collaborators may
devote to our drug product candidates;

• Because the outcome of planned and anticipated clinical trials of our product candidates by our

collaborators is highly uncertain, we cannot reasonably estimate the timing or amounts, if any, of future
milestone payments we will receive from these collaborators;

• Our own independent HCV development programs and antibiotic program are in preclinical

development and we will be required to invest significant capital and incur significant additional
research and development expenses to develop and commercialize these compounds;

•

Since our inception, we have not paid a material amount of U.S. federal income taxes; and

• We do not have any taxable income in prior carryback periods or any taxable temporary differences

which could represent a source of taxable income upon future reversal.

We account for uncertainty in income taxes recognized in the financial statements by applying a two-step process
to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the
likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-
not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the
financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater
than 50% likelihood of being realized upon ultimate settlement.

Results of Operations

Comparison of Years Ended September 30, 2013, 2012 and 2011

Revenue
Research and development expenses
General and administrative expenses
Other income (expense):
Interest income
Interest expense
Change in fair value of warrant liability
Therapeutic tax credit
Gain on embedded derivative
Other income

Year Ended September 30,

2013

2012

2011

$32,053
16,841
6,183

(in thousands)
$41,706
15,115
5,302

$41,882
11,547
5,036

248
(31)
381
—
—
—

118
—

(8)

—
—
—

83
(3,161)
(686)
750
670
355

Revenue. We recognized revenue of $32.1 million in the year ended September 30, 2013, as compared to
$41.7 million in the year ended September 30, 2012. During fiscal 2013, we received and recognized as revenue
a $15.0 million milestone payment under our collaboration with AbbVie based on AbbVie’s initiation of dosing
in a Phase 3 clinical trial that includes ABT-450. We did not have any revenue related to the AbbVie
collaboration during fiscal 2012. During the year ended September 30, 2013 we also recognized revenue of
$12.7 million under our collaboration with Novartis, as a result of an $11.0 million milestone payment we
received in January 2013 based on Novartis’ initiation of dosing in a Phase 1 clinical trial that includes EDP-239,
and $1.7 million related to research services we provided. During the comparable period in 2012, Novartis paid
us an upfront payment of $34.4 million and $1.1 million related to research services we provided, which we
recognized as revenue during the period. Government contract revenue was $4.4 million and $6.1 million during
the years ended September 30, 2013 and 2012, respectively, related to our contract with NIAID for the
EDP-788 program.

We recognized revenue of $41.7 million during the year ended September 30, 2012, as compared to
$41.9 million during the year ended September 30, 2011. In fiscal 2012, Novartis paid us an upfront payment of
$34.4 million from Novartis, which we recognized as revenue during the year ended September 30, 2012. We
also recognized $1.1 million related to research funding from Novartis. Government contract revenue was
$6.1 million in the year ended September 30, 2012 for the EDP-788 program related to the contract with NIAID.
We did not have any government contract revenue in fiscal 2011. In fiscal 2011, upon AbbVie’s successful
completion of a Phase 2a clinical study, we received a milestone payment of $40.0 million which we recognized
as revenue during the year based on our completion of our deliverables under the AbbVie Agreement. We also
recorded $1.9 million of revenue related to research funding received from AbbVie during the year ended
September 30, 2011.

Research and development expenses.

Development programs:
Protease inhibitor
NS5A inhibitor
Antibiotic
Research and drug discovery

Total research and development expenses

Year Ended September 30,

2013

2012

2011

(in thousands)

$ —
1,717
3,186
11,938

$ —
2,993
4,127
7,995

$ 1,109
6,097
—
4,341

$16,841

$15,115

$11,547

Research and development expenses were $16.8 million in the year ended September 30, 2013, as compared to
$15.1 million for the same period in 2012. The increase year over year was due primarily to an increase of
$3.9 million in preclinical expenses for our early stage drug discovery programs. This increase was partially
offset by a decrease of $1.3 million in expenses for our NS5A inhibitor program and a decrease of $0.9 million in
our expenses for our antibiotic program. In fiscal 2013 we incurred higher research expenses in our early stage
drug discovery programs due to an increase in both the number of preclinical studies and the related costs. Our
research costs related to our NS5A inhibitor program decreased as a result of our signing a collaboration
agreement with Novartis in February 2012, at which time Novartis became responsible for further clinical trial
costs. Prior to entering into the collaboration agreement with Novartis, we had been incurring costs for
preclinical and clinical development of EDP-239. We continued to incur research expense for NS5A research to
identify additional compounds through August 2013, for which we had been receiving funding from Novartis
through August 2013. We incurred preclinical expense for the development of EDP-788 as a result of the
contract we entered into in September 2011 with NIAID, which is funding our research program for EDP-788.

Research and development expenses were $15.1 million for the year ended September 30, 2012 as compared to
$11.5 million for the year ended September 30, 2011. The increase year over year was due primarily to an
increase of $4.1 million of preclinical expenses for our antibiotic program, specifically the development of
EDP-788, for which we had no costs in 2011 as well as an increase in our early stage drug discovery programs of
$3.7 million. These increases were partially offset by a decrease of $1.1 million in our expenses for our protease
inhibitor program and a decrease of $3.1 million in expenses for our NS5A inhibitor program. We incurred
preclinical expense for the development of EDP-788 as a result of the contract we entered into in September
2011 with NIAID, which is funding our research program for EDP-788. We incurred increased research expenses
in our early stage drug discovery programs due to an increase in both the number of preclinical studies and the
related costs as well as a $0.9 million expense for the cost of a third-party license for intellectual property used in
our research activities. Our research costs related to our NS5A inhibitor program decreased as a result of our
signing a collaboration agreement with Novartis in February 2012, at which time Novartis became responsible
for further clinical trial costs. Prior to entering into the collaboration agreement with Novartis, we had been
incurring costs for preclinical and clinical development of EDP-239. We continue to incur research expense for
NS5A research to identify additional compounds, for which we were receiving funding from Novartis through
August 2013. Our research costs related to our protease inhibitor program decreased as a result of the conclusion
of our research program with AbbVie in June 2011.

From inception of each development program through September 30, 2013, we incurred cumulative expenses of
$18.7 million for our protease inhibitor program, $13.2 million for our NS5A inhibitor program, and $7.3 million
for our EDP-788 antibiotic program.

General and administrative expenses. General and administrative expenses increased by $0.9 million from $5.3
million in fiscal 2012 to $6.2 million in fiscal 2013. The increase was primarily due to increased stock-based
compensation expense of $0.6 million related to additional employee stock options and a higher value of our
common stock, as well as additional expenses incurred as a result of operating as a publicly traded company.

General and administrative expenses increased by $0.3 million from $5.0 million in fiscal 2011 to $5.3 million in
fiscal 2012. The increase was primarily due to increased stock-based compensation expense, as a result of
additional stock option grants to employees and a higher value of our common stock, as well as higher
accounting and audit fees, partially offset by lower facility costs as a result of our move to a new office location
on October 1, 2011.

Other income (expense). Changes in components of other income (expense) were as follows:

Interest income. The increase in interest income for the year ended September 30, 2013, as compared to the year
ended September 30, 2012, was due to higher average cash and investment balances following the receipt of the
$15.0 million milestone payment received from AbbVie and the $11.0 million milestone payment received from
Novartis in fiscal 2013, as well as our receipt of $59.9 million of cash proceeds, net of underwriting discounts
and commissions, from our IPO in March 2013.

The increase in interest income for the year ended September 30, 2012, as compared to the year ended
September 30, 2011, was due to higher average cash and investment balances primarily due to the receipt of the
$34.4 million upfront payment from Novartis in the second quarter of fiscal 2012.

Interest expense. In fiscal 2013, interest expense consisted of non-cash interest expense which is being accreted
to the value of accrued third-party license fees over the term of the obligation.

Interest expense of $3.2 million for the year ended September 30, 2011 related entirely to our bridge financing in
October and November 2010, under which we borrowed $2.0 million from existing investors. In connection with
the convertible note agreement for this financing, we issued warrants for the purchase of our Series 1
nonconvertible preferred stock, which were initially valued at $1.3 million and recorded as a debt discount. The
convertible note agreement included call and put options that constituted an embedded derivative valued at $0.7
million, which was also recorded as a debt discount. We incurred issuance costs of $0.2 million, which were
recorded as deferred financing costs. In December 2010, we repaid the $2.0 million of principal outstanding plus
interest and an applicable premium of $1.0 million to the note holders upon receipt of a $40.0 million milestone
payment from AbbVie. Upon repayment, we accreted the debt discounts and deferred financing costs to interest
expense and recorded the premium as interest expense. We had no outstanding debt and therefore no related
interest expense for the year ended September 30, 2013 or 2012.

Change in fair value of warrant liability. We account for any outstanding warrants for our Series E redeemable
convertible preferred stock and our Series 1 nonconvertible preferred stock as liabilities held at fair value, with
changes in fair value recorded as a component of other income (expense).

During the year ended September 30, 2013, we recorded a small amount of income due to the expiration of our
series E warrants during the year, as well as a $0.4 million decrease in the fair value of our warrant liability due
to the remeasurement of the fair value of the outstanding warrants for Series 1 nonconvertible preferred stock.

During the year ended September 30, 2012, we recorded a small amount of expense related to the increase in the
fair value of our warrant liability as of September 30, 2012 primarily as a result of the remeasurement of our
Series E warrants at the reporting date utilizing the Black-Scholes option-pricing model.

We recorded expense related to the increase in the fair value of our warrant liability for the year ended
September 30, 2011 of $0.7 million due primarily to the remeasurement of the fair value of our Series 1
nonconvertible preferred stock warrants, which increased in value primarily due to the resolution of certain
contingencies under the terms of the warrants.

Therapeutic tax credit. We recognized income from a therapeutic tax credit of $0.8 million for the year ended
September 30, 2011 under the QTDP program, which provided for reimbursement in calendar year 2010 of

certain costs we paid or incurred during calendar years 2009 and 2010 directly related to the conduct of a QTDP.
We did not receive any such reimbursements during fiscal 2013 or 2012.

Gain on embedded derivative. We recorded a gain of $0.7 million on an embedded derivative for the year ended
September 30, 2011 related to a derivative liability embedded in our convertible note agreement that was settled
upon repayment of the notes in December 2010. We had no comparable item for either of the years ended
September 30, 2013 or 2012.

Other income (expense), net. Other income in fiscal 2011 consisted primarily of miscellaneous service income
unrelated to our core operations. Commencing in fiscal 2012, we no longer provided these services.

Liquidity and Capital Resources

From our inception through September 30, 2013, we have financed our operations primarily through contract
payments under our collaborations, private placements of our equity, government research and development
contracts and grants and our IPO that was completed in March 2013 for which we received $59.9 million, net of
underwriting discounts and commissions. As of September 30, 2013, we had $112.2 million in cash, cash
equivalents and short- and long-term marketable securities.

The following table shows a summary of our cash flows for each of the years ended September 30, 2013, 2012
and 2011.

Cash provided by (used in):
Operating activities
Investing activities
Financing activities

Year Ended September 30,

2013

2012

2011

(in thousands)

$ 10,653
$(69,216)
$ 56,911

$ 22,623
$(18,040)
(909)
$

$ 24,019
$(17,682)
34
$

Net cash provided by (used in) operating activities

During the year ended September 30, 2013, operating activities provided $10.7 million of cash. The cash flow
provided by operating activities primarily resulted from our net income of $9.6 million, as well as from net non-
cash charges of $0.3 million and $0.7 million from changes in our operating assets and liabilities, respectively.
Our net income in fiscal 2013 was primarily due to $32.1 million of revenue recognized upon receipt of a
$15.0 million milestone payment earned under our collaboration agreement with AbbVie and an $11.0 million
milestone payment earned under our collaboration with Novartis, and $4.4 million recognized under our
government contract with NIAID, net of our operating expenses. Our net non-cash charges in the period
primarily consisted of $1.1 million of stock-based compensation expense and $1.3 million related to amortization
of the premium on our marketable securities, offset in part by $1.8 million of purchased premium on marketable
securities. Net sources of cash from changes in our operating assets and liabilities during the year ended
September 30, 2013 consisted primarily of a $1.4 million decrease in accounts receivable and unbilled
receivables and $0.1 increase in accounts payable, which were offset in part by $0.3 million increase in prepaid
expenses and other current assets and $0.3 decrease in accrued expenses. Cash provided by the $1.4 million
decrease in accounts receivable was primarily due to the timing of our billings and collections under the NIAID
contract. The $0.2 million net use of cash from changes in accounts payable and accrued expenses was primarily
due to the timing of payments made by us to vendors.

During the year ended September 30, 2012, operating activities provided $22.6 million of cash. The cash flow
provided by operating activities primarily resulted from our net income of $21.4 million and net non-cash
charges of $1.1 million, together partially offset by net uses of cash of $0.1 million from changes in our operating
assets and liabilities. Our net income in the period was primarily due to $35.6 million of revenue recognized

related to the upfront payment and research funding we received under our collaboration arrangement with
Novartis as well as $6.1 million of revenue recognized from the NIAID contract, both offset by our operating
expenses. Our net non-cash charges in the period primarily consisted of $0.6 million of amortization of the
premium on our marketable securities and $0.4 million of stock-based compensation expense. Net uses of cash
from changes in our operating assets and liabilities during the year ended September 30, 2012 consisted primarily
of a $0.8 million and $1.9 million increase in our accounts receivable and unbilled receivables, respectively,
principally related to our collaboration agreements with NIAID and Novartis, as well as an increase of $0.2
million in our prepaid expenses and other current assets. These amounts were partially offset by a $2.5 million
increase in accounts payable and accrued expenses and a $0.5 million increase in other long-term liabilities. Our
accounts payable, accrued expense and other long-term liabilities balances were affected by the timing of
payments made by us to our vendors and additionally reflected a $1.0 million payable for the cost of a third-party
license used in our research activities.

During the year ended September 30, 2011, operating activities provided $24.0 million of cash. The cash flow
provided by operating activities primarily resulted from our net income of $23.3 million and net non-cash
charges of $3.1 million, together partially offset by net uses of cash of $2.4 million from changes in our operating
assets and liabilities. Our net income was primarily due to $41.9 million of revenue recognized related to the
milestone payment we received under our collaboration agreement with AbbVie during fiscal 2011, offset by our
operating expenses. Our net non-cash charges in the year primarily consisted of $2.1 million of non-cash interest
expense, a $0.7 million expense from the increase in the fair value of warrants and $0.5 million of depreciation
and amortization expense, offset by a $0.7 million non-cash gain from settlement of an embedded derivative.
Non-cash interest expense was primarily due to the accretion of debt discounts and deferred financing costs
recorded upon repayment of our bridge financing notes in October and November 2010. Net uses of cash from
changes in our operating assets and liabilities during the year ended September 30, 2011 consisted primarily of a
$1.1 million decrease in accrued expenses, a $0.4 million decrease in deferred revenue, a $0.4 million decrease in
accrued rent and a $0.3 million increase in prepaid expenses and other assets. The aggregate $1.8 million net use
of cash from changes in accrued expenses, accrued rent, and prepaid expenses and other assets was primarily due
to the timing of payments made by us to vendors. The decrease of $0.4 million in deferred revenue was the result
of revenue we had deferred as of the end of fiscal 2010 that we recognized upon the completion of our
obligations under our collaboration agreement with AbbVie during fiscal 2011.

