ENANTA PHARMACEUTICALS INC (ENTA) FY 2025 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Overview
We are a biotechnology company that uses our robust, chemistry-driven approach and drug discovery capabilities to discover and develop small molecule drugs for virology and immunology indications.
Virology
We discovered glecaprevir, the second of two antiviral protease inhibitors developed through our collaboration with AbbVie for the treatment of acute or chronic infection with hepatitis C virus, or HCV. Glecaprevir is co-formulated as part of AbbVie’s leading brand of direct-acting antiviral, or DAA, combination treatment for HCV, which has been marketed under the tradenames MAVYRET® (U.S.) and MAVIRET® (ex-U.S.) (glecaprevir/pibrentasvir) since 2017 for the treatment of chronic HCV. MAVYRET® was also approved as the first and only treatment for acute HCV infection in June 2025.
Our active development programs in virology are focused on respiratory syncytial virus, or RSV, the most common cause of bronchiolitis and pneumonia and a leading cause of U.S. hospitalization in young children and a significant cause of respiratory illness in older adults. Populations at high risk for severe RSV infection include infants and young children, adults older than 65 years of age, and those with comorbidities such as chronic heart or lung disease. Recent CDC estimates suggest a significant RSV burden in the U.S., with up to 6.5 million outpatient visits, 350,000 hospitalizations and 23,000 deaths annually.
We also have clinical stage programs in virology for SARS-CoV-2, the virus that causes COVID-19, and Hepatitis B virus, or HBV, the most prevalent chronic hepatitis.
Immunology
In immunology, we are designing and developing highly potent and selective oral small molecule inhibitors for the treatment of type 2 inflammatory disease by targeting key mechanisms of the immune response. An overactive response is a primary driver of a number of inflammatory diseases.
Our initial immunology targets involve the following mechanisms of immune response:
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The receptor tyrosine kinase, known as KIT, which is critical for regulating mast cell survival and activation, including release of potent inflammatory mediators such as histamine, which is a primary driver of inflammation in the skin and implicated in multiple allergic diseases; and
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STAT6, a transcription factor uniquely responsible for interleukin-4, or (IL-4)/interleukin-13, or (IL-13) cell signaling, which drives a type 2 dominant phenotype and downstream inflammation.
These mechanisms are implicated, along with others, in several diseases, and it is not uncommon for an efficacious treatment for one disease to be tested and approved for other immunology indications. We currently plan to focus our initial immunology drug development proof-of-concept efforts on the following disease indications:
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Chronic spontaneous urticaria, or CSU, a severely debilitating, chronic inflammatory skin disease manifested by hives, angioedema, which is swelling of soft tissues, or both, but with no identified triggers, which has an estimated global prevalence of between 0.5% – 1% of the population, resulting in approximately 1.75 - 3.5 million people with this condition at any given time in the U.S. alone or chronic inducible urticaria (CIndU) of various forms with a variety of known triggers; and
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Atopic dermatitis, or AD, a chronic dermatological disease characterized by dry, red, inflamed, irritated and itchy skin with significant quality of life impacts such as leading a limited lifestyle, avoidance of social interactions and a reduced range of activities, with AD affecting 7.3% of the US adult population, of whom ~40% have moderate to severe disease.
As of September 30, 2025, we had $188.9 million in cash, cash equivalents and short-term marketable securities. Based on our operating plan, we believe that our existing cash, cash equivalents and short-term marketable securities as of September
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30, 2025, as well as the cash flows from our retained portion of future HCV royalties and the proceeds from our public offering in October 2025, will enable us to fund our operating expenses and capital expenditure requirements into fiscal 2029.
Our Royalty Revenue Collaboration and Royalty Sale Agreement
Our royalty revenue is generated through our Collaborative Development and License Agreement with AbbVie, under which we have discovered and out-licensed to AbbVie two protease inhibitor compounds that have been clinically tested, manufactured, and commercialized by AbbVie as part of its combination regimens for HCV.
