BioCryst Pharmaceuticals, Inc. — 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2017. The company develops small-molecule medicines, particularly for rare diseases, and has historically incurred operating losses. Financial amounts below are in U.S. dollars; figures are rounded to millions unless stated otherwise.
Financial results and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $3.1m | $4.8m | $12.5m | $9.6m |
| Research and development expense | $15.8m | $14.2m | $32.5m | $34.7m |
| General and administrative expense | $2.8m | $2.7m | $5.9m | $5.9m |
| Operating loss | $(15.5)m | $(12.1)m | $(26.2)m | $(31.2)m |
| Net loss | $(16.9)m | $(16.3)m | $(31.1)m | $(39.1)m |
| Net loss per share | $(0.21) | $(0.22) | $(0.40) | $(0.53) |
- Revenue growth for the first half reflected a $4.3m increase in peramivir-related royalties and a $2.0m Canadian regulatory milestone from Seqirus, partly offset by lower U.S. government contract revenue. The royalty increase was largely attributable to Japanese government stockpiling; future orders are uncertain.
- Q2 revenue declined year over year, primarily because reimbursement revenue under U.S. government development contracts was lower. Q2 R&D expense increased, mainly from higher spending on the HAE portfolio; first-half R&D expense decreased, principally due to lower HAE and galidesivir costs.
- Interest expense was $4.2m for the first half, up from $2.9m, primarily reflecting the Senior Credit Facility entered into in September 2016. The six-month statement reports a $1.0m foreign-currency derivative loss; currency-hedge remeasurement and realized currency effects create period-to-period volatility.
- Operating cash used in the first half was $18.2m, versus $30.0m in the prior-year period. Investing activities used $13.0m and financing provided $48.8m, including $47.8m net proceeds from a March 2017 common-stock offering.
- At June 30, cash and cash equivalents were $39.7m, restricted cash $5.4m, and investments $50.6m. Net working capital was $33.3m. Total assets were $113.5m and stockholders’ equity $24.1m.
- Debt included $23.0m under the Senior Credit Facility, bearing 9.1% at quarter-end, and non-recourse PhaRMA Notes with a $30.0m principal amount and $28.5m balance-sheet carrying amount. The PhaRMA Notes remain in default; related interest payable was $11.6m. The company says these notes are non-recourse except for the pledge of its interest in Royalty Sub.
- The company reported no gross margin measure. Operating losses reflect the development-stage business and substantial R&D spending.
Material developments and outlook
- Management expects 2017 operating cash usage of $30m–$50m and operating expenses of $53m–$73m; the expense range excludes equity-based compensation. Management said available resources should fund operations well into 2018, but also disclosed that planned operations raise doubt about the company’s ability to continue as a going concern.
- Management expects continuing operating losses and negative cash flows until revenue is sufficient to support operations. Potential funding measures include controlling R&D spending, additional equity or debt financing, government funding, licensing transactions, further approvals, or reducing or restructuring programs. Additional capital may not be available on acceptable terms.
- BCX7353: interim Phase 2 APeX-1 results showed reduced HAE attack rates at tested doses, with differing results across doses and gastrointestinal adverse events in the 350 mg group. The trial was ongoing; full results, including Part 3, were expected before the end of Q3 2017. The filing also reports that the first subject entered the acute-treatment ZENITH-1 study on August 2, 2017, after quarter-end.
- RAPIVAB/peramivir was approved in the U.S., Canada, Japan, Taiwan and Korea. An EU marketing application was under review, and the FDA had assigned priority review to the pediatric label-expansion application, with a decision target by the end of September 2017.
- Galidesivir’s IV Phase 1 trial was delayed pending an additional nonclinical Ebola efficacy study in a delayed-treatment setting and further protocol planning.
- Mundipharma received Japanese approval in April 2017 for forodesine (Mundesine) for relapsed/refractory peripheral T-cell lymphoma.
- Key risks include clinical and regulatory uncertainty, dependence on government contract reimbursements and partners, uncertain peramivir stockpiling and royalties, third-party manufacturing and trial execution, competition in HAE, and the need for additional capital. The Senior Credit Facility carries restrictive covenants and floating-rate exposure. The currency hedge may require annual $2.0m payments in 2018–2020 if specified exchange-rate conditions are met; potential collateral was capped at $5.85m, with none posted at quarter-end.
- Management stated disclosure controls were effective as of June 30, 2017, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Cash runway against actual spending and the stated 2017 cash-use outlook; assess the going-concern disclosure and timing or terms of any additional financing.
- Whether BCX7353’s complete APeX-1 results support dose selection and advancement, including safety and tolerability, and subsequent progress in ZENITH-1.
- Progress and outcomes for the RAPIVAB pediatric FDA review and EU application, and whether further Japanese government stockpiling or other partner sales generate royalties.
- Continuation, reimbursement, and audit exposure under BARDA/HHS and NIAID/HHS contracts, particularly for galidesivir.
- Status and consequences of the PhaRMA Notes default, including royalty cash allocation, potential creditor remedies, and any hedge-related payments or collateral calls.