BioCryst Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2013. Financial amounts are in millions of dollars unless noted. The company is a clinical-stage biotechnology business; it reported ongoing operating losses and negative operating cash flow.
Financial performance and liquidity
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Total revenue | $2.4 | $5.8 | $6.8 | $22.2 |
| Research and development expense | $8.0 | $12.1 | $27.1 | $40.4 |
| General and administrative expense | $1.3 | $1.6 | $4.0 | $4.9 |
| Loss from operations | $(6.9) | $(8.0) | $(24.4) | $(23.2) |
| Net loss | $(8.0) | $(9.7) | $(24.7) | $(28.0) |
| Basic and diluted loss per share | $(0.14) | $(0.19) | $(0.46) | $(0.57) |
| Operating cash flow | Not separately stated for quarter | Not separately stated for quarter | $(22.0) | $(30.4) |
Gross margin is not presented; revenue is primarily government-contract reimbursement, royalties, and collaboration revenue. Q3 revenue included $2.1 million of BARDA/HHS reimbursement. Nine-month revenue included $3.8 million from BARDA/HHS and $2.0 million in royalties.
At September 30, cash and cash equivalents were $26.1 million, restricted cash was $0.2 million, and investments totaled $17.2 million, for $43.4 million in cash and investments. Current assets were $46.8 million and current liabilities $13.2 million; management reported net working capital of $33.7 million. Total assets were $53.2 million. Non-recourse notes payable were $30.0 million, with $2.7 million of interest payable. Stockholders’ equity was $3.4 million, compared with a $0.5 million deficit at year-end 2012.
Nine-month financing provided $28.4 million of cash, principally from common-stock sales and option exercises. Cash increased $5.2 million to $26.1 million during the period. The company raised approximately $18.5 million net in an August public offering and $5.2 million net through its at-the-market program during the nine months. Shares outstanding were 59,091,393 at October 31, 2013.
Material changes versus the prior comparable periods
- Nine-month revenue fell $15.4 million year over year, largely because 2012 included $7.8 million of deferred forodesine revenue recognized after completion of the Mundipharma knowledge transfer, and BARDA/HHS reimbursement declined $6.9 million as peramivir activity decreased.
- Q3 revenue declined $3.4 million year over year, mainly because Q3 2012 included $2.8 million of RAPIACTA royalty revenue recognized after the company gained sufficient return-history data, along with lower BARDA/HHS reimbursement.
- R&D expense decreased $13.3 million for the nine months, reflecting lower spending on peramivir and BCX5191, reduced infrastructure costs, and the absence of $1.9 million in deferred expenses recognized in 2012. Spending increased on BCX4161 and BCX4430.
- G&A expense declined $0.9 million for the nine months, primarily following the December 2012 restructuring.
- Net loss improved year over year, partly reflecting a $3.2 million nine-month gain on the foreign-currency hedge, versus a $1.5 million loss in 2012. The hedge gain is non-operating and subject to market-value fluctuations.
Outlook, developments, and risks
- Management expected 2013 operating cash usage of $22 million to $26 million and operating expenses of $45 million to $55 million. The cash-use forecast was unchanged from February; the expense range increased from $25 million to $35 million, reflecting peramivir NDA work and a write-off of deferred PNP collaboration costs.
- Management stated that available resources, expected BARDA/HHS and NIAID funding, and other financing sources were expected to fund planned operations through 2014. The company cautioned that it would need additional funding or other actions to continue operations substantially beyond 2014, and that financing may not be available on acceptable terms.
- BARDA/HHS issued a peramivir stop-work order in March 2013. In July, it modified the order to permit up to $12.8 million of already-obligated funding for activities directly associated with an NDA filing. The company expected to submit the peramivir NDA by year-end 2013 and anticipated some unreimbursed costs.
- In September, NIAID awarded an initial $5.0 million contract for BCX4430 development; total funding could reach $22.0 million if options are exercised. BCX4161 completed Phase 1 and the company began screening for a Phase 2a HAE study in late October.
- Royalty Sub’s $30.0 million PhaRMA Notes bear interest at 14% and are payable from specified peramivir royalties and related hedge payments. September 2013 royalty receipts covered $1.8 million of interest, leaving an approximately $2.4 million shortfall that accrues interest at 14%. The shortfall was not then an event of default, but must be addressed by the next payment date, September 1, 2014, to avoid default under the stated terms. Management estimated royalties would be sufficient, but gave no assurance.
- The yen-dollar hedge caused quarterly earnings volatility and required $1.9 million of collateral at September 30. The agreement may require annual $2.0 million payments from 2014 through 2020 if the specified exchange-rate condition is met.
- Key risks include clinical and regulatory failure or delay, dependence on government contract funding and partner performance, need for future capital, potential dilution, reliance on third-party manufacturers, and uncertain commercial demand. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the peramivir NDA was filed on the expected timetable and whether BARDA/HHS continued to fund related work.
- Whether peramivir royalties were sufficient to cover the PhaRMA Notes’ accrued interest shortfall by September 1, 2014.
- Actual cash burn, remaining liquidity, and the timing and terms of any additional financing needed after the stated runway through 2014.
- Progress and results of the BCX4161 Phase 2a study, as well as exercise of NIAID funding options for BCX4430.
- Future revenue and royalty trends, including the effect of seasonal RAPIACTA sales and reduced peramivir development reimbursement.