Glecaprevir is the HCV protease inhibitor we discovered that was developed by AbbVie in a fixed-dose combination with its NS5A inhibitor, pibrentasvir, for the treatment of chronic HCV. In June 2025 it was also approved by the FDA as the first and only treatment for acute HCV infection. This patented combination, currently marketed under the brand names MAVYRET® (U.S.) and MAVIRET® (ex-U.S.), is referred to in this report as MAVYRET/MAVIRET. The first protease inhibitor developed through this collaboration, paritaprevir, is part of AbbVie’s initial HCV regimens, which have been almost entirely replaced by MAVYRET/MAVIRET. Since August 2017, substantially all of our royalty revenue has been derived from AbbVie’s net sales of MAVYRET/MAVIRET. Our ongoing royalty revenues from this regimen consist of annually tiered, double-digit, per-product royalties on 50% of the calendar year net sales of the glecaprevir/pibrentasvir combination in MAVYRET/MAVIRET. The annual royalty tiers return to the lowest tier for sales on and after each January 1.
In April 2023, we entered into a royalty sale agreement with an affiliate of OMERS, a Canadian public employee pension fund, pursuant to which we were paid a $200.0 million cash purchase price in exchange for 54.5% of our future quarterly royalty payments on net sales of MAVYRET/MAVIRET, after June 30, 2023, through June 30, 2032, subject to a cap on aggregate payments to OMERS equal to 1.42 times the purchase price.
For accounting purposes, we continue to record 100% of HCV royalties earned under the AbbVie agreement as royalty revenue in our consolidated statements of operations. The $200.0 million received in April 2023 was recognized on our consolidated balance sheets as a liability, which will be reduced by the payments made to OMERS over the term of the Agreement. We recognize imputed interest expense over the life of the royalty sale agreement based on our estimated future MAVYRET/MAVIRET royalties.
Financial Operations Overview
We are currently funding all research and development for our wholly-owned programs, which are targeted toward the discovery and development of novel compounds. We completed two Phase 2b studies of zelicapavir and a Phase 2a human challenge study of EDP-323, both of which are in our virology program. We also are conducting preclinical discovery research efforts in immunology.
As a result of the timing of our clinical and preclinical development programs, we expect our research and development expenses will fluctuate from period to period. However, in the next 12 months, we expect our external research and development expenses generally to decrease since we have completed our Phase 2 studies of zelicapavir and EDP-323 and we are evaluating partnering opportunities for the RSV programs.
Through September 30, 2025, we have funded our operations primarily through royalty payments received under our collaboration agreement with AbbVie, a $200.0 million payment received in April 2023 from our royalty sale agreement, and our existing cash, cash equivalents, and short-term marketable securities. Based on our operating plan, we believe that our existing cash, cash equivalents and short-term marketable securities as of September 30, 2025, as well as the cash flows from our retained portion of future HCV royalties and the proceeds from our public offering in October 2025, will enable us to fund our operating expenses and capital expenditure requirements into fiscal 2029.
Revenue
Our revenue is primarily derived from our collaboration agreement with AbbVie and AbbVie’s sales of MAVYRET/MAVIRET, an 8-week treatment regimen for acute or chronic HCV. During the year ended September 30, 2023, we also generated $1.0 million of license revenue from an upfront payment related to a license agreement for one of the antibacterial compounds we are no longer developing.
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The following table is a summary of revenue recognized for the years ended September 30, 2025, 2024, and 2023:
| Years Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | 2024 | 2023 | |||||||||
| (in thousands) | |||||||||||
| Revenue | |||||||||||
| Royalty revenue | $ | 65,324 | $ | 67,635 | $ | 78,204 | |||||
| License revenue | — | — | 1,000 | ||||||||
| Total revenue | $ | 65,324 | $ | 67,635 | $ | 79,204 |
As disclosed above regarding our OMERS royalty sale agreement, we only retain 45.5% of the cash payments from royalties on net sales of MAVYRET/MAVIRET occurring after June 30, 2023 through June 30, 2032, subject to a cap on aggregate payments to OMERS equal to 1.42 times OMERS’ purchase price.
Internal Programs
As our internal product candidates are currently in Phase 1 or Phase 2 clinical development, we have not generated any revenue from our own product sales. We do not expect to generate any revenue from product sales derived from these product candidates for at least the next several years.
Operating Expenses
Our operating expenses are comprised of research and development expenses and general and administrative expenses.
