BioCryst Pharmaceuticals, Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions unless noted.
Business context
BioCryst is a clinical-stage biotechnology company developing small-molecule drug candidates. Its programs include peramivir for influenza, BCX4208 for gout, and preclinical candidates BCX4161 and BCX5191. Revenue primarily came from research and development collaborations and government reimbursement, rather than product sales.
Key financial metrics
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Revenue | $12.221 million | $5.435 million |
| Research and development expense | $15.441 million | $13.403 million |
| General and administrative expense | $1.781 million | $3.531 million |
| Operating loss | $(5.001) million | $(11.499) million |
| Net loss | $(6.052) million | $(13.027) million |
| Basic and diluted loss per share | $(0.13) | $(0.29) |
| Net cash used in operating activities | $(12.248) million | $(14.327) million |
Revenue included $7.766 million of previously deferred Mundipharma revenue recognized after completion of the forodesine knowledge transfer. BioCryst also recognized $1.864 million of related deferred expense; neither recognition affected cash. BARDA/HHS reimbursed $4.160 million of development costs, compared with $4.665 million a year earlier.
At March 31, 2012, cash and cash equivalents were