Net cash provided by (used in) investing activities

During the year ended September 30, 2013, net cash used by investing activities was $69.2 million. Net cash
used by investing activities during this period consisted primarily of cash paid for the purchases of marketable
securities of $115.9 million and purchases of laboratory equipment of $0.6 million, which was partially offset by
cash received from the sales and maturities of marketable securities of $47.3 million.

During the year ended September 30, 2012, net cash used in investing activities was $18.0 million. Net cash used
in investing activities during this period consisted primarily of purchases of marketable securities, which used
cash of $47.7 million, partially offset by cash received from the sale and maturities of marketable securities of
$28.7 million and an increase in cash of $1.1 million due to a release of a letter of credit in December 2011
related to the previous lease of our Watertown facility.

During the year ended September 30, 2011, net cash used in investing activities was $17.7 million. Net cash used
in investing activities in the year consisted primarily of purchases of marketable securities, which used cash of
$33.6 million, and purchases of $0.4 million of laboratory equipment, partially offset by cash received from the
sale of marketable securities of $16.8 million.

Net cash provided by (used in) financing activities

Net cash provided by financing activities during the year ended September 30, 2013 was $56.9 million and
consisted of $59.9 million of proceeds from our IPO, net of underwriting discounts and commissions, and
proceeds of $0.6 million from the exercise of stock options, offset by $3.5 million of expenses related to our IPO
and paid during the period.

Net cash used in financing activities for fiscal 2012 consisted of payments of deferred offering costs in
anticipation of our initial public offering, partially offset by proceeds received from the exercise of stock options.

Net cash provided by financing activities for fiscal 2011 primarily related to the exercise of stock options. In
addition, during the first quarter of fiscal 2011, we entered into a bridge note financing arrangement with existing
investors, under which we borrowed $2.0 million. We repaid that amount in full within the same quarter.

As of September 30, 2013, we had $112.2 million in cash, cash equivalents and investments. We believe that our
existing cash, cash equivalents and investments as of September 30, 2013, will be sufficient to meet our
anticipated cash requirements for at least the next 24 months. 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:

• whether our existing collaborations continue to generate substantial milestone payments, and ultimately

royalties, to us;

•

the number and characteristics of the future product candidates we pursue;

the scope, progress, results and costs of researching and developing any of our future product
candidates on our own, including conducting preclinical research and clinical trials;

the timing of, and the costs involved in, obtaining regulatory approvals for any future product
candidates we develop independently;

the cost of commercialization activities, if any, of any future product candidates we develop
independently that are approved for sale, including marketing, sales and distribution costs;

the cost of manufacturing our future product candidates and any products we successfully
commercialize independently, including manufacturing for clinical development;

our ability to maintain existing collaborations and to establish new collaborations, licensing or other
arrangements and the financial terms of such agreements;

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents,
including litigation costs and the outcome of such litigation; and

the timing, receipt and amount of sales of, or royalties on, ABT-450, EDP-239 and our future product
candidates, if any.

We do not believe that inflation had a material effect on our business, financial condition or results of operations
in the last two fiscal years. If our costs were to become subject to significant inflationary pressures, we could not
offset such higher costs through revenue increases. Our inability to do so could harm our business, financial
condition and results of operations.

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.

Recently Issued Accounting Pronouncements

Accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do
not require adoption until a future date are not expected to have a material impact on our financial statements
upon adoption.

Contractual Obligations and Commitments

We lease office space in Watertown, Massachusetts under a seven-year lease that commenced on October 1,
2011. In fiscal 2012, we entered into an intellectual property license agreement that will require us to make
certain non-cancelable payments over the next three years. The following table summarizes our contractual
obligations at September 30, 2013 and the effect such obligations are expected to have on our liquidity and cash
flow in future periods:

Operating lease commitments
Intellectual property license

Total(1)

Payments Due By Fiscal Year

Total

Less Than
1 Year

$4,865
450

$ 921
250

1-3 Years

3-5 Years

(in thousands)
$1,918
200

$2,026
—

$5,315

$1,171

$2,118

$2,026

More Than
5 years

$—
—

$—

(1) As of September 30, 2013, we had outstanding warrants for the purchase of 1,999,989 shares of our Series 1
nonconvertible preferred stock that we classified as a long-term liability on our balance sheet, recorded at
fair value of $1.6 million. If those warrants are exercised, the Series 1 nonconvertible preferred stock issued
upon exercise would require the payment of $2.0 million upon a qualifying merger or sale of this company.
The table above does not include this liability because we are unable to estimate the timing of this required
payment, or if it will be required at all.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Sensitivity

We had cash, cash equivalents and marketable securities of $112.2 million at September 30, 2013, which
consisted of cash, government and agency securities, corporate bonds and commercial paper and certificates of
deposit. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of
these investments, we do not believe that we have any material exposure to changes in the fair value of our
investment portfolio as a result of changes in interest rates. We had no debt outstanding as of September 30,
2013.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements, together with the report of our independent registered public accounting
firm, appear on pages F-1 through F-37 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the Exchange Act),
is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,
and that such information is accumulated and communicated to management, including our Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, as the Company’s are designed to do, and management necessarily was
required to apply its judgment in evaluating the risk related to controls and procedures.

In connection with the preparation of this Form 10-K, as of September 30, 2013, an evaluation was performed
under the supervision and with the participation of our management, including the CEO and CFO, of the
effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act). Based on that evaluation, our management concluded that our disclosure
controls and procedures were effective at a reasonable assurance level as of September 30, 2013. These
conclusions were communicated to the Audit Committee.

Management’s Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal
control over financial reporting or an attestation report of the Company’s independent registered public
accounting firm due to a transition period established by rules of the Securities and Exchange Commission for
newly public companies. In addition, as an Emerging Growth Company, as defined under the terms of the Jobs
Act of 2012, the Company’s independent registered accounting firm is not required to issue a report on the
internal control over financial reporting.

Change in Internal Control Over Financial Reporting — There were no changes in our internal control over
financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Portions of the response to this item are incorporated herein by reference from the discussion responsive thereto under
the captions “Election of Directors—Nominees for Director and Current Directors”, “Section 16(a) Beneficial
Ownership Reporting Compliance”, “Executive Officers” and “Corporate Governance—Board and Committee
Matters” in the Company’s Definitive Proxy Statement relating to the 2014 Annual Meeting of Stockholders (the 2014
Proxy Statement).

We have adopted a Code of Business Conduct and Ethics (the code of ethics) that applies to all of our directors,
officers and employees. The code of ethics is available on our website at www.enanta.com. In addition, if we
make any substantive amendments to the code of ethics or grant any waiver, including any implicit waiver, from
a provision of the code to any of our executive officers or directors, we will disclose the nature of such
amendment or waiver as required by applicable law.

ITEM 11. EXECUTIVE COMPENSATION

The response to this item is incorporated herein by reference from the discussion responsive thereto under the
following captions in the 2014 Proxy Statement: “Executive Compensation” and “Corporate Governance—
Compensation Committee Interlocks and Insider Participation.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

The response to this item is incorporated herein by reference in part from the discussion responsive thereto under
the caption “Beneficial Ownership of Common Stock” in the 2014 Proxy Statement.

The following table provides information about the securities authorized for issuance under the Company’s
equity compensation plans as of September 30, 2013:

Equity Compensation Plan Information

Plan Category

Equity compensation plans approved by security

holders(1)

Equity compensation plans not approved by

security holders

Totals

Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights

(a)

1,583,031(2)

—

1,583,031(2)

Weighted
average
exercise price of
outstanding
options,
warrants and
rights

Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))

(b)

$5.15

—

$5.15

(c)

531,652(3)

—

531,652(3)

(1) Consists of the Company’s Amended and Restated 1995 Equity Incentive Plan, as amended, the Company’s

2012 Equity Incentive Plan, as amended, and the Company’s Employee Stock Purchase Plan.

(2) Consists of shares of the Company’s common stock issuable upon exercise of outstanding options issued

under the Company’s Amended and Restated 1995 Equity Incentive Plan and the Company’s 2012 Equity
Incentive Plan.

(3) Consists of shares of the Company’s common stock reserved for future issuance under the Company’s 2012
Equity Incentive Plan and the Company’s Employee Stock Purchase Plan. Does not include 538,102 shares
that were automatically added to the Company’s 2012 Equity Incentive Plan by its terms as of October 1,
2013.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE

The response to this item is incorporated herein by reference from the discussion responsive thereto under the
caption “Corporate Governance—Certain Relationships and Related Transactions” and “Corporate
Governance—Board and Committee Matters” in the 2014 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The response to this item is incorporated herein by reference from the discussion responsive thereto under the
captions “Corporate Governance—Board and Committee Matters” and “Audit Committee Report—Audit Fees”
in the 2014 Proxy Statement.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) 1. FINANCIAL STATEMENTS

The financial statements are included under Part II, Item 8 of this Report.

2. FINANCIAL STATEMENTS SCHEDULE

Schedules are omitted because they are not applicable, or are not required, or because the information is included
in the consolidated financial statements and notes thereto.

3. EXHIBITS –

The exhibits are listed below under Part IV, Item 15(b) of this Report.

(b) EXHIBITS

Exhibit
Number

3.1

3.2

4.1

4.2

10.1#

10.2#

10.3#

Exhibit Description

Form

Date

Exhibit
Number

File Number

Filed Herewith

Incorporated by Reference

Restated Certificate of Incorporation of
Enanta Pharmaceuticals, Inc.

Amended and Restated Bylaws of Enanta
Pharmaceuticals, Inc.

Specimen certificate evidencing shares of
common stock.

Form of Series 1 Non-Convertible
Preferred Stock Warrant

Form of Indemnification Agreement for
directors and officers.

Amended and Restated Employment
Agreement between the Company and
Jay R. Luly, Ph.D., dated as of March 4,
2013.

Form of Amended and Restated
Employment Agreement for Executive
Officers other than Chief Executive
Officer.

8-K

03/28/2013

3.1

001-35839

8-K

03/28/2013

3.2

001-35839

S-1/A 02/05/2013

4.1

333-184779

S-1

11/06/2012

4.2

333-184779

S-1/A 02/05/2013

10.7

333-184779

S-1/A 03/05/2013

10.5

333-184779

S-1/A 03/05/2013

10.17

333-184779

10.4†

10.5†

10.6†

Collaborative Development and License
Agreement between the Company and
Abbott Laboratories, dated November 27,
2006; as amended by a First Amendment
to Collaborative Development and
License Agreement dated January 27,
2009 and a Second Amendment to
Collaborative Development and License
Agreement dated December 9, 2009
(assigned to AbbVie Inc. as of January 1,
2013).

Collaboration and License Agreement
between the Company and Novartis
Institutes for BioMedical Research, Inc.,
dated February 16, 2012.

Amendment No. 1, dated March 28,
2013, to that certain Collaboration and
License Agreement between Enanta
Pharmaceuticals, Inc. and Novartis
Institutes for BioMedical Research, Inc.

S-1/A 02/05/2013

10.1

333-184779

S-1/A 03/05/2013

10.2

333-184779

10-Q 05/15/2013

10.2

001-35839

10.7 † Agreement between the Company and

S-1

11/06/2012

10.3

333-184779

the National Institute of Allergy and
Infectious Diseases, dated September 30,
2011.

Modification No. 1, dated August 28,
2013, to that certain Agreement between
the Company and the National Institute
of Allergy and Infectious Diseases.

Modification No. 2, dated August 29,
2013, to that certain Agreement between
the Company and the National Institute
of Allergy and Infectious Diseases.

Lease Agreement between Company and
ARE-500 Arsenal Street LLC, dated as
of April 15, 2011.

Third Amended and Restated
Registration Rights Agreement, dated as
of August 23, 2012.

10.8

10.9

10.10

10.11

S-1

11/06/2012

10.6

333-184779

S-1/A 11/06/2012

10.4

333-184779

10.12# Amended and Restated 1995 Equity

S-1/A 03/05/2013

10.8

333-184779

Incentive Plan.

10.13# Form of Incentive Stock Option

S-1/A 03/05/2013

10.9

333-184779

Certificate under Amended and Restated
1995 Equity Incentive Plan.

10.14# Form of Non-Statutory Stock Option

S-1/A 03/05/2013

10.10

333-184779

Certificate under Amended and Restated
1995 Equity Incentive Plan.

10.15# Form of Non-Statutory Stock Option

S-1/A 03/05/2013

10.11

333-184779

Certificate for directors under Amended
and Restated 1995 Equity Incentive Plan.

X
X

10.16# 2012 Equity Incentive Plan (As adjusted to

reflect the application of the 1-for-4.31
reverse stock split of the Company’s
common stock effected on March 1, 2013).
10.17# Form of Incentive Stock Option Agreement
under 2012 Equity Incentive Plan.

S-1/A 03/05/2013

10.13

333-184779

10.18# Form of Non-Statutory Stock Option

S-1/A 03/05/2013

10.14

333-184779

Agreement under 2012 Equity Incentive
Plan.

10.19# Form of Non-Statutory Stock Option

S-1/A 03/05/2013

10.15

333-184779

S-1/A 02/05/2013

10.16

333-184779

31.1

31.2

32.1

101

Certificate for directors under 2012
Equity Incentive Plan.
10.20# Employee Stock Purchase Plan.
21.1
23.1

Subsidiaries of the Company.
Consent of PricewaterhouseCoopers LLP,
Independent Registered Public
Accounting Firm.
Certification of the Chief Executive Officer
pursuant to Rule 13a-14(a) or 15d-14(a) of
the Securities Exchange Act of 1934.
Certification of Chief Financial Officer
pursuant to Rule 13a-14(a) or 15d-14(a)
of the Securities Exchange Act of 1934.
Certification of the Chief Executive
Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
The following materials from the Annual
Report of Enanta Pharmaceuticals, Inc. on
Form 10-K for the year ended September
30, 2013, formatted in XBRL (eXtensible
Business Reporting Language): (i)
Balance Sheets as of September 30, 2013
and September 30, 2012 of Enanta
Pharmaceuticals, Inc., (ii) Statements of
Operations for the years ended September
30, 2013 and 2012 of Enanta
Pharmaceuticals, Inc., (iii) Statements of
Cash Flows for the years ended
September 30, 2013 and 2012 of Enanta
Pharmaceuticals, Inc., and (iv) Notes to
Financial Statements of Enanta
Pharmaceuticals, Inc.1

# Management contract or compensatory plan, contract or agreement.
† Confidential treatment granted as to portions of this Exhibit. The confidential portions of this Exhibit have been

omitted and are marked by asterisks.

1 Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed
or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933,
as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as
amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 18th day
of December, 2013.

ENANTA PHARMACEUTICALS, INC.

By:

/s/

Jay R. Luly, Ph.D.

Jay R. Luly, Ph.D.
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the Company in the capacities and on the dates indicated.

Signature

Title

Date

/s/

Jay R. Luly, Ph.D.
Jay R. Luly, Ph.D.

/s/ Paul J. Mellett

Paul J. Mellett

/s/ Ernst-Günter Afting, M.D., Ph.D.

Ernst-Günter Afting, M.D., Ph.D.

/s/ Stephen Buckley, Jr.

Stephen Buckley, Jr.

/s/ Bruce L.A. Carter, Ph.D.

Bruce L.A. Carter, Ph.D.

/s/ Marc E. Goldberg

Marc E. Goldberg

/s/ David Poorvin, Ph.D.

David Poorvin, Ph.D.