Research and Development Expenses
Research and development expenses consist of costs incurred to conduct basic research, such as the discovery and development of novel small molecules as therapeutics, as well as any external expenses of preclinical and clinical development activities. We expense all costs of research and development as incurred. These expenses consist primarily of:
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third-party contract costs relating to research, formulation, manufacturing, preclinical study, and clinical trial activities;
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personnel costs, including salaries, related benefits, and stock-based compensation for employees engaged in scientific research and development functions;
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allocated facility-related costs;
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laboratory consumables; and
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third-party license fees.
At any given time, we have later stage programs in clinical development as well as several active early-stage research and drug discovery projects. Our internal resources, employees and infrastructure are utilized across multiple projects, including our early-stage discovery projects. As such, we report information regarding costs incurred based on our programs (i.e., disease area) rather than on a project specific basis. All indirect costs are allocated to programs based on headcount and square footage of our facilities. We expect that our research and development expenses will fluctuate from period to period as we advance our research and development programs. However, in the next 12 months, we expect our external research and development expenses generally to decrease since we have completed our Phase 2 studies of zelicapavir and EDP-323 and we are evaluating partnering opportunities for the RSV programs. To date, we have not identified any significant impact of inflation on spending in research and development, but it is uncertain whether there will be inflationary impacts in future periods.
Our research and drug discovery and development programs are in early stages; therefore, the successful development of our product candidates is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict. Given the uncertainty associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine the duration and completion costs of the current or future clinical trials of our product candidates or if, or to what extent, we will generate revenue from the commercialization and sale of any of our product candidates. We anticipate that we will make determinations as to which development programs to pursue and how much funding to direct to each program on an ongoing basis in response to the preclinical and clinical success and prospects of each product candidate, as well as ongoing assessments of the commercial potential of each product candidate.
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General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, which include salaries, related benefits and stock-based compensation, of our executive, finance, business and corporate development and other administrative functions. General and administrative expenses also include allocated facility-related costs not otherwise included in research and development expenses, directors’ and officers’ liability insurance premiums, professional fees for auditing, tax, and legal services, patent expenses and litigation expenses associated with prosecuting our patent infringement litigation.
We expect that general and administrative expenses may increase in the long term. To date we have not experienced a significant impact of inflation on general and administrative expenses.
Other Income (Expense)
Other income (expense) consists of interest expense, interest and investment income, net and the change in fair value of our outstanding Series 1 nonconvertible preferred stock. Interest expense consists of the interest expense and amortization of debt issuance costs associated with the royalty sale agreement with an affiliate of OMERS. Interest income consists of interest earned on our cash equivalents and marketable securities balances. Investment income consists of the amortization or accretion of any purchased premium or discount, respectively, on our marketable securities. The change in fair value of our Series 1 nonconvertible preferred stock relates to the remeasurement of these financial instruments from period to period as these instruments may require a transfer of assets because of the liquidation preference features of the underlying instrument.
Income Tax Benefit (Expense)
Income tax benefit (expense) is based on our best estimate of taxable net income (loss), applicable income tax rates, net research and development tax credits and carryforwards, net operating loss carrybacks and interest earned on such refunds, changes in valuation allowance estimates and deferred income taxes.
On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act ("OBBBA"), which includes several changes to U.S. federal income tax law, including the temporary and permanent extension of expiring provisions of the Tax Cuts and Jobs Act of 2017. We determined that the tax provisions of the legislation do not have a material impact on our 2025 consolidated financial statements and continue to assess the impact on future years.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, equity, 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 consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions and conditions. See also Note 2 to the consolidated 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.
Research and Development and Pharmaceutical Drug Manufacturing Accruals
We have entered into various contracts with third parties to perform research and development and pharmaceutical drug manufacturing. These include contracts with contract research organizations, or CROs, clinical manufacturing organizations, or CMOs, testing laboratories, research hospitals and not-for-profit organizations and other entities to support our research and development activities. We expense the cost of each contract as the work is performed. When billing terms under these contracts do not coincide with the timing of when the work is performed, we are required to make estimates of our outstanding obligations to those third parties as of period-end. Our accrual estimates are based on a number of factors, including our knowledge of the research and development programs and pharmaceutical drug manufacturing activities and associated timelines, invoicing to date, and the provisions in the contract. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from our estimates.
Liability Related to the Sale of Future Royalties
We accounted for the $200.0 million payment from OMERS as a liability on our consolidated balance sheets because (1) under the royalty sale agreement, OMERS will receive a portion of our royalty payments up to a capped amount of 1.42 times the original payment to us, and (2) we have significant continuing involvement in the generation of cash flows under the AbbVie Agreement. Interest expense for the liability related to the sale of future royalties will be recognized using the effective interest rate method over the term of the royalty sale agreement.
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The liability related to the sale of future royalties and the related interest expense are based on our current estimates of future royalties, which we determine by using third-party forecasts of MAVYRET/MAVIRET sales. Third-party forecasts are updated periodically based on the latest pricing, market share, and patient data. Changes in the amount or timing of estimated royalties will affect the interest rate utilized in calculating the liability related to the sale of future royalties.
Results of Operations
| Years Ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | 2024 | 2023 | ||||||||||
| (in thousands) | ||||||||||||
| Revenue | $ | 65,324 | $ | 67,635 | $ | 79,204 | ||||||
| Research and development | 106,740 | 131,476 | 163,524 | |||||||||
| General and administrative | 43,933 | 57,850 | 52,887 | |||||||||
| Interest expense | (7,681 | ) | (10,940 | ) | (5,148 | ) | ||||||
| Interest and investment income, net | 9,442 | 14,770 | 11,360 | |||||||||
| Change in fair value of Series 1 nonconvertible preferred stock | 39 | 73 | — | |||||||||
| Income tax benefit (expense) | 1,660 | 1,743 | (2,821 | ) | ||||||||
| Net loss | $ | (81,889 | ) | $ | (116,045 | ) | $ | (133,816 | ) |
Comparison of the Years Ended September 30, 2025 and 2024
Revenue
We recognized revenue of $65.3 million and $67.6 million during the years ended September 30, 2025 and 2024, respectively. The decrease in revenue year-over-year was primarily due to AbbVie’s lower reported HCV sales as compared to the comparable period in 2024.
Our royalty revenues eligible to be earned in the future will depend on AbbVie’s HCV market share, the pricing of the MAVYRET/MAVIRET regimen, the number of patients treated and the effect of the label expansion for MAVYRET in the United States for the treatment of patients with acute HCV. In addition, at the beginning of each calendar year (the second quarter of our fiscal year), our royalty rate resets to the lowest tier for each of our royalty-bearing products licensed to AbbVie.
Beginning with the quarter ended September 30, 2023, 54.5% of our quarterly royalty payments on net sales of MAVYRET/MAVIRET that are included in our total revenue are paid to OMERS through June 30, 2032, subject to a cap on aggregate payments equal to 1.42 times the purchase price. The $200.0 million received in April 2023 was recognized on our consolidated balance sheets as a liability which will be reduced by the payments made to OMERS over the term of the royalty sale agreement. We will continue to record 100% of HCV royalties earned under the AbbVie Agreement as royalty revenue in our consolidated statements of operations since the AbbVie Agreement has not been amended and is independent of our agreement with OMERS.
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Research and development expenses
| Years Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | 2024 | 2023 | |||||||||
| (in thousands) | |||||||||||
| R&D programs: | |||||||||||
| Virology | |||||||||||
| RSV | $ | 59,808 | $ | 86,367 | $ | 78,120 | |||||
| COVID-19 | 587 | 4,625 | 66,082 | ||||||||
| HBV | 152 | 371 | 6,974 | ||||||||
| Total Virology | $ | 60,547 | $ | 91,363 | $ | 151,176 | |||||
| Immunology | |||||||||||
| KIT | 18,052 | 19,822 | — | ||||||||
| STAT6 | 16,614 | 4,691 | — | ||||||||
| Total Immunology | $ | 34,666 | $ | 24,513 | $ | — | |||||
| Other Programs | |||||||||||
| Early discovery | 11,328 | 14,995 | 8,253 | ||||||||
| Other programs for out-licensing | 199 | 605 | 4,095 | ||||||||
| Total Other Programs | $ | 11,527 | $ | 15,600 | $ | 12,348 | |||||
| Total research and development expenses | $ | 106,740 | $ | 131,476 | $ | 163,524 |
Research and development expenses for the year ended September 30, 2025 decreased by $24.7 million compared to the same period in 2024.
Virology
The costs in our virology program decreased by $30.8 million primarily due to the timing of clinical trials in our RSV programs.
Immunology
The costs in our immunology programs increased by $10.2 million as we advance this new therapeutic area of focus for the company.