/s/ Terry Vance

Terry Vance

President and Chief Executive
Officer and Director
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial and
Accounting Officer)

December 18, 2013

Director

December 18, 2013

Director

December 18, 2013

Director

December 18, 2013

Director

December 18, 2013

Director

December 18, 2013

Director

December 18, 2013

ENANTA PHARMACEUTICALS, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Redeemable and Convertible Preferred Stock and Stockholders’

Equity (Deficit)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-2
F-3
F-4
F-5

F-6
F-7
F-8

F-1

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Enanta Pharmaceuticals, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
operations, comprehensive income, changes in redeemable and convertible preferred stock and stockholders’
equity (deficit) and cash flows present fairly, in all material respects, the financial position of Enanta
Pharmaceuticals, Inc. and its subsidiary at September 30, 2013 and 2012 and the results of their operations and
their cash flows for each of the three years in the period ended September 30, 2013 in conformity with
accounting principles generally accepted in the United States of America. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
December 18, 2013

F-2

ENANTA PHARMACEUTICALS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

Assets
Current assets:

Cash and cash equivalents
Short-term marketable securities
Accounts receivable
Unbilled receivables
Prepaid expenses and other current assets

Total current assets
Property and equipment, net
Long-term marketable securities
Restricted cash
Other assets

Total assets

Liabilities, Redeemable and Convertible Preferred Stock and

Stockholders’ Equity (Deficit)

Current liabilities:

Accounts payable
Accrued expenses
Deferred revenue

Total current liabilities

Warrant liability
Other long-term liabilities

Total liabilities

Commitments and contingencies (Note 15)
Redeemable convertible preferred stock (Series C, D, E, F, G-1 and G-2); $0.01 par

value; no shares authorized, issued or outstanding at September 30, 2013; 45,421,288
shares authorized; 43,115,343 shares issued and outstanding at September 30, 2012;
aggregate liquidation preference of $159,079 at September 30, 2012

Convertible preferred stock (Series A and B); $0.01 par value; no shares authorized,

issued or outstanding at September 30, 2013; 566,450 shares authorized, issued and
outstanding at September 30, 2012; aggregate liquidation preference of $327 at
September 30, 2012

Stockholders’ equity (deficit):

Common stock; $0.01 par value; 100,000,000 shares authorized; 18,138,597 and
1,343,147 shares issued and 17,929,781 and 1,134,331 shares outstanding at
September 30, 2013 and 2012, respectively

Additional paid-in capital
Treasury stock, at par value; 208,816 shares at September 30, 2013 and 2012
Accumulated other comprehensive income (loss)
Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities, redeemable and convertible preferred stock and stockholders’

equity (deficit)

September 30,

2013

2012

8,859
92,621
808
784
1,641

104,713
1,121
10,703
436
—

$ 10,511
33,251
1,049
1,893
604

47,308
611
1,656
436
2,151

$ 116,973

$ 52,162

1,481
3,035
10

4,526
1,620
359

6,505

1,851
3,866
17

5,734
2,001
498

8,233

—

158,955

—

327

181
217,741
(2)
(2)
(107,450)

—

(2)
10
(115,374)

110,468

(115,353)

$ 116,973

$ 52,162

The accompanying notes are an integral part of these consolidated financial statements.

F-3

ENANTA PHARMACEUTICALS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)

Revenue
Operating expenses:

Research and development
General and administrative

Total operating expenses

Total other income (expense), net

Net income

Accretion of redeemable convertible preferred stock to redemption

value

Net income attributable to participating securities

Net income (loss) attributable to common stockholders

Net income (loss) per share attributable to common stockholders:

Basic
Diluted

Weighted average common shares outstanding:

Basic
Diluted

Year Ended September 30,

2013

2012

2011

32,053

41,706

41,882

16,841
6,183

23,024

9,029

15,115
5,302

20,417

21,289

248
(31)
381
—
—
—

598

118
—

(8)

—
—
—

110

11,547
5,036

16,583

25,299

83
(3,161)
(686)
750
670
355

(1,989)

9,627

21,399

23,310

(2,526)
(13,670)

(5,367)
(14,663)

(5,454)
(16,291)

(6,569) $

1,369

1,565

(0.67) $
(0.67) $

1.26
1.13

$
$

1.40
1.32

$
$

9,788,039
9,788,039

1,088,784
2,474,823

1,119,250
1,857,273

The accompanying notes are an integral part of these consolidated financial statements.

F-4

ENANTA PHARMACEUTICALS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

Net income

Other comprehensive income (loss):

Net unrealized gains (losses) on marketable securities, net of tax of $0

Total other comprehensive income (loss)

Comprehensive income

Year Ended September 30,

2013

2012

2011

$9,627

$21,399

$23,310

(12)

(1)

$9,615

$21,410

$23,309

The accompanying notes are an integral part of these consolidated financial statements.

F-5

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T

ENANTA PHARMACEUTICALS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Cash flows from operating activities

Net income
Adjustments to reconcile net income to net cash provided by operating

9,627

$ 21,399

$ 23,310

Year Ended September 30,

2013

2012

2011

activities:

Depreciation and amortization expense
Non-cash interest expense
Change in fair value of warrant liability
Gain on embedded derivative
Stock-based compensation expense
Gain on disposal of property and equipment
Premium on marketable securities
Amortization of premium on marketable securities
Change in operating assets and liabilities:

Accounts receivable
Unbilled receivables
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued expenses
Deferred revenue
Other long-term liabilities

Net cash provided by operating activities

Cash flows from investing activities

Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of marketable securities
Sales of marketable securities
Maturities of marketable securities
Change in restricted cash
Net cash used in investing activities

Cash flows from financing activities

Proceeds from issuance of convertible notes
Repayment of convertible notes
Proceeds from initial public offering, net of underwriting discounts and

commissions

Proceeds from exercise of stock options
Payments of initial public offering costs
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

Cash paid for interest

Supplemental disclosure of noncash financing activities:

Accretion of redeemable convertible preferred stock to redemption value
Deferred initial public offering costs included in accounts payable and

accrued expenses

Conversion of preferred stock into common stock

221
31
(381)
—
1,063
(100)
(1,811)
1,262

241
1,109
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22
115
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(7)
(147)
10,653

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—

(115,888)
5,453
41,825
—
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172
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424
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590

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5
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1,726
17
498
22,623

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66
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15,750
12,950
1,140
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499
2,059
686
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225
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—
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58
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(356)
24,019

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9
(33,574)
16,764
—
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—
—

2,000
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59,892
559
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56,911
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10,511
8,859

—
141
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3,674
6,837
$ 10,511

—

34
—
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466
$ 6,837

— $ — $ 1,056

2,526

$ 5,367

$ 5,454

$
$ 161,808

— $ 1,079

$ —
$ — $ —

The accompanying notes are an integral part of these consolidated financial statements.

F-7

ENANTA PHARMACEUTICALS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)

1. Nature of the Business

Enanta Pharmaceuticals, Inc. (the “Company”), incorporated in Delaware in 1995, is a research and
development-focused biotechnology company that uses its chemistry-driven approach and drug discovery
capabilities to create small molecule drugs in the infectious disease field. The Company is developing novel
protease, NS5A, cyclophilin and nucleotide polymerase inhibitors targeted against the hepatitis C virus (“HCV”).
Additionally, the Company has created a new class of macrolide antibiotics known as Bicyclolides that
overcomes bacterial resistance. Antibacterial focus areas include “superbugs,” respiratory tract infections, and
intravenous and oral treatments for hospital and community Methicillin-resistant Staphylococcus aureus
(“MRSA”).

The Company is subject to risks common to companies in the biotechnology industry including, but not limited
to, new technological innovations, dependence on collaborative arrangements, protection of proprietary
technology, dependence on key personnel, compliance with government regulations and the need to obtain
additional financing. Product candidates currently under development will require significant additional research
and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to
commercialization. These efforts require significant amounts of additional capital, adequate personnel
infrastructure, and extensive compliance reporting capabilities.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include those of the Company and its subsidiary, Enanta
Pharmaceuticals Security Corporation, after elimination of all intercompany accounts and transactions. The
accompanying consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”).

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not
limited to, management’s judgments of separate units of accounting and best estimate of selling price of those
units of accounting within its revenue arrangements; the valuation of outstanding warrants and stock-based
awards; the useful lives of property and equipment; and the accounting for income taxes, including uncertain tax
positions and the valuation of net deferred tax assets. Estimates are periodically reviewed in light of changes in
circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Cash Equivalents and Marketable Securities

The Company considers all short-term, highly liquid investments with original maturities of ninety days or less at
acquisition date to be cash equivalents. Marketable securities with original maturities of greater than three
months and remaining maturities of less than one year from the balance sheet date are classified as short-term
marketable securities. Marketable securities with remaining maturities of greater than one year from the balance
sheet date are classified as long-term marketable securities.

F-8

The Company classifies all of its marketable securities as available-for-sale. All marketable securities are held
with one investment manager. The Company continually evaluates the credit ratings of its investment portfolio
and underlying securities. The Company invests in accordance with its investment policy and invests at the date
of purchase in securities with a rating of A3 or higher and A- or higher according to Moody’s and S&P,
respectively. The Company reports available-for-sale investments at fair value as of each balance sheet date and
records any unrealized gains and losses as a component of stockholders’ equity (deficit). The cost of securities
sold is determined on a specific identification basis, and realized gains and losses are included in other income
(expense) within the statement of operations. If any adjustment to fair value reflects a decline in the value of the
investment, the Company considers available evidence to evaluate the extent to which the decline is “other than
temporary” and reduces the investment to fair value through a charge to the statement of operations. There were
no such adjustments necessary during the years ended September 30, 2013, 2012 or 2011.

Restricted Cash

As of September 30, 2013 and 2012, the Company had outstanding a letter of credit collateralized by a money
market account of $436 to the benefit of the landlord of the Company’s current office lease. This amount was
classified as long-term restricted cash as of September 30, 2013 and 2012.

Concentration of Credit Risk and of Significant Customers and Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of
cash, cash equivalents, marketable securities, accounts receivable and unbilled receivables. The Company has all
cash and investment balances at one accredited financial institution, in amounts that exceed federally insured
limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk
associated with commercial banking relationships.

The Company has historically generated all of its revenue from its collaborative research and license agreements
and a U.S. government contract (see Note 8). As of September 30, 2013 and 2012, accounts receivable and
unbilled receivables consisted of amounts due from the Company’s collaborators and under a U.S. government
contract (see Note 8).

The Company is completely dependent on third-party manufacturers for product supply for preclinical research
activities in its non-partnered programs. In particular, the Company relies and expects to continue to rely
exclusively on one manufacturer to supply it with its requirements for the active pharmaceutical ingredients
related to these programs. These research programs would be adversely affected by a significant interruption in
the supply of active pharmaceutical ingredients.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the
use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are
considered observable and the last is considered unobservable, is used to measure fair value:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets
for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets
or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant
to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow
methodologies and similar techniques.

F-9

The Company’s cash equivalents and marketable securities assets and its warrant liabilities are carried at fair
value determined according to the fair value hierarchy described above (see Note 3). The carrying values of
accounts receivable and unbilled receivables, accounts payable and accrued expenses approximate their fair value
due to the short-term nature of these assets and liabilities. The carrying value of accrued third-party license fees
included in other long-term liabilities has been recorded at its present value, which approximates fair value.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation or amortization. Depreciation and
amortization expense is recognized using the straight-line method over the following estimated useful lives:

Laboratory and office equipment
Leasehold improvements
Purchased software
Computer equipment
Furniture

3–5 years
Shorter of life of lease or estimated useful life
3–5 years
3–5 years
7 years

Expenditures for repairs and maintenance of assets are charged to expense as incurred. Costs of major additions
and betterments are capitalized and depreciated on a straight-line basis over their useful lives. Upon retirement or
sale, the cost and related accumulated depreciation or amortization of assets disposed of are removed from the
accounts and any resulting gain or loss is included in income (loss) from operations.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property and equipment, for impairment whenever events or
changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.
Factors that the Company considers in deciding when to perform an impairment review include significant
underperformance of the business in relation to expectations, significant negative industry or economic trends,
and significant changes or planned changes in the use of the assets. If an impairment review is performed to
evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows
expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An
impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the
use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the
carrying value of the impaired asset over its fair value, determined based on discounted cash flows. To date, the
Company has not recorded any impairment losses on long-lived assets.

Revenue Recognition

The Company’s revenue is generated primarily through collaborative research and license agreements. The terms
of these agreements contain multiple deliverables, which may include (i) licenses, (ii) research and development
activities, and (iii) participation in joint research and development steering committees. The terms of these
agreements may include nonrefundable upfront license fees, payments for research and development activities,
payments based upon the achievement of certain milestones, and royalty payments based on product sales
derived from the collaboration. In all instances, revenue is recognized only when the price is fixed or
determinable, persuasive evidence of an arrangement exists, delivery has occurred or the services have been
rendered, collectibility of the resulting receivable is reasonably assured, and the Company has fulfilled its
performance obligations under the contract.

For agreements entered into prior to October 1, 2011, the Company evaluated license agreements with multiple
deliverables to determine if the deliverable elements could be recognized separately by considering (i) if the
delivered elements (typically the license) had standalone value to the customer, (ii) if the fair value of any
undelivered elements (typically the research and development services and the steering committee activities)

F-10

could be determined based on vendor-specific objective evidence (“VSOE”) or vendor objective evidence
(“VOE”), and (iii) if the arrangement included a general right of return relative to the delivered item, the delivery
or performance of the undelivered item was considered probable and substantially within the control of the
Company. VSOE of fair value was based on the consistent price of a deliverable when the Company regularly
sold it on a standalone basis. Alternatively, VOE was based upon third-party objective evidence of fair value. If
the delivered elements had value on a standalone basis and the fair value of the undelivered elements could be
determined based on VSOE or VOE, revenues of such elements were then accounted for separately as delivered
with arrangement consideration allocated to the delivered elements based on the residual value method. If either
(i) the delivered elements were considered to not have standalone value or (ii) VSOE or VOE of fair value for
any of the undelivered elements could not be determined, the arrangement was accounted for as a single unit of
accounting and all payments received were recognized as revenue over the estimated period of performance of
the entire arrangement.

On October 1, 2011, the Company adopted Accounting Standards Update (“ASU”) No. 2009-13, Multiple-
Deliverable Revenue Arrangements (“ASU 2009-13”). This guidance, which applies to multiple-element
arrangements entered into or materially modified on or after October 1, 2011, amends the criteria for separating
and allocating consideration in a multiple-element arrangement by modifying the fair value requirements for
revenue recognition and eliminating the use of the residual value method. The selling prices of deliverables under
the arrangement may be derived using third-party evidence (“TPE”) or a best estimate of selling price (“BESP”),
if VSOE is not available. The objective of BESP is to determine the price at which the Company would transact a
sale if the element within the license agreement was sold on a standalone basis. Establishing BESP involves
management’s judgment and considers multiple factors, including market conditions and company-specific
factors including those factors contemplated in negotiating the agreements as well as internally developed models
that include assumptions related to market opportunity, discounted cash flows, estimated development costs,
probability of success, and the time needed to commercialize a product candidate pursuant to the license. In
validating the Company’s BESP, the Company considers whether changes in key assumptions used to determine
the BESP will have a significant effect on the allocation of the arrangement consideration between the multiple
deliverables. Deliverables under the arrangement are separate units of accounting if (i) the delivered item has
value to the customer on a standalone basis, and (ii) if the arrangement includes a general right of return relative
to the delivered item, delivery or performance of the undelivered item is considered probable and substantially
within the control of the Company. The arrangement consideration that is fixed or determinable at the inception
of the arrangement is allocated to the separate units of accounting based on their relative selling prices. The
appropriate revenue recognition model is applied to each element, and revenue is accordingly recognized as each
element is delivered. The Company may exercise significant judgment in determining whether a deliverable is a
separate unit of accounting. The Company elected to adopt ASU 2009-13 prospectively as of October 1, 2011.