Other Programs
Other program costs decreased by $4.1 million due to the completion of the discovery-stage activities related to our STAT6 program.
General and administrative expenses
General and administrative expenses decreased by $13.9 million for the year ended September 30, 2025, compared to the same period in 2024, primarily due to a decrease in legal expenses related to our patent infringement suit against Pfizer and a decrease in stock-based compensation expenses.
Other income (expense)
Changes in components of other income (expense) were as follows:
Interest expense
Interest expense decreased by $3.3 million for the year ended September 30, 2025, as compared to the same period in 2024, due to the paydown of our obligation associated with our royalty sale agreement entered into during April 2023 with an affiliate of OMERS.
Interest and investment income, net
Interest and investment income, net, decreased by $5.3 million for the year ended September 30, 2025, as compared to the same period in 2024. The decrease was due to lower cash and investment balances year over year.
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Income tax benefit (expense)
During each of the years ended September 30, 2025 and 2024, we recorded an income tax benefit of $1.7 million, representing interest recorded on our $33.8 million federal tax refund, which we received in April 2025.
On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act ("OBBBA"), which includes several changes to U.S. federal income tax law, including the temporary and permanent extension of expiring provisions of the Tax Cuts and Jobs Act of 2017. We determined that the tax provisions of the legislation do not have a material impact on our 2025 consolidated financial statements and continue to assess the impact on future years.
Comparison of the Years Ended September 30, 2024 and 2023
For a discussion of our results of operations for the year ended September 30, 2024, as compared to the year ended September 30, 2023, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the Years Ended September 30, 2024 and 2023 included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
Liquidity and Capital Resources
We fund our operations with cash flows from our retained portion of our royalty revenue and our existing financial resources. At September 30, 2025, our principal sources of liquidity were cash and cash equivalents and short-term marketable securities of $188.9 million.
The following table shows a summary of our cash flows:
| Years Ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | 2024 | 2023 | ||||||||||
| (in thousands) | ||||||||||||
| Cash provided by (used in): | ||||||||||||
| Operating activities | $ | (19,272 | ) | $ | (78,764 | ) | $ | (103,154 | ) | |||
| Investing activities | 40,347 | 58,235 | (53,578 | ) | ||||||||
| Financing activities | (26,618 | ) | (27,626 | ) | 198,126 | |||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (5,543 | ) | $ | (48,155 | ) | $ | 41,394 |
Net cash used in operating activities
Cash used in operating activities was $19.3 million for the year ended September 30, 2025 as compared to cash used in operating activities of $78.8 million for the same period in 2024. The decrease in cash used in operating activities of $59.5 million was primarily driven by lower operating expenses and receipt of a $33.8 million income tax refund in April 2025, partially offset by lower cash receipts associated with our AbbVie agreement.
Net cash provided by (used in) investing activities
Cash provided by investing activities was $40.3 million for the year ended September 30, 2025 as compared to cash provided by investing activities of $58.2 million for the same period in 2024. Our cash provided by investing activities decreased $17.9 million, driven by timing of purchases, sales and maturities of marketable securities in 2025 compared to 2024. This decrease was partially offset by a reduction in capital expenditures in fiscal 2025 as we completed the buildout of our new office and laboratory space at 4 Kingsbury Avenue in 2025.
Net cash (used in) provided by financing activities
Cash used in financing activities was $26.6 million for the year ended September 30, 2025 as compared to cash used in financing activities of $27.6 million for the same period in 2024. Our cash used in financing activities decreased $1.0 million, driven primarily by lower payments on our royalty sale agreement with OMERS.