In determining the separate units of accounting, the Company evaluates whether the license has standalone value
to the collaborator based on consideration of the relevant facts and circumstances for each arrangement. Factors
considered in this determination include the research and development capabilities of the collaborator and the
availability of relevant research expertise in the marketplace. In addition, the Company considers whether or not
(i) the collaborator can use the license for its intended purpose without the receipt of the remaining deliverables,
(ii) the value of the license is dependent on the undelivered items, and (iii) the collaborator or other vendors can
provide the undelivered items.

Under a collaborative research and license agreement, a steering committee is typically responsible for
overseeing the general working relationships, determining the protocols to be followed in the research and
development performed, and evaluating the results from the continued development of the product in order to
determine the clinical studies to be performed. The Company evaluates whether its participation in joint research
and development steering committees is a substantive obligation or whether the services are considered
inconsequential or perfunctory. The Company’s participation on a steering committee is considered
“participatory” and therefore accounted for as a separate element when the collaborator requires the participation
of the Company to ensure all elements of an arrangement are maximized. Steering committee services that are

F-11

considered participatory are combined with other research services or performance obligations required under an
arrangement, if any, in determining the level of effort required in an arrangement and the period over which the
Company expects to complete its aggregate performance obligations. Alternatively, the Company’s participation
on a steering committee is considered “protective” and therefore not accounted for as a separate element in a case
where the Company can exercise or control when to be involved at its own discretion. Factors the Company
considers in determining if its participation in a joint steering committee is participating or protective include:
(i) which party negotiated or requested the steering committee, (ii) how frequently the steering committee meets,
(iii) whether or not there are any penalties or other recourse if the Company does not attend the steering
committee meetings, (iv) which party has decision making authority on the steering committee, and (v) whether
or not the collaborator has the requisite experience and expertise associated with the research and development of
the licensed intellectual property.

For all periods presented, whenever the Company determines that an element is delivered over a period of time,
revenue is recognized using either a proportional performance model or a straight-line model over the period of
performance, which is typically the research and development term. Full-time equivalents (“FTEs”) are typically
used as the measure of performance. At each reporting period, the Company reassesses its cumulative measure of
performance and makes appropriate adjustments, if necessary. The Company recognizes revenue using the
proportional performance model whenever the Company can make reasonably reliable estimates of the level of
effort required to complete its performance obligations under an arrangement. Revenue recognized under the
proportional performance model at each reporting period is determined by multiplying the total expected
payments under the contract (excluding royalties and payments contingent upon achievement of milestones) by
the ratio of the level of effort incurred to date to the estimated total level of effort required to complete the
performance obligations under the arrangement. Revenue is limited to the lesser of the cumulative amount of
payments received or the cumulative amount of revenue earned, as determined using the proportional
performance model as of each reporting period. Alternatively, if the Company cannot make reasonably reliable
estimates the level of effort required to complete its performance obligations under an arrangement, then revenue
under the arrangement is recognized on a straight-line basis over the period expected to complete the Company’s
performance obligations. If and when a contingent milestone payment is earned, the additional consideration to
be received is allocated to the separate units of accounting in the arrangement based on their relative selling
prices at the inception of the arrangement. Revenue is limited to the lesser of the cumulative amount of payments
received or the cumulative amount of revenue earned, as determined on a straight-line basis as of the period end
date. If the Company cannot reasonably estimate when its performance obligation period ends, then revenue is
deferred until the Company can reasonably estimate when the performance obligation period ends.

Royalty revenue, if any, is recognized based on contractual terms when reported sales are reliably measurable
and collectibility is reasonably assured, provided that there are no performance obligations then remaining. To
date, none of the Company’s products have been approved, and therefore the Company has not earned any
royalty revenue from product sales.

During the years ended September 30, 2013 and 2012, the Company also generated revenue from a government
contract under which the Company is reimbursed for certain allowable costs incurred for the funded project.
Revenue from the government contract is recognized when the related service is performed. The related costs
incurred by the Company under the government contract are included in research and development expense in
the statements of operations.

Amounts received prior to satisfying all revenue recognition criteria are recorded as deferred revenue in the
accompanying balance sheets. Amounts not expected to be recognized as revenue within the next twelve months
of the balance sheet date are classified as long-term deferred revenue.

In the event that a collaborative research and license agreement is terminated and the Company then has no
further performance obligations, the Company recognizes as revenue any portion of the upfront payment that had
not previously been recorded as revenue but was classified as deferred revenue at the date of such termination.

F-12

Research and Development Costs

Research and development costs are expensed as incurred. Included in research and development costs are
wages, stock-based compensation and benefits of employees, third-party license fees and other operational costs
related to the Company’s research and development activities, including facility-related expenses and external
costs of outside contractors engaged to conduct both preclinical and clinical studies. The Company also includes
in research and development expense the costs to complete the Company’s obligations under research
collaborations.

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are recorded as
general and administrative expenses as incurred, as recoverability of such expenditures is uncertain.

Deferred Offering Costs

The Company capitalized certain legal, accounting and other third-party fees that were directly associated with
the equity financing that resulted in the Company’s initial public offering of its common stock (“IPO”) in March
2013. Those fees were included in other assets in the accompanying balance sheet until the IPO was
consummated. The Company recorded deferred financing costs of $2,129 at September 30, 2012 in other assets
in the accompanying balance sheet. After consummation of the IPO, these costs were recorded in stockholders’
equity as a reduction of additional paid-in capital generated as a result of the offering.

Accounting for Stock-Based Compensation

The Company measures all stock options and other stock-based awards granted to employees at the fair value on
the date of the grant using the Black-Scholes option-pricing model. The fair value of the awards is recognized as
expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of
the respective award. The straight-line method of expense recognition is applied to all awards with service-only
conditions. The Company classifies stock-based compensation expense in the statements of operations in the
same manner in which the award recipient’s payroll costs are classified.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in
the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference
between the financial reporting and tax basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the
provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered
from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is
more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is
established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by
estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-
step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to
determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax
position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount
of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest
amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for
income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered
appropriate as well as the related net interest and penalties.

F-13

Net Income (Loss) Per Share

The Company follows the two-class method when computing net income (loss) per share during periods before
the IPO when the Company had issued shares that met the definition of participating securities. The two-class
method is used to determine net income (loss) per share for each class of common and participating securities
according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class
method requires income available to common stockholders for the period to be allocated between common and
participating securities based upon their respective rights to receive dividends as if all income for the period had
been distributed.

The Company’s redeemable convertible preferred shares and convertible preferred shares contractually entitled
the holders of such shares to participate in dividends, but did not contractually require the holders of such shares
to participate in losses of the Company. Accordingly, in periods in which the Company had participating
securities and reported a net loss or a net loss attributable to common stockholders resulting from preferred stock
dividends or accretion, net losses were not allocated to participating securities.

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income
(loss) attributable to common stockholders by the weighted average number of shares of common stock
outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by
adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the
potential impact of dilutive securities, including outstanding stock options and outstanding warrants. Diluted net
income (loss) per share attributable to common stockholders is computed by dividing the diluted net income
(loss) attributable to common stockholders by the weighted average number of common shares outstanding for
the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options
and outstanding warrants. For periods in which the Company has reported net losses, diluted net loss per share
attributable to common stockholders is the same as basic net loss per share attributable to common stockholders,
since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss
per share attributable to common stockholders is the same as basic net loss per share attributable to common
stockholders for the year ended September 30, 2013.

Segment Data

The Company manages its operations as a single segment for the purposes of assessing performance and making
operating decisions. The Company is a biotechnology company focused on discovering and developing small
molecule drugs in the infectious disease field. Revenue is generated exclusively from transactions occurring in
the United States, and all assets are held in the United States.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) as well as other changes in stockholders’ equity (deficit)
that result from transactions and economic events other than those with stockholders. The Company’s only
element of other comprehensive income (loss) is unrealized gains and losses on available-for-sale marketable
securities.

Recently Issued and Adopted Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2011-04, Fair Value
Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.
GAAP and IFRSs (“ASU 2011-04”). This accounting standard clarifies the application of certain existing fair
value measurement guidance and expands the disclosures for fair value measurements that are estimated using
significant unobservable (Level 3) inputs. This ASU is effective on a prospective basis for annual and interim
reporting periods beginning on or after December 15, 2011. The Company’s adoption of this standard on
January 1, 2012 did not have a material effect on its financial position, results of operations or cash flows.

F-14

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of
Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). This newly issued
accounting standard requires an entity to provide information about the amounts reclassified out of accumulated
other comprehensive income by component. In addition, an entity is required to present, either on the face of the
statement where net income is presented or in the notes, significant amounts reclassified out of accumulated
other comprehensive income by the respective line items of net income but only if the amount reclassified is
required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other
amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is
required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about
those amounts. ASU 2013-02 is effective for fiscal years and interim periods within those years beginning after
December 15, 2012 and will become effective for the Company on October 1, 2013. The Company does not
believe the adoption of this standard will have an impact on the Company’s financial position, results of
operations or cash flows.

In July 2013, The FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
(“ASU 2013-11”). This newly issued accounting standard requires that an unrecognized tax benefit, or a portion
of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax
asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To
the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the
reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would
result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the
entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax
benefit should be presented in the financial statements as a liability and should not be combined with deferred tax
assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and
deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position
at the reporting date. For example, an entity should not evaluate whether the deferred tax asset expires before the
statute of limitations on the tax position or whether the deferred tax asset may be used prior to the unrecognized
tax benefit being settled. ASU 2013-11 is effective for fiscal years and interim periods within those years
beginning after December 15, 2013 and will become effective for the Company on October 1, 2014. The
Company does not believe the adoption of this standard will have an impact on its financial position, results of
operations or cash flows.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that
do not require adoption until a future date are not expected to have a material impact on the Company’s financial
statements upon adoption.

F-15

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities that were subject to
fair value measurement on a recurring basis as of September 30, 2013 and 2012 and indicate the fair value
hierarchy of the valuation inputs utilized to determine such fair value:

Assets:
Cash equivalents
U.S. Treasury notes
Commercial paper
Corporate bonds
U.S. Agency bonds
Certificate of deposit

Liabilities:
Warrant liability

Assets:
Cash equivalents
U.S. Treasury notes
Commercial paper
Corporate bonds

Liabilities:
Warrant liability

Fair Value Measurements as of September 30, 2013 Using:

Level 1

Level 2

Level 3

Total

$ 7,517
1,005
—
—
—
—

$ 8,522

$ —
—
10,596
84,755
3,518
3,450

$102,319

$ —
—
—
—
—
—

$ —

7,517
1,005
10,596
84,755
3,518
3,450

$110,841

$ —

1,620

Fair Value Measurements as of September 30, 2012 Using:

Level 1

Level 2

Level 3

Total

$ 6,471
1,015
—
—

$ 7,486

$ —
—
8,143
25,749

$ 33,892

$ —
—
—
—

$ —

6,471
1,015
8,143
25,749

$ 41,378

$ —

2,001

During the years ended September 30, 2013, 2012 and 2011, there were no transfers between Level 1, Level 2
and Level 3.

Cash equivalents at September 30, 2013 and 2012 consist of money market funds.

As of September 30, 2013, the warrant liability consists solely of the warrants for the purchase of Series 1
nonconvertible preferred stock. As of September 30, 2013, the Company utilized a probability weighted
valuation model which takes into consideration various outcomes that may require the Company to transfer
assets upon exercise. The fair value of these outstanding warrants to purchase our Series 1 nonconvertible
preferred stock as recorded in the balance sheet was $1,620 and $1,981 at September 30, 2013 and 2012,
respectively. The Series E warrants expired during the year ended September 30, 2013.

F-16

The recurring Level 3 fair value measurements of the Company’s warrant liability using probability-weighted
discounted cash flow include the following significant unobservable inputs:

Warrant Liability

Probabilities of payout

Unobservable Input

Range
(Weighted
Average)

25% - 90%

Periods in which payout is expected to occur

2014 - 2018

Discount rate

4.25%

The fair value of warrants for the purchase of Series E redeemable convertible preferred stock (see Note 12) was
$20, as of September 30, 2012. These warrants expired unexercised in fiscal 2013.

The following table provides a rollforward of the aggregate fair values of the Company’s warrants for the
purchase of Series E preferred stock and Series 1 nonconvertible preferred stock for which fair value is
determined by Level 3 inputs:

Balance, September 30, 2010

Warrants issued
Increase in fair value
Decrease in fair value

Balance, September 30, 2011

Warrants expired
Increase in fair value
Decrease in fair value

Balance, September 30, 2012

Warrants expired
Decrease in fair value

Balance, September 30, 2013

26
1,280
705
(18)

1,993
(8)
19
(3)

2,001
(20)
(361)

$1,620

4. Marketable Securities

As of September 30, 2013 and 2012, the fair value of available-for-sale marketable securities by type of security
was as follows:

Commercial paper
Corporate bonds
U.S. Agency bonds
Certificate of deposit
U.S. Treasury notes

Commercial paper
Corporate bonds
U.S. Treasury notes

September 30, 2013

Amortized Cost

Gross Unrealized
Gains

Gross Unrealized
Losses

$ 10,596
84,757
3,519
3,450
1,004

$103,326

$—
23

—
—
1

$ 24

$—

(25)
(1)

—
—

$ (26)

September 30, 2012

Amortized Cost

Gross Unrealized
Gains

Gross Unrealized
Losses

$—

9
2

$ 11

$—

(1)

—

$ (1)

8,143
25,741
1,013

$ 34,897

F-17

Fair Value

$ 10,596
84,755
3,518
3,450
1,005

$103,324

Fair Value

8,143
25,749
1,015

$ 34,907

At September 30, 2013, marketable securities consisted of investments that mature within one year, with the
exception of certain corporate bonds, which have maturities within two years and an aggregate fair value of
$10,703. At September 30, 2012, marketable securities consisted of investments that mature within one year,
with the exception of one U.S. Treasury note and one corporate bond, which have maturities within two years
and an aggregate fair value of $1,656.

5. Property and Equipment

Property and equipment consisted of the following as of September 30, 2013 and 2012:

Laboratory and office equipment
Leasehold improvements
Purchased software
Computer equipment
Furniture

Less: Accumulated depreciation and amortization

September 30,

2013

2012

$ 4,395
272
438
90
263

$ 4,142
268
402
76
259

5,458
(4,337)

5,147
(4,536)

$ 1,121

611

Depreciation and amortization expense was $221, $172 and $499 for the years ended September 30, 2013, 2012
and 2011, respectively. During the years ended September 30, 2013, 2012 and 2011, assets with a cost of $420,
$273 and $3,810, respectively, were sold or disposed of, resulting in a gain of $100, $63 and $7, respectively.

6. Accrued Expenses and Other Long-Term Liabilities

Accrued expenses (current) and other long-term liabilities consisted of the following as of September 30, 2013
and 2012:

September 30,

2013

2012

$1,041
989
378
240
387

$1,305
1,330
718
222
291

$3,035

$3,866

$ 127
184
48

75
423
—

$ 359

$ 498

Accrued expenses:
Accrued payroll and related expenses
Accrued vendor manufacturing
Accrued professional fees
Accrued third-party license fee
Accrued other

Other long-term liabilities:
Accrued rent expense
Present value of accrued third-party license fee
Asset retirement obligation

F-18

7. Convertible Notes

2011 Bridge Financing

In October 2010, the Company entered into a convertible note and warrant purchase agreement with existing
investors to sell, in one or more closings, term notes in the aggregate principal amount of up to $6,500. The term
notes had an interest rate of 5% per annum, with principal and interest payable at the stated maturity date of
October 4, 2011 or earlier if put to the Company by the noteholders or if called by the Company. The noteholders
could put the term notes to the Company for early repayment upon receipt by the Company of the next milestone
payment under the Company’s collaborative development and license agreement with Abbott Laboratories
(subsequently AbbVie, as explained in Note 8 below) or upon a merger, sale or liquidity event as specified by the
note agreement. The Company could call the term notes for early repayment at any time. If called by the
Company prior to maturity, repaid at maturity, or put by the noteholders upon receipt by the Company of the
milestone payment, the term notes required payment of a prepayment premium equal to 51.8% of the principal
amount of the notes in addition to the principal and interest payable. If put by the noteholders due to a liquidity
event, the term notes were not subject to the premium of 51.8% but were to be repaid at the following multiples:

•

two times the principal amount if the liquidity event occurred on or before March 31, 2011, and

three times the principal amount if the liquidity event occurred after March 31, 2011.

During the first closing of the term notes in October and November 2010, the Company borrowed a total of
$2,000. The remaining balance of $4,500 under the agreement was not drawn down.

The call and put options within the notes agreement constituted an embedded derivative, which was required to
be separately recognized and measured at fair value, resulting in the Company recognizing a debt discount and
derivative liability of $670 at the date of issuance of the notes.

In addition, each purchaser of a note received warrants to purchase shares of Series 1 nonconvertible preferred
stock (the “Nonconvertible Preferred”) at the rate of one warrant for each dollar of the original purchase amount
of the note. The warrants have an exercise price of $0.01 per share. At issuance, the number of shares issuable
upon exercise of the warrants was not yet fixed. The number of shares for which the warrants could be
exercisable was (i) one share for each dollar of the original principal amount of the Note, plus (ii) if the milestone
payment was not received on or before March 31, 2011, an additional share for each dollar of the original
principal amount of the notes. Additionally, if a liquidation event occurred, thereby requiring repayment of the
term notes, these warrants would automatically expire and would therefore have no value. At the date of
issuance, the warrants were valued using the Black-Scholes option-pricing model for each of the two scenarios
described above. A decision tree was used to estimate the probability of how many shares the warrants would
ultimately be exercised into or if the warrants would have no value under the third scenario. This resulted in a
total fair value of $1,280 at date of issuance. Upon repayment of the notes in December 2010, the number of
shares issuable upon exercise of the warrants became fixed at 1,999,989 Nonconvertible Preferred shares.
Additionally, the possibility that the notes would not be redeemed and that the warrants would therefore have no
value was eliminated. Accordingly, at the time of the note repayment in December 2010, the Company revalued
the warrants, which resulted in a total fair value of $1,983. The change in the fair value of the warrants was
recorded within other income (expense) in the statement of operations. Additionally, as these warrants are
financial instruments that may require a future transfer of assets, they are classified as liabilities on the balance
sheet. Upon issuance of the notes and warrants, the fair value of the warrants was recorded as a warrant liability
and a corresponding debt discount was recognized. The warrants are remeasured at each balance sheet date (see
Note 3), and the change in fair value is recorded within other income (expense).

Following the receipt by the Company of a $40,000 milestone payment from Abbott Laboratories in December
2010 (see Note 8), the Company repaid the $2,000 in principal plus the accrued interest of $20 and the applicable
premium of $1,036 (51.8% of the principal amount). Upon repayment of the notes, the unamortized debt discount
derived from both the embedded derivatives and the warrants was accreted as a charge to interest expense and the

F-19

derivative liability (recorded at fair value) was removed, resulting in a gain recorded in the statement of
operations. The warrants, however, remained outstanding as of September 30, 2013. The note agreement was
canceled upon the December 2010 repayment and no further warrants were issued under the agreement.

In connection with this financing, the Company incurred issuance costs of $41 during the year ended
September 30, 2011. These costs were initially recorded as deferred financing costs in other assets on the balance
sheet. In December 2010, upon repayment of the notes, the total deferred financing costs of $150 were charged to
interest expense.

8. Collaboration Agreements

AbbVie Collaboration

On November 27, 2006, the Company entered into a Collaborative Development and License Agreement with
Abbott Laboratories (“Abbott”) to identify, develop and commercialize HCV NS3 and NS3/4A protease inhibitor
compounds, including ABT-450. On January 1, 2013, Abbott announced that it had completed the spin-off of its
research-based pharmaceuticals business into a new, independent biopharmaceutical company named AbbVie
Inc. (“AbbVie”). AbbVie was formed to hold Abbott’s research-based pharmaceuticals business and, as a result
of the spin-off, became an independent public company. In connection with the spin-off, Abbott assigned to
AbbVie the above Collaborative Development and License Agreement (“AbbVie Agreement”). Under the terms
of the AbbVie Agreement, as amended, through September 30, 2009, AbbVie paid $48,300 to the Company for
upfront license payments and FTE reimbursements to fund research activities. The Company is also eligible to
receive milestone payments for the successful development by AbbVie of one or more HCV compounds as well
as tiered royalties per product ranging from the low double digits up to twenty percent, or up to the high teens on
a blended basis, on net sales by AbbVie allocable to the collaboration’s protease inhibitors.

Also on November 27, 2006, the Company entered into a Series G preferred stock purchase agreement with
AbbVie. In connection with that agreement, the Company sold to AbbVie 4,620,764 shares of Series G-1
redeemable convertible preferred stock at a price of $2.70518 per share, resulting in gross proceeds of $12,500.
Due to the simultaneous issuance of Series G-2 redeemable convertible preferred stock to a third party unrelated
to AbbVie which had similar terms to Series G-1 but a lower price per share, the Company determined that the
Series G-1 redeemable convertible preferred stock sold to AbbVie was issued at a premium of $1,617. The
Company aggregated this premium with the upfront payments received and recorded it as deferred revenue to be
recognized over the period of performance under the AbbVie Agreement.

In January 2009, the Company and AbbVie amended the AbbVie Agreement to include an option for AbbVie to
opt into an evaluation period that would commence upon the termination or expiration of the research program
term and continue for a period of six months. During the evaluation period, AbbVie would have the right to
analyze certain compounds for the purpose of identifying any suitable for further development. In December
2009, the Company and AbbVie further amended the AbbVie Agreement to extend funding of the research
activities for another year through December 2010. In December 2010, AbbVie opted into the evaluation period
and additional research activities for the six-month evaluation period ended June 15, 2011. In connection with
these amendments, AbbVie paid the Company an additional $4,150 for the research services performed from
December 15, 2009 through June 15, 2011.

On December 17, 2010, the Company received a milestone payment of $40,000 for the successful completion of
AbbVie’s Phase 2a clinical study. During the year ended September 30, 2013, the Company received an
additional $15,000 milestone payment under the AbbVie Agreement as a result of AbbVie’s initiation of dosing
in a Phase 3 clinical trial of a regimen that included ABT-450. Through September 30, 2013, the Company had
received upfront license payments, research funding, and milestone payments totaling $107,450 under the
AbbVie Agreement.

F-20

As of September 30, 2013, the Company is eligible to receive additional future milestone payments totaling up to
$40,000 upon AbbVie’s achievement of regulatory filing milestones for the first protease inhibitor product
resulting from its collaboration and additional milestone payments totaling up to $155,000 upon AbbVie’s
achievement of commercial regulatory approval milestones in selected world markets. The Company is also
eligible to receive additional milestone payments totaling up to $80,000 upon AbbVie’s achievement of similar
commercial regulatory approval milestones for each additional product containing a protease inhibitor.

The Company determined that the deliverables under the AbbVie Agreement included (i) the non-exclusive,
royalty-free, worldwide research license and the exclusive, royalty-bearing development and commercialization
license, (ii) the research services, and (iii) a commitment to participate on a steering committee, all of which
were to be delivered over a three-year period. The Company concluded that the license did not have standalone
value as it was dependent, in part, upon the Company’s continuing involvement in the HCV protease inhibitor
research and its involvement in the joint steering committee. Additionally, the undelivered items, including the
Company’s participation in the joint steering committee, which was considered participatory due to its decision
making responsibilities, and the research services, did not have VSOE or VOE of fair value. Therefore, the
license, the research services, and the joint steering committee participation were treated as a single unit of
accounting. Accordingly, all amounts received were deferred, and revenue was recognized using the proportional
performance model over the period during which the Company performed research services in connection with
the AbbVie Agreement, as amended.

Under this model, the revenue recognized was limited to the lesser of the cumulative amount of payments received
or the cumulative amount of revenue earned, as determined using the proportional performance model, as of each
reporting period. At each reporting period, the Company updated its estimates of effort remaining to complete its
obligations under the AbbVie Agreement, the expected term over which the obligations would be performed, and
the total expected revenue based on all known information. Based on the obligations and responsibilities of the joint
steering committee, the Company determined that the obligation to participate in the joint steering committee was
participatory only through the research and evaluation period, which ended June 15, 2011. Subsequent to the
research and evaluation period, all decisions related to the development, commercialization and marketing are to be
made by AbbVie. The Company has the right to continue to attend the joint steering committee meetings to monitor
the development and marketing plans; however, the Company has no decision making rights. As such, the joint
steering committee commitment became protective in nature as of June 16, 2011.

During fiscal 2010 and 2011, revenue related to the AbbVie Agreement was recognized in the amounts of $6,518
and $41,882, respectively. In fiscal 2011, the Company completed all remaining obligations under the agreement.
As a result no revenue was recognized related to this agreement during the year ended September 30, 2012. Since
all obligations under the AbbVie Agreement were concluded by the end of fiscal 2011, any future milestone
payments received will be recognized as revenue when each milestone is achieved by AbbVie. During fiscal
2013 the Company earned and recognized as revenue a $15,000 milestone payment based on AbbVie’s initiation
of dosing in a Phase 3 clinical trial that included ABT-450.

The Company has the option, but not the obligation, to co-develop and share in the profit of any product in the
United States that is developed as a result of the AbbVie Agreement. This option for the first compound (ABT-
450) expired in fiscal 2011. The Company has no further obligations in regard to the AbbVie Agreement and will
evaluate future options as they arise.

Royalties owed to the Company under the agreement can be reduced by AbbVie in certain circumstances,
including (i) if AbbVie exercises its right to license or otherwise acquire rights to intellectual property controlled
by a third party where a product could not be legally developed or commercialized in a country without the third-
party intellectual property right, (ii) where a product developed under the collaboration agreement is sold in a
country and not covered by a valid patent claim in such country, and (iii) where sales of a generic product are
equal to at least a specified percentage of AbbVie’s market share of a product in a country.

F-21

Subject to certain exceptions, a party’s rights and obligations under the agreement continues until (i) such time as
AbbVie is no longer developing a product candidate or (ii) if, as of the time AbbVie is no longer developing any
product candidates, AbbVie is commercializing any other protease inhibitor product, such time as all royalty
terms for all covered products and all co-development terms for all co-developed products have ended.
Accordingly, the final expiration date of the agreement is currently indeterminable.

If the Company terminates the agreement for cause or AbbVie terminates without cause, any licenses and other
rights granted to AbbVie will terminate and AbbVie will be deemed to have granted the Company (i) a non-
exclusive, perpetual, fully paid, worldwide, royalty-free license, with the right to sublicense, under AbbVie’s
intellectual property used in any product candidate, and (ii) an exclusive (even as to AbbVie), perpetual, fully
paid, worldwide, royalty-free license, with the right to sublicense, under AbbVie’s interest in any joint
intellectual property rights to develop product candidates resulting from covered compounds and to
commercialize any products derived from such compounds. Upon the Company’s request, AbbVie will also
transfer to the Company all right, title and interest in any related product trademarks, regulatory filings and
clinical trials.

If AbbVie terminates the agreement for the Company’s uncured breach, the milestone and royalty payments
payable by AbbVie may be reduced, the licenses granted to AbbVie will remain in place, the Company will be
deemed to have granted AbbVie an exclusive license under the Company’s interest in joint intellectual property,
AbbVie will continue to have the right to commercialize any covered products, and all rights and licenses granted
to the Company by AbbVie will terminate.

Novartis Collaboration

On February 16, 2012, the Company entered into a license and collaboration agreement with Novartis (the
“Novartis Agreement”) for the development, manufacture and commercialization of its lead development
candidate, EDP-239, from its NS5A HCV inhibitor program. Under the terms of the Novartis Agreement,
Novartis agreed to pay a nonrefundable upfront fee to the Company and reimbursement of manufacturing and
quality assurance expenses related to EDP-239 totaling $34,442. In November 2012, a clinical milestone
payment of $11,000 was earned and recognized as revenue upon Novartis’ initiation of dosing in the first Phase 1
clinical trial involving EDP-239. Under the Novartis Agreement, the Company is eligible to receive additional
milestone payments totaling up to $395,000 upon Novartis’ initiation of clinical trials, achievement of regulatory
approvals, and/or net sales of products containing the Company’s NS5A inhibitors, including a milestone
payment of $15,000 that will be due upon Novartis’ initiation of the first Phase 2 clinical trial using a
combination containing an NS5A inhibitor from the collaboration. The Company is also eligible to receive tiered
royalties ranging on a blended basis from the low double digits up to the high teens on net product sales by
Novartis allocable to the collaboration’s NS5A inhibitors. In addition, Novartis agreed to fund research activities
for one year commencing February 2012, up to a total of $1,800. In March 2013, the Novartis Agreement was
amended to extend research funding for an additional six months at the same reimbursement rate.

The Company determined that the deliverables under the Novartis Agreement include (i) the exclusive, royalty-
bearing, sublicensable license to EDP-239 and (ii) the research services. The Company concluded that the
EDP-239 license had standalone value to Novartis and was separable from the research services as the license is

F-22

sublicensable, there are no restrictions as to Novartis’ use of the license and Novartis has the requisite scientific
expertise in the HCV NS5A field. The Company also concluded that its participation on the joint steering
committee, as provided by the agreement, is protective in nature as the Company has no decision making
authority, there are no penalties or recourse if the Company chooses not to participate, and the purpose of the
steering committee is to keep the Company apprised as to the status of the development and commercialization
efforts. Therefore, no arrangement consideration was allocated to the joint steering committee participation. The
Company was not able to establish VSOE or TPE for either the license or the research services and instead
allocated the arrangement consideration between the license and research services based on their relative selling
prices using BESP. The Company developed its estimate of BESP of the license using a discounted cash flow
analysis, taking into consideration assumptions including the development and commercialization timeline,
discount rate, probability of success, and probable treatment combination and associated peak sales figures that
generate royalty amounts. The funding rate for the research services is consistent with the rate received in the
Company’s prior collaboration arrangement with AbbVie and is consistent with its fully burdened cost of service.
Therefore, the Company’s determination of BESP for the research services is consistent with the reimbursement
rate stated in the contract. These assumptions involve judgment and inherent uncertainty; however, significant
changes in key assumptions used to determine the BESP would not have a significant effect on the total amount
of revenue recognized.

The Company received an upfront cash payment of $34,442 in March 2012 related to the Novartis Agreement.
The Company recognized the entire upfront cash receipt as revenue because the allocated selling price of the
license deliverable exceeded the upfront noncontingent cash payments received. During the year ended
September 30, 2012, the Company recognized total revenue of $35,567 related to the delivery of the license and
the performance of the research services.

During the year ended September 30, 2013, the Company recognized total revenue of $12,675 under the Novartis
Agreement, of which $10,894 was attributable to license fees and $1,781 was attributable to the performance of
research services.

Subject to certain exceptions, on a country-by-country and product-by-product basis, a party’s rights and
obligations under the agreement continue until the later of (i) the expiration of the last to expire patent rights of a
covered product in the applicable country or (ii) ten years from the first commercial sale of a covered product in
the applicable country. As a result, the final expiration date of the Novartis license is indeterminable at this time.
Upon expiration of the agreement with respect to a particular product and country, the licenses granted to
Novartis in the agreement with respect to such product and country will remain in effect and convert to a
nonexclusive, perpetual, unrestricted, fully paid, royalty-free, worldwide license.

The Company may terminate the agreement (i) in the event of a material breach by Novartis, subject to prior
notice and the opportunity to cure, (ii) in the event Novartis fails to use commercially reasonable efforts to
develop and commercialize covered products in its territory, or (iii) in the event Novartis is subject to an
insolvency event. Novartis may terminate the agreement (i) in the event of a material breach by the Company,
subject to prior notice and the opportunity to cure, (ii) in the event the Company is subject to an insolvency
event, or (iii) for any reason upon 120 days prior written notice. In the case of a termination for cause by the
Company or a termination without cause by Novartis, any licenses and other rights granted by either party to the
other will terminate and revert back to the granting party and the Company will regain control of the prosecution
of the patents relating to the Company’s intellectual property. If such termination occurs prior to the second
anniversary of the end of the research term, the Company obtains a worldwide, exclusive, fully paid, perpetual
license, with the right to sublicense, under all collaboration intellectual property owned in whole or in part by
Novartis, to research, develop and commercialize compounds and products contemplated by the collaboration. If
such termination occurs after the second anniversary of the end of the research term, then Novartis agrees to
negotiate with the Company to grant it a worldwide, exclusive, field-limited, royalty-bearing license, with right
to sublicense, under all collaboration intellectual property owned in whole or in part by Novartis.

F-23

NIAID Contract

On September 30, 2011, the Company entered into a contract with the National Institute of Allergy and
Infectious Diseases (“NIAID”), a division of the National Institutes of Health (“NIH”), which contract could
provide up to $42,700 in development funding to the Company over a five-year period. The contract will fund
the preclinical and clinical development of a new class of bridged bicyclic antibiotics known as Bicyclolides to
be used as medical countermeasures against multiple biodefense Category A and B bacteria.

The contract has an initial term of 30 months ending on March 30, 2014. NIAID has the option to extend the
contract up to six times. If each extension option is exercised, the contract would be extended until
September 30, 2016. The initial award under the initial term was $14,300, with the possibility of up to a total of
$42,700 if each option period is exercised by NIAID.

In August 2013 NIAID exercised the first two options under this agreement which obligate it to provide an
additional $9,200 in funding to the Company for preclinical and early clinical development of EDP-788, bringing
total funding paid or committed to date by NIAID to approximately $23,500 through February 2015.

The Company recognizes revenue under this agreement as development services are performed in accordance
with the funding agreement. During the year ended September 30, 2012, $6,139 of revenue was recognized under
this agreement, of which $1,049 was invoiced but unpaid and included in accounts receivable and $1,668 was
unpaid and included in unbilled receivables on the Company’s balance sheet as of September 30, 2012. During
the year ended September 30, 2013, the Company recognized revenue of $4,378, under this agreement, of which
$258 was invoiced but unpaid and included in accounts receivable and $784 was unpaid and included in unbilled
receivables at September 30, 2013.

NIAID may terminate performance of work under this contract if it determines that a termination is in the
government’s interest or if the Company defaults in performing the contract. After termination, the Company
would submit a final termination settlement proposal in order to settle all outstanding liabilities, including those
arising from the termination of subcontracts, the cost of which would be reimbursable in whole or in part, under
this contract, contingent on approval by NIAID. If the Company and NIAID fail to agree in whole or in part on
the amount of costs to be paid because of the termination of work, NIAID shall determine, on the basis of
information available, the amount to be repaid.

9. Stockholders’ Equity

On March 1, 2013, the Company effected an increase in the number of authorized shares of its common stock
from 70,000,000 to 100,000,000 shares. On March 1, 2013, the Company effected a 1-for-4.31 reverse stock split
of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion
ratio for each series of redeemable convertible preferred stock and convertible preferred stock. Accordingly, all
share and per share amounts for all periods presented in these financial statements and notes thereto have been
adjusted retroactively, where applicable, to reflect the reverse stock split and adjustment of the preferred share
conversion ratios.

On March 26, 2013 the Company completed an initial public offering of its common stock, which resulted in the
sale of 4,600,000 shares. The Company received net proceeds from the IPO of $59,892 based upon the price of
$14.00 per share and after deducting underwriting discounts and commissions paid by the Company.

Upon the closing of the initial public offering, all outstanding shares of the Company’s redeemable convertible
preferred stock and convertible preferred stock were converted into 11,656,875 shares of common stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s
stockholders. Common stockholders are entitled to receive such dividends as may be declared by the board of
directors, if any.

F-24

During the year ended September 30, 2011, the Company reacquired 208,816 shares of restricted common stock
that were forfeited by former employees. The Company recorded these shares as treasury stock at their par value.

10. Preferred Stock

Redeemable convertible preferred stock consisted of the following as of September 30, 2012:

Preferred
Shares
Authorized

Preferred
Shares
Issued and
Outstanding

Liquidation
Preference

Carrying
Value

Series C redeemable convertible preferred stock
Series D redeemable convertible preferred stock
Series E redeemable convertible preferred stock
Series F redeemable convertible preferred stock
Series G-1 redeemable convertible preferred stock
Series G-2 redeemable convertible preferred stock

2,543,603 $
2,543,603
5,968,334
5,968,334
16,132,546 14,368,037
6,894,966
6,894,966
4,620,764
4,729,543
8,719,639
9,152,296

8,551 $

37,922
66,136
15,000
12,500
18,970

8,551
37,922
66,136
15,000
12,376
18,970

Common
Stock Issuable
Upon
Conversion

590,159
1,853,953
4,386,373
1,599,760
1,072,103
2,023,110

45,421,288 43,115,343 $159,079 $158,955

11,525,458

Upon the closing of the initial public offering, all outstanding shares of the Company’s redeemable convertible
preferred stock were converted into 11,525,458 shares of common stock.

Prior to the conversion, the rights and preferences of the Company’s outstanding redeemable convertible
preferred stock were as follows:

Voting Rights

Holders of all redeemable convertible preferred stock had the right to vote the number of shares equal to the
number of shares of common stock into which such redeemable convertible preferred stock could be converted
into on the date for determination of stockholders entitled to vote at a meeting or on the date of any written
consent.

Dividends

Holders of the Series C redeemable convertible preferred stock, Series D redeemable convertible preferred stock
and Series E redeemable convertible preferred stock were entitled to receive, out of funds legally available,
cumulative dividends at an annual rate of 7%, 9% and 9%, respectively, when and if declared by the board of
directors. Holders of the Series F redeemable convertible preferred stock and Series G-1 and G-2 redeemable
convertible preferred stock were entitled to receive, out of funds legally available, noncumulative dividends at an
annual rate of 7%, if declared by the board of directors. No dividends were declared or paid through conversion
date.

The Company recorded cumulative dividends and accretion to redemption value through charges to stockholders’
deficit of $2,526 and $5,367 in fiscal 2013 and 2012, respectively, in connection with these dividend and
redemption rights.

Liquidation Preference

In the event of any liquidation, dissolution or winding up of the Company, inclusive of a sale of the Company, a
sale of the capital stock representing a majority of the voting power or a merger or consolidation of the Company
into or with another corporation in which the existing Company held less than 80% of the voting power of the
surviving or resulting corporation, the Series E, Series F and Series G-1 and G-2 redeemable convertible

F-25

preferred stockholders were entitled to receive, in preference to all other stockholders, except for holders of
Series 1 Nonconvertible Preferred stock, and to the extent available, an amount equal to the original offering
price per share ($2.51, $2.1755, $2.70518 and $2.1755, respectively, adjusted for any stock dividends, stock
splits or reclassifications) plus all dividends declared but unpaid.

Holders of Series E redeemable convertible preferred stock were to receive with their preference all cumulative
dividends, whether or not declared. In the event that proceeds were not sufficient to permit payment in full to
these holders, the proceeds were to be ratably distributed among Series E, F, G-1 and G-2 holders in proportion
to the full preferential amount each such holder was otherwise entitled to receive.

After the Series E, Series F and Series G-1 and G-2 redeemable convertible preferred stockholders were paid, and
to the extent available, the Series D redeemable convertible preferred stockholders were entitled to receive, in
preference to all other stockholders, an amount equal to the original offering price per share ($3.00, adjusted for
any stock dividends, stock splits or reclassifications) plus all cumulative Series D dividends, whether or not
declared.

After the Series D redeemable convertible preferred stockholders were paid, and to the extent available, the
Series C redeemable convertible preferred stockholders were entitled to receive an amount equal to the original
offering price per share ($1.72, adjusted for any stock dividends, stock splits or reclassifications) plus all
cumulative Series C dividends, whether or not declared.

After payments were made in full to the Series 1 Nonconvertible Preferred stockholders, if any, to the holders of
the Series G-1, Series G-2, Series F, Series E, Series D and Series C redeemable convertible preferred stock and
to the holders of the Series B and Series A convertible preferred stock, to the extent available, holders of the
common stock and holders of the Series C, Series D and Series E redeemable convertible preferred stock were to
receive the remaining amounts available for distribution ratably in proportion to the number of common shares
held by them or issuable to them upon conversion of their preferred stock into common stock. The distributions
were subject to an overall distribution limit of two times the original purchase price per share of the Series C,
Series D and Series E redeemable convertible preferred stock.

Conversion

Each share of redeemable convertible preferred stock was convertible into common stock at the option of the
stockholder at any time after the date of issuance. Each share of the preferred stock automatically converted into
shares of common stock at the applicable Series C, Series D, Series E, Series F and Series G-1 and G-2 redeemable
convertible preferred stock conversion ratio upon the closing of the Company’s initial public offering on March 26,
2013. The conversion ratio of the Series C, Series D, Series E, Series F and Series G-1 and G-2 redeemable
convertible preferred stock as defined was $1.72, $3.00, $2.51, $2.1755, $2.70518 and $2.1755, respectively. The
conversion prices of Series C, Series D, Series E, Series F, Series G-1 and G-2 redeemable convertible preferred
stock were $7.41320, $9.65772, $8.22176, $9.37641, $11.65933 and $9.37641, respectively. As a result, all
outstanding shares of Series D redeemable convertible preferred stock converted into common stock on a 0.31063-
for-1 basis, all outstanding shares of Series E redeemable convertible preferred stock converted into common stock
on a 0.30529-for-1 basis, and all outstanding shares of Series C, Series F, Series G-1 and G-2 redeemable
convertible preferred stock converted into common stock on a 0.23202-for-1 basis.

Redemption Rights

At the written election of the majority of the holders of the Series C, Series D, Series E, Series F or Series G-1
and G-2 redeemable convertible preferred stock, the shares of Series C, Series D, Series E, Series F and Series
G-1 and G-2 redeemable convertible preferred stock outstanding prior to conversion were redeemable in
installments commencing December 31, 2013. The carrying values of the Series C, Series D, Series E, Series F
and Series G-1 and G-2 redeemable convertible preferred stock were being accreted to their redemption values
through their respective redemption dates.

F-26

Reissuance

Shares of any Series C, Series D, Series E, Series F or Series G-1 or G-2 redeemable convertible preferred stock
that were redeemed or converted were retired or canceled and are not reissuable by the Company.

Convertible preferred stock, which was not redeemable, consisted of the following as of September 30, 2012:

Series A convertible preferred stock
Series B convertible preferred stock

Preferred
Shares
Authorized

379,450
187,000

566,450

Preferred
Shares
Issued and
Outstanding

379,450
187,000

566,450

Liquidation
Preference

Carrying
Value

$140
187

$327

$140
187

$327

Common
Stock Issuable
Upon
Conversion

88,033
43,384

131,417

Upon the closing of the initial public offering, all outstanding shares of the Company’s convertible preferred
stock were converted into 131,417 shares of common stock.

Prior to the conversion, the holders of the Convertible Preferred Stock had the following rights and preferences:

Voting Rights

Holders of all convertible preferred stock had the right to vote the number of shares equal to the number of shares
of common stock into which such preferred shares could be converted into on the date for determination of
stockholders entitled to vote at a meeting or on the date of any written consent.

Dividends

If dividends were declared and paid on the shares of Series A or Series B convertible preferred stock, the
Company was required to declare at the same time a dividend payable with respect to the Series C, Series D,
Series E, Series F, Series G-1 and G-2 redeemable convertible preferred stock equivalent to the dividend amount
they would receive if all convertible preferred shares were converted into common stock. The Company could
not pay dividends to the holders or the Series A and Series B convertible preferred stock until all cumulative
dividends accrued but unpaid on Series C, Series D, Series E, Series F, Series G-1 and G-2 redeemable
convertible preferred stock had been paid in full. Holders of the Series A and B convertible preferred stock were
not entitled to receive cumulative dividends.

Liquidation Preference

In the event of any liquidation, dissolution or winding up of the Company, inclusive of a “deemed liquidation”
(defined as a sale of the Company, a sale of the capital stock representing a majority of the voting power, or a
merger or consolidation of the Company into or with another corporation of the Company in which the existing
Company holds less than 80% of the voting power of the surviving or resulting corporation), after the holders of
the Series 1 nonconvertible preferred stock, if any, and redeemable preferred stock had been paid, and to the
extent available, holders of Series A and Series B convertible preferred stock were entitled to receive an amount
equal to the original offering price per share ($0.37 for Series A convertible preferred stock and $1.00 for Series
B convertible preferred stock, adjusted for any stock dividends, stock splits or reclassifications) plus all
dividends declared but unpaid.

Conversion

Each share of Convertible Preferred Stock was convertible into common stock at the option of the holder at any
time after the date of issuance. Each share of the convertible preferred stock automatically converted into shares

F-27

of common stock at the applicable conversion ratio upon the closing of the Company’s initial public offering on
March 26, 2013. All outstanding shares of Series A and Series B convertible preferred stock converted into
common stock on a 0.23202-for-1 basis.

Redemption Rights

There were no redemption rights afforded the Series A and Series B convertible preferred stock. The holders of
Series A and Series B convertible preferred stock had liquidation rights in the event of a deemed liquidation that,
in certain situations, were not solely within the control of the Company. Therefore, the Series A and Series B
convertible preferred stock was classified outside of stockholders’ deficit.

Reissuance

Shares of any Series A or Series B convertible preferred stock that were converted into common stock were
retired or canceled and are not reissuable by the Company.

Series 1 Nonconvertible Preferred Stock

The Company’s Certificate of Incorporation authorizes the issuance of up to 1,999,989 shares of Series 1
Nonconvertible Preferred Stock (the “Series 1 Nonconvertible Preferred”) at a par value of $0.01 per share. As of
September 30, 2013 and 2012, there were no shares of Series 1 Nonconvertible Preferred issued or outstanding.
Holders of Series 1 Nonconvertible Preferred stock are not entitled to receive dividends. In the event of any
liquidation, deemed liquidation, dissolution or winding up of the Company, the Series 1 Nonconvertible
Preferred stockholders are entitled to receive in preference to all other stockholders, an amount equal to $1.00 per
share, adjusted for any stock dividends, stock splits or reclassifications. Series 1 Nonconvertible Preferred
holders will not be entitled to vote unless required by the Company pursuant to the laws of the State of Delaware.
The Company may redeem the Series 1 Nonconvertible Preferred stock with the approval of the holders of a
majority of the outstanding shares of Series 1 Nonconvertible Preferred at a redemption price of $1.00 per share.
The Company must redeem the stock within 60 days of such election. Shares that are redeemed will be retired or
canceled and not reissued by the Company.