Year Ended September 30, 2024
For a discussion of our cash flows for the year ended September 30, 2024, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Flows included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
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Funding Requirements
As of September 30, 2025, we had $188.9 million in cash, cash equivalents and short-term marketable securities. Based on our operating plan, we believe that our existing cash, cash equivalents and short-term marketable securities as of September 30, 2025, as well as the cash flows from our retained portion of future HCV royalties and the proceeds from our public offering in October 2025, will enable us to fund our operating expenses and capital expenditure requirements into fiscal 2029. However, our projection 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:
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the number and characteristics of our research and development programs;
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the scope, progress, results and costs of researching and developing our product candidates on our own, including conducting advanced clinical trials;
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our ability to establish new collaborations, licensing or other arrangements, if any, and the financial terms of such arrangements;
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the amount of our retained portion of royalties generated from MAVYRET/MAVIRET sales under our existing collaboration with AbbVie;
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delays and additional expenses in our clinical trials;
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the cost of manufacturing our product candidates for clinical development and any products we successfully commercialize independently;
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opportunities to in-license or otherwise acquire new technologies and therapeutic candidates;
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costs associated with prosecuting our patent infringement litigation regarding use of a coronavirus 3CL protease inhibitor in Paxlovid, Pfizer's antiviral treatment for COVID-19;
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the timing of, and the costs involved in, obtaining regulatory approvals for any product candidates we develop independently;
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the cost of commercialization activities, if any, of any product candidates we develop independently that are approved for sale, including marketing, sales and distribution costs;
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the timing and amount of any sales of our product candidates, if any, or royalties thereon;
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents, including any litigation costs and the outcomes of any such litigation; and
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potential fluctuations in foreign currency exchange rates.
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
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is set forth in Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K.
Contractual Obligations and Commitments
Facility Leases
As of the date of this report, we lease space in Watertown, Massachusetts, under two separate lease agreements with one landlord.
In May 2022, we entered into a ten-year lease for new laboratory and office space in Watertown, Massachusetts, adjacent to our 400 Talcott Avenue premises at Arsenal on the Charles at 4 Kingsbury Avenue since our lease for office and laboratory space at 500 Arsenal Street was to expire on September 1, 2027. The construction of the facility shell was completed and we gained access to the building to construct tenant improvements during the three months ended March 31, 2024. Upon gaining access to the 4 Kingsbury Avenue building, we capitalized a right-of-use asset and lease liability of approximately $32 million on our consolidated balance sheets which reflects our fixed base rent payments, net of approximately $15 million of a
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tenant improvement allowance provided by the landlord, over the 10-year term of the lease. The 4 Kingsbury Avenue lease ends September 30, 2034.
In conjunction with the commencement of our lease at 4 Kingsbury Avenue during the three months ended March 31, 2024, we adjusted our 500 Arsenal Street lease liability to shorten the expiration date from September 2027 to the date the 4 Kingsbury Avenue building became ready for our occupancy. This resulted in a decrease in the lease liability and right-of-use asset on our consolidated balance sheets by approximately $9.0 million. The rent commencement date for our 4 Kingsbury Avenue lease was September 12, 2024, and we moved into the space in November 2024 at which time our lease at 500 Arsenal Street expired.
The second lease for office space located at 400 Talcott Avenue commenced on September 24, 2018 for a term of six years. In May 2022, we amended this lease to expand the rented space and extend the lease term through June 1, 2034. We spent approximately $6.3 million in capital expenditures for the additional space, which primarily relate to tenant improvements. We received a tenant improvement allowance from the landlord of $2.5 million. In July 2024, we amended our lease agreement to confirm alignment with the lease end date of our 4 Kingsbury Avenue lease at September 30, 2034.
Total estimated minimum lease payments for the next 5 years and thereafter under our existing facility and leased equipment agreements are $8.5 million in 2026, $8.7 million in 2027, $9.0 million in 2028, $9.3 million in 2029, $9.5 million in 2030, and $41.1 million thereafter.
Preferred Stock
As of September 30, 2025, we had 1.9 million outstanding shares of Series 1 nonconvertible preferred stock, all of which we classified as a long-term liability on our consolidated balance sheet and recorded at fair value of $1.3 million. The fair value of the preferred stock was measured based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy. The fair value of these instruments represents less than 10% of liabilities as of September 30, 2025. The Series 1 nonconvertible preferred stock issued would require the payment of $2.0 million in the event of a qualifying merger or sale of the company.
OMERS Agreement
In April 2023, we entered into a royalty sale agreement with an affiliate of OMERS, pursuant to which we were paid a $200.0 million cash purchase price in exchange for 54.5% of our future quarterly royalty payments on net sales of MAVYRET/MAVIRET after June 30, 2023, through June 30, 2032, subject to a cap on aggregate payments equal to 1.42 times the purchase price.
The $200.0 million received in April 2023 was recognized on our consolidated balance sheets as a liability which will be reduced by the payments made to OMERS over the term of the Agreement.