If all outstanding warrants to purchase the Series 1 Nonconvertible Preferred stock are exercised, the resulting
outstanding shares of Series 1 Nonconvertible Preferred stock will carry an aggregate $2,000 liquidation
preference that is superior to the common stock and any other classes of preferred stock then outstanding.

11. Common Stock Warrants

As of September 30, 2010, warrants to purchase 345,952 shares of common stock were outstanding. The value of
these warrants was classified as equity as these warrants were exercisable into common stock only and, as such,
would not require a transfer of assets. In October 2010, these warrants expired unexercised. As a result, as of
September 30, 2013 and 2012, no common stock warrants were outstanding.

12. Preferred Stock Warrants

Warrants to Purchase Series E Preferred Stock

Warrants for the purchase of Series E redeemable convertible preferred stock (“Series E preferred stock”) were
issued by the Company in fiscal 2002 and fiscal 2004 during various financings. As these warrants were financial
instruments that would require a transfer of assets because of the redemption feature at the option of the holders
of the Series E preferred stock, these warrants were classified as liabilities on the Company’s balance sheet at
September 30, 2012.

F-28

As of September 30, 2011, warrants for the purchase of 341,556 shares of Series E preferred stock were
outstanding. During the year ended September 30, 2012, warrants for the purchase of 329,056 shares expired. As
of September 30, 2012, warrants for the purchase of 12,500 shares of Series E preferred stock remained
outstanding. These warrants expired during the year ended September 30, 2013.

The Company is required to remeasure the fair value of these preferred stock warrants at each reporting date,
with any adjustments recorded as other income (expense). The warrants outstanding at each reporting date were
remeasured using the Black-Scholes option-pricing model, and the resulting change in fair value was recorded in
other income (expense) in the statement of operations. As a result, the Company recorded income of $18 for the
year ended September 30, 2011, and expense of $19 for the year ended September 30, 2012, related to the change
in fair value of the warrants. The Company also recorded income of $8 for the year ended September 30, 2012
related to the expiration of 329,056 warrants. As of September 30, 2012, the total fair value of the outstanding
Series E preferred stock warrants was $20. During the year ended September 30, 2013, the Company recorded
income of $20 related to the expiration of the Series E preferred stock warrants.

Warrants to Purchase Series 1 Preferred Stock

In October and November 2010, a total of 1,999,989 warrants to purchase Series 1 nonconvertible preferred stock
were issued. These warrants expire on October 4, 2017. As these warrants are free-standing financial instruments
that may require the Company to transfer assets upon exercise, these warrants are classified as liabilities. These
warrants had a fair value upon issuance of $1,280. The Company is required to remeasure the fair value of these
preferred stock warrants at each reporting date, with any adjustments recorded within the change in fair value of
warrant liability included in other income (expense) in the statement of operations. The warrants were
remeasured at each reporting period, resulting in net income of $361 and $3 for the years ended September 30,
2013 and 2012, respectively. As of September 30, 2013 and 2012, the total fair value of the Series 1
nonconvertible preferred stock warrants was $1,620 and $1,981, respectively.

The following table summarizes the Company’s warrant activity since October 1, 2010:

Weighted
Average
Exercise
Price

$8.40

Common
Stock
Exercisable

345,952
—

(345,952)

—

—
—
—
—

—

Weighted
Average
Exercise
Price

$2.51

Series E
Preferred
Stock
Exercisable

341,556
—
—
—

341,556
—

(329,056)

—

12,500
—
(12,500)
—

—

Series 1
Preferred
Stock
Exercisable

Weighted
Average
Exercise
Price

—

1,999,989
—
—

1,999,989
—
—
—

$0.01

1,999,989

$0.01

Outstanding, as of September 30, 2010

Granted
Expired
Exercised

Outstanding, as of September 30, 2011

Granted
Expired
Exercised

Outstanding, as of September 30, 2012

Granted
Expired
Exercised

Outstanding, as of September 30, 2013

13. Stock-Based Awards

In 2012 the Company’s Board adopted the 2012 Equity Incentive Plan (the “2012 Plan”), which was
subsequently approved by the stockholders and became effective immediately prior to the closing of the
Company’s initial public offering on March 26, 2013. The 2012 Plan permits the Company to sell or issue

F-29

common stock or restricted common stock, and to grant incentive stock options or nonqualified stock options for
the purchase of common stock, restricted stock units, stock appreciation rights or other cash incentive awards, to
employees, members of the board of directors and consultants of the Company. The total number of shares of
common stock that could be issued under the plan initially was 321,613 shares, plus additional shares from the
1995 Equity Incentive Plan that had not been issued or reserved for future issuance upon exercise of options. The
number of shares of common stock that may be issued under the 2012 Plan is also subject to increase on the first
day of each fiscal year by the lowest of (i) 3% of the Company’s outstanding shares of common stock as of that
date, (ii) 2,088,167 shares of common stock, or (iii) an amount determined by the board of directors.

The 2012 Plan replaces and is the successor to the 1995 Equity Incentive Plan (the “1995 Plan”). The 1995 Plan
provided for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock
options or nonqualified stock options for the purchase of common stock, to employees, members of the board of
directors and consultants of the Company. Sales, issuances or grants of shares entitle the holder to purchase
common stock from the Company, for a specified exercise price, during a period specified by the applicable
equity award agreement. The 1995 Plan is administered by the board of directors and exercise prices, vesting and
other restrictions are all determined at their discretion.

Options granted under the 1995 Plan to non-executive employees generally vest 25% per year and expire after
ten years; options granted to executive employees generally vest over one to four years; and options granted to
the board of directors vest over two to three years. The total number of shares of common stock that could be
issued under the 1995 Plan was 2,540,759 shares as of September 30, 2012. On January 17, 2013, the Company’s
stockholders approved an amendment to the 1995 Plan to increase the number of shares of common stock
reserved for issuance under the 1995 Plan to 2,772,777 shares. Upon the closing of the Company’s initial public
offering, all remaining shares reserved for issuance under the 1995 Plan were transferred to the 2012 Plan, of
which 346,038 shares remained available for future grant as of September 30, 2013, and no further awards will
be made under the 1995 Plan.

On January 3, 2013, the Company’s stockholders approved an Employee Stock Purchase Plan (“ESPP”). A total
of 185,614 shares of common stock are reserved for issuance under this plan, which became effective
immediately prior the closing of the Company’s initial public offering. As of September 30, 2013, the Company
had not commenced any offering under the ESPP and no shares have been issued.

The Company applies the fair value recognition provisions for all stock-based awards granted or modified. In the
case of service-based awards, the compensation cost is recorded over the requisite service period of the award on
the straight-line method based on the grant-date fair value. The requisite service period for service-based awards
is generally four years, with restrictions lapsing evenly over the period.

In March 2013, the Company granted to certain executives 167,052 options that vest upon the achievement of
certain performance-based targets. The fair value of these options at the grant date was $1,487. In April 2013, the
terms of the options were modified resulting in an immaterial change in the fair value of the options. Through
September 30, 2013, the Company recorded no compensation expense related to these options as none of the
performance-based targets was deemed to be probable of being achieved.

Stock Option Valuation

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing
model. Prior to March 2013 the Company had been a private company and lacked company-specific historical
and implied volatility information. Therefore, the Company estimated its expected stock volatility based on the
historical volatility of its publicly traded peer companies inclusive of the Company, commencing March 2013
and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its
own traded stock price. The expected term of the Company’s stock options has been determined utilizing the
“simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined

F-30

by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods
approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the
Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
The relevant data used to determine the value of the stock option grants is as follows, presented on a weighted
average basis:

Risk-free interest rate
Expected term (in years)
Expected volatility
Expected dividend yield

Year Ended September 30,

2013

2012

2011

1.05% 0.93% 2.73%
6.00
6.09

6.25

73%
0%

78%
0%

87%
0%

The Company recognizes compensation expense for only the portion of awards that are expected to vest. In
developing a forfeiture rate estimate, the Company has considered its historical experience to estimate pre-
vesting forfeitures for service-based awards. The impact of a forfeiture rate adjustment will be recognized in full
in the period of adjustment, and if the actual forfeiture rate is materially different from the Company’s estimate,
the Company may be required to record adjustments to stock-based compensation expense in future periods.

As required by the 1995 Plan and 2012 plan, the exercise price for awards granted is not to be less than the fair
value of common shares as estimated by the Company as of the date of grant. For the periods prior to the March
2013 IPO, the Company valued its common stock by taking into consideration its most recently available
valuation of common shares performed by management and the board of directors as well as additional factors
which may have changed since the date of the most recent contemporaneous valuation through the date of grant.
For the periods after the IPO, the Company based fair value of its common stock on the quoted market price.

The following table summarizes stock option activity for the year ended September 30, 2013:

Outstanding as of September 30, 2012

Granted
Exercised
Forfeited
Expired

Outstanding as of September 30, 2013

Options vested and expected to vest as of

September 30, 2013

Shares
Issuable
Under
Options

1,771,471
364,318
(538,575)
(11,319)
(2,864)

1,583,031

Weighted
Average
Exercise
Price

$ 2.08
14.21
1.04
12.54
2.59

$ 5.15

1,408,344

$ 4.06

Options exercisable as of September 30, 2013

1,161,570

$ 2.33

Weighted
Average
Remaining
Contractual
Term
(in years)

4.1

Aggregate
Intrinsic
Value

$19,911

5.0

4.5

3.5

$28,133

$26,568

$23,919

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options
and the fair value of the Company’s common stock for those shares that had exercise prices lower than the fair
value of the Company’s common stock. The aggregate intrinsic value of stock options exercised was $7,574,
$606 and $10 during the years ended September 30, 2013, 2012 and 2011, respectively.

The Company received cash proceeds from the exercise of stock options of $559, $141 and $34 during the years
ended September 30, 2013, 2012 and 2011, respectively. The weighted average grant date fair value of options
granted during the years ended September 30, 2013, 2012 and 2011 was $9.16, $7.79 and $1.95, respectively.

F-31

The Company recorded stock-based compensation expense for the years ended September 30, 2013, 2012 and
2011 in the following expense categories:

Research and development
General and administrative

Year Ended September 30,

2013

$ 393
670

$1,063

2012

$126
298

$424

2011

$ 66
159

$225

As of September 30, 2013, the Company had an aggregate of $1,416 of unrecognized stock-based compensation
cost, which is expected to be recognized over a weighted average period of 2.8 years.

14. Net Income (Loss) Per Share

Basic and diluted net income (loss) per share attributable to common stockholders was calculated as follows for
the years ended September 30, 2013, 2012 and 2011:

Basic net income (loss) per share attributable to common

stockholders:
Numerator:

Net income
Accretion of redeemable convertible preferred

stock to redemption value

Net income attributable to participating

securities

Net income (loss) attributable to common

Year Ended September 30,

2013

2012

2011

9,627

21,399

23,310

(2,526)

(5,367)

(5,454)

(13,670)

(14,663)

(16,291)

stockholders

(6,569)

1,369

1,565

Denominator:

Weighted average common shares

outstanding—basic

9,788,039

1,088,784

1,119,250

Net income (loss) per share attributable to common

stockholders—basic

(0.67)

1.26

1.40

Year Ended September 30,

2013

2012

2011

Diluted net income (loss) per share attributable to

common stockholders:

Numerator:

Net income
Accretion of redeemable convertible preferred

stock to redemption value

Net income attributable to participating

securities

Net income (loss) attributable to common

stockholders—diluted

9,627

21,399

23,310

(2,526)

(5,367)

(5,454)

(13,670)

(13,225)

(15,401)

(6,569)

2,807

2,455

Denominator:

Weighted average common shares

outstanding—basic

Dilutive effect of common stock equivalents

Weighted average common shares

outstanding—diluted

9,788,039
—

1,088,784
1,386,039

1,119,250
738,023

9,788,039

2,474,823

1,857,273

Net income (loss) per share attributable to common

stockholders—diluted

(0.67)

1.13

1.32

F-32

Stock options for the purchase of 1,713,313 weighted average shares were excluded from the computation of
diluted net loss per share attributable to common stockholders for the year ended September 30, 2013 because
those options had an anti-dilutive impact due to the net loss attributable to common stockholders.

Stock options for the purchase of 33,359 and 594,453 weighted average shares were excluded from the
computation of diluted net income per share attributable to common stockholders for the years ended
September 30, 2012 and 2011, respectively because those options had an anti-dilutive impact due to the assumed
proceeds per share using the treasury stock method being greater than the average fair value of the Company’s
common shares for those periods.

Warrants outstanding as of September 30, 2011 for the purchase of 341,556 shares of Series E preferred stock
were excluded from the calculations of diluted net income per share attributable to common stockholders for the
year ended September 30, 2011 because those warrants had an anti-dilutive impact due to the assumed proceeds
per share using the treasury stock method being greater than the average fair value of the Company’s common
shares for that year.

15. Commitments and Contingencies

Leases

During the year ended September 30, 2011, the Company signed a seven-year lease for new office space that
began on October 1, 2011. The lease provides for payment escalations during the term of the lease. Payment
escalations as specified in the lease agreements are accrued such that rent expense is recognized on a straight-line
basis over the terms of occupancy. The Company incurred rent expense of $948, $948 and $1,995, respectively,
for the years ended September 30, 2013, 2012 and 2011.

Future minimum lease payments for operating leases as of September 30, 2013 are as follows:

Year ending September 30,

2014
2015
2016
2017
2018

Total

921
946
972
999
1,027

$4,865

The Company previously leased office space in Watertown, Massachusetts under a ten-year lease that expired at
the end of September 2011. In connection with the prior office lease, the Company issued a $1,140 letter of credit
through November 2011 to the benefit of the landlord, collateralized by a certificate of deposit. On December 2,
2011, the landlord released the letter of credit to the Company. In connection with the new lease, the Company
issued a $436 letter of credit, collateralized by a money market account. As of September 30, 2013 and 2012, the
Company classified amounts of $436 in each year, as restricted cash relating to this lease.

Intellectual Property Licenses

During the year ended September 30, 2012, in response to correspondence the Company received from a third
party related to assets the Company used or may have used in prior periods, the Company entered into a non-
exclusive intellectual property license agreement with the third party. Under the agreement, the Company is
required to pay the third party licensor an upfront license fee of $350 and additional license fees of $250 on the
first anniversary, $250 on the second anniversary and $200 on the third anniversary of the agreement. In addition,
the Company is required to pay (1) annual maintenance fees of $105 for each year that the agreement remains in
effect, commencing on the first anniversary of the agreement, in order to maintain the right to use the license, and

F-33

(2) a one-time fee of $50 in each circumstance in which the Company provides the licensed intellectual property
to one of its collaborators with the prior consent of the licensor. As a result, during fiscal 2012, the Company
recorded in research and development expense a total of $895 of license expense, which represented the fair
value of the payments that the Company believed related to its use of the assets in fiscal 2012 and prior periods.
As of September 30, 2012, the Company had recorded liabilities totaling $995 related to the agreement. Of that
amount, $350 was included in accounts payable, $222 was included in accrued expenses and $423 was included
in other long-term liabilities on the balance sheet at September 30, 2012. During the year ended September 30,
2013, the Company paid $350 due under the agreement. As of September 30, 2013, the Company had recorded
liabilities totaling $674 in connection with the agreement, of which $250 was included in accounts payable, $240
was included in accrued expenses and $184 was included in other long-term liabilities on the balance sheet.

Future non-cancelable minimum payments under the agreement are as follows:

Year ending September 30,

2014
2015

Total

250
200

$450

As of September 30, 2012, the Company was aware of a potential license it may need to acquire with respect to
patents it used, or may have used, in its HCV research during prior years or periods. As of September 30, 2012,
the Company believed that license costs were probable, but a range of the loss could not be reasonably estimated;
therefore, no accrual for this matter was recorded as of September 30, 2012. During the year ended
September 30, 2013, the Company obtained an amendment to an existing license agreement to extend rights to
patents previously licensed for one of its programs for use in its other HCV research. Under the amended
agreement, the Company is obligated to pay milestones totaling up to $5,000, plus low single digit royalties, for
each HCV product it develops and obtains regulatory approval outside of its collaboration with AbbVie or any
other collaboration it may enter into in the future with a partner that has already licensed these patents. In the
same period, the Company paid a milestone payment of $500 under this amended agreement.

Litigation and Contingencies Related to Use of Intellectual Property

From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the
ordinary course of business. The Company currently is not a party to any threatened or pending litigation.
However, third parties might allege that the Company or its collaborators are infringing their patent rights or that
the Company is otherwise violating their intellectual property rights. Such third parties may resort to litigation
against the Company or its collaborators, which the Company has agreed to indemnify. With respect to some of
these patents, the Company expects that it will be required to obtain licenses and could be required to pay license
fees or royalties, or both. These licenses may not be available on acceptable terms, or at all. A costly license, or
inability to obtain a necessary license, could have a material adverse effect on the Company’s financial condition,
results of operations or cash flows. The Company accrues contingent liabilities when it is probable that future
expenditures will be made and such expenditures can be reasonably estimated.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to
customers, vendors, lessors, business partners, and other parties with respect to certain matters including, but not
limited to, losses arising out of breach of such agreements, from services to be provided by the Company, or
from intellectual property infringement claims made by third parties. In addition, the Company has entered into
indemnification agreements with members of its board of directors that will require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors
or officers. The maximum potential amount of future payments the Company could be required to make under

F-34

these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any
material costs as a result of such indemnifications. In addition, the Company maintains officers and directors
insurance coverage. The Company does not believe that the outcome of any claims under indemnification
arrangements will have a material effect on its financial position, results of operations or cash flows, and it has
not accrued any liabilities related to such obligations in its financial statements as of September 30, 2013 or
2012.

16. Income Taxes

During the years ended September 30, 2013, 2012 and 2011, no provision for income taxes was recorded due
primarily to the Company’s use of net operating loss carryforwards to fully offset the income before income
taxes of $9,627, $21,399 and $21,310, respectively, generated in those periods. As the deferred tax assets for
those utilized net operating loss carryforwards had previously been recorded with a full valuation allowance, the
use of the net operating loss carryforwards in each of those periods resulted in an income tax benefit being
recognized, which substantially offset the tax provision recorded as a result of the income before income taxes
generated.

In all periods presented, all income before income taxes was sourced from the United States.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as
follows:

Federal statutory income tax rate

State taxes, net of federal benefit
Federal research and development tax credit
Change in deferred tax asset valuation allowance
Other

Effective income tax rate

Year Ended September 30,

2013

2012

2011

34.0% 34.0% 34.0%
5.4
5.5
(0.2)
(2.5)
(40.1)
(51.0)
0.9
14.0

5.8
(2.0)
(40.5)
2.7

0.0% 0.0% 0.0%

Net deferred tax assets as of September 30, 2013 and 2012 consisted of the following:

Net operating loss carryforwards
Tax credit carryforwards
Capitalized research and development expenses
Other temporary differences

Gross deferred tax assets

Valuation allowance

Net deferred tax assets

September 30,

2013

2012

$ 8,495
6,111
6,953
1,333

$ 10,961
5,731
9,750
1,357

22,892
(22,892)

27,799
(27,799)

$ —

As of September 30, 2013, the Company had net operating loss carryforwards for federal and state income tax
purposes of $24,107 and $5,653, respectively, which begin to expire in fiscal 2018 and 2015, respectively. The
Company also has available research and development tax credit and other credit carryforwards for federal and
state income tax purposes of $4,375 and $2,631, respectively, which begin to expire in fiscal 2021 and 2016,
respectively. Utilization of the net operating loss carryforwards and research and development tax credit
carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code
of 1986 due to ownership changes that could occur in the future. These ownership changes may limit the amount
of carryforwards that can be utilized annually to offset future taxable income.

F-35

During the years ended September 30, 2013, 2012 and 2011, gross deferred tax assets related to net operating
loss carryforwards decreased due to their utilization as a result of income before income taxes generated during
those periods.

The Company has concluded, based on the weight of available evidence, that its net deferred tax assets are not
more likely than not to be realized in the future. Management has considered the Company’s history of
cumulative net losses incurred since inception, its lack of commercialization of any products or generation of any
revenue from product sales since inception and its inability to reasonably estimate the timing or amounts, if any,
of future milestone payments it will receive from its collaborators, and concluded that it is more likely than not
that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance
has been established against the deferred tax assets as of September 30, 2013 and 2012. Management reevaluates
the positive and negative evidence at each reporting period.

Changes in the valuation allowance for deferred tax assets during the years ended September 30, 2013, 2012 and
2011 were as follows:

Year Ended September 30,

2013

2012

2011

Valuation allowance as of beginning of year

$27,799

$36,369

$45,812

Decreases recorded as benefit to income tax

provision

Increases recorded to income tax provision

Valuation allowance as of end of year

(4,907)
—

(8,570)
—

(9,443)
—

$22,892

$27,799

$36,369

The Company has not recorded any amounts for unrecognized tax benefits as of September 30, 2013 or 2012.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the
normal course of business, the Company is subject to examination by federal and state jurisdictions, where
applicable. There are currently no pending income tax examinations. The Company’s tax years are still open
under statute from 2009 to the present. Earlier years may be examined to the extent that tax credit or net
operating loss carryforwards are used in future periods. The Company’s policy is to record interest and penalties
related to income taxes as part of its income tax provision.

17. 401(k) Plan

In December 1999, the Company established a 401(k) plan. This plan covers substantially all employees who
meet minimum age and service requirements. Under the terms of the plan, the Company contributes on an annual
basis up to 2% of an employee’s base salary up to a maximum of $4 per employee.

During the years ended September 30, 2013, 2012 and 2011, the Company recognized $90, $84 and $95,
respectively, of expense related to its contributions to this plan.

18. Related Party Transactions

The Company has entered into consulting agreements for research and development and business management
activities with certain members of the Company’s board of directors. Consulting fees expensed and paid for each
of the years ended September 30, 2013, 2012 and 2011 were $10, $75 and $75.

As further described in Note 7, the Company had entered into a note and warrant purchase agreement with
stockholders in fiscal 2011.

F-36

19. Qualifying Therapeutic Discovery Project Program

In November 2010, the Company received notification from the Internal Revenue Service that it had been
awarded grants for four research projects under the Qualifying Therapeutic Discovery Project Credit program,
covering 50% of qualifying expenses incurred, up to a maximum of $244 for each of the four projects. During the
year ended September 30, 2011, the Company recorded the proceeds of $750 in other income (expense) in the
statement of operations, upon approval of the qualifying expenses.

A payment of $489 was received in fiscal 2011 for work on two of the projects already carried out during fiscal
2010. For the two projects carried out during fiscal 2011, a total amount receivable of $261 was recorded as of
September 30, 2011, and was received in full in October 2011.

20. Selected Quarterly Financial Data (unaudited)

Quarterly financial information for fiscal 2013 and 2012 is presented in the following table, in thousands, except
per share data:

December 31, 2012 March 31, 2013

June 30, 2013

September 30, 2013

2013 Quarter Ended

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share attributable to

common shareholders—basic . . . . . . . . . . .

Net income (loss) per share attributable to

common shareholders—diluted . . . . . . . . .

$27,859
5,950
48
21,957

1.61

1.45

$ 1,196
5,197
252
(3,749)

$ 1,649
5,827
40
(4,138)

$ 1,349
6,050
258
(4,443)

$ (2.28)

$ (0.23)

$ (0.25)

$ (2.28)

$ (0.23)

$ (0.25)

December 31, 2011 March 31, 2012

June 30, 2012

September 30, 2012

2012 Quarter Ended

741
3,923
23
(3,159)

common shareholders—basic . . . . . . . . . . .

$ (4.44)

Net income (loss) per share attributable to

common shareholders—diluted . . . . . . . . .

$ (4.44)

$36,565
4,470
16
32,111

2.41

2.17

$ 2,542
6,070
27
(3,501)

$ 1,858
5,954
44
(4,052)

$ (4.31)

$ (4.78)

$ (4.31)

$ (4.78)

F-37

EXHIBIT INDEX

Incorporated by Reference

Exhibit Description

Form

Date

Exhibit
Number

File Number

Filed Herewith

Exhibit
Number

3.1

3.2

4.1

4.2

10.1#

10.2#

10.3#

10.4†

10.5†

10.6†

Restated Certificate of Incorporation of
Enanta Pharmaceuticals, Inc.

Amended and Restated Bylaws of Enanta
Pharmaceuticals, Inc.

Specimen certificate evidencing shares of
common stock.

Form of Series 1 Non-Convertible
Preferred Stock Warrant

Form of Indemnification Agreement for
directors and officers.

Amended and Restated Employment
Agreement between the Company and
Jay R. Luly, Ph.D., dated as of March 4,
2013.

Form of Amended and Restated
Employment Agreement for Executive
Officers other than Chief Executive
Officer.

Collaboration and License Agreement
between the Company and Novartis
Institutes for BioMedical Research, Inc.,
dated February 16, 2012.

Amendment No. 1, dated March 28,
2013, to that certain Collaboration and
License Agreement between Enanta
Pharmaceuticals, Inc. and Novartis
Institutes for BioMedical Research, Inc.

10.7 † Agreement between the Company and

10.8

the National Institute of Allergy and
Infectious Diseases, dated September 30,
2011.
Modification No. 1, dated August 28,
2013, to that certain Agreement between
the Company and the National Institute
of Allergy and Infectious Diseases.

8-K

03/28/2013

3.1

001-35839

8-K

03/28/2013

3.2

001-35839

S-1/A 02/05/2013

4.1

333-184779

S-1

11/06/2012

4.2

333-184779

S-1/A 02/05/2013

10.7

333-184779

S-1/A 03/05/2013

10.5

333-184779

S-1/A 03/05/2013

10.17

333-184779

S-1/A 02/05/2013

10.1

333-184779

S-1/A 03/05/2013

10.2

333-184779

10-Q 05/15/2013

10.2

001-35839

S-1

11/06/2012

10.3

333-184779

Exhibit Description

Form

Date

Exhibit
Number

File Number

Filed Herewith

Incorporated by Reference

Exhibit
Number

10.9

10.10

10.11

Modification No. 2, dated August 29,
2013, to that certain Agreement between
the Company and the National Institute
of Allergy and Infectious Diseases.
Lease Agreement between Company and
ARE-500 Arsenal Street LLC, dated as
of April 15, 2011.
Third Amended and Restated
Registration Rights Agreement, dated as
of August 23, 2012.

S-1

11/06/2012

10.6

333-184779

S-1/A 11/06/2012

10.4

333-184779

10.12# Amended and Restated 1995 Equity

Incentive Plan.

S-1/A 03/05/2013

10.8

333-184779

S-1/A 03/05/2013

10.9

333-184779

S-1/A 03/05/2013

10.10

333-184779

S-1/A 03/05/2013

10.11

333-184779

S-1/A 03/05/2013

10.13

333-184779

S-1/A 03/05/2013

10.14

333-184779

S-1/A 03/05/2013
S-1/A 02/05/2013

10.15
10.16

333-184779
333-184779

10.13# Form of Incentive Stock Option

Certificate under Amended and Restated
1995 Equity Incentive Plan.
10.14# Form of Non-Statutory Stock Option

Certificate under Amended and Restated
1995 Equity Incentive Plan.
10.15# Form of Non-Statutory Stock Option

Certificate for directors under Amended
and Restated 1995 Equity Incentive Plan.
10.16# 2012 Equity Incentive Plan (As adjusted to

10.18# Form of Non-Statutory Stock Option

Agreement under 2012 Equity Incentive
Plan.

10.19# Form of Non-Statutory Stock Option

Certificate for directors under 2012
Equity Incentive Plan.
10.20# Employee Stock Purchase Plan.
21.1
23.1

31.1

31.2

32.1

Exhibit
Number

101

Exhibit Description

Form

Date

Exhibit
Number

File Number

Filed Herewith

Incorporated by Reference

The following materials from the Annual
Report of Enanta Pharmaceuticals, Inc.
on Form 10-K for the year ended
September 30, 2013, formatted in XBRL
(eXtensible Business Reporting
Language): (i) Balance Sheets as of
September 30, 2013 and September 30,
2012 of Enanta Pharmaceuticals, Inc., (ii)
Statements of Operations for the years
ended September 30, 2013 and 2012 of
Enanta Pharmaceuticals, Inc., (iii)
Statements of Cash Flows for the years
ended September 30, 2013 and 2012 of
Enanta Pharmaceuticals, Inc., and (iv)
Notes to Financial Statements of Enanta
Pharmaceuticals, Inc.1

# Management contract or compensatory plan, contract or agreement.
† Confidential treatment granted as to portions of this Exhibit. The confidential portions of this Exhibit have been

omitted and are marked by asterisks.

Management Team

Jay R. Luly, Ph.D.

President, Director and Chief Executive Officer

Yat Sun Or, Ph.D.

Senior Vice President, Research & Development
and Chief Scientific Officer

Paul J. Mellett

Corporate Headquarters
Enanta Pharmaceuticals, Inc.
500 Arsenal Street
Watertown, MA 02472

Investor Inquiries
The 2013 Annual Report on Form 10-K and other
investor information are available free of charge on
the Company’s website at www.enanta.com.

Senior Vice President, Finance & Administration
and Chief Financial Officer

Investor Inquiries (including requests for a copy of
our Form 10-K) should be directed to:

Board of Directors

Ernst-Günter Afting, M.D., Ph.D.

Retired pharmaceutical and government research
executive

Enanta Pharmaceuticals, Inc.
500 Arsenal Street
Watertown, MA 02472
Attention: Investor Relations
Phone: 617-607-0800

Stephen Buckley, Jr.

Retired partner of Ernst & Young LLP

Bruce L.A. Carter, Ph.D.

Former President and Chief Executive Officer,
ZymoGenetics, Inc.

Marc E. Goldberg

Managing Director, Bioventures Investors

Jay R. Luly, Ph.D.

President and Chief Executive Officer, Enanta
Pharmaceuticals, Inc.

David Poorvin, Ph.D.

Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110

Legal Counsel
Edwards Wildman Palmer LLP
111 Huntington Avenue
Boston, MA 02199

Transfer Agent
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021

Private consultant; former executive of Schering-
Plough Corporation

Stock Listing
NASDAQ Global Select Market: ENTA

Terry Vance

Chief Business Officer, BioMotin, LLC and Venture
Partner of Saints Capital

Web Site
www.enanta.com

Enanta Pharmaceuticals, Inc.
500 Arsenal Street
Watertown, MA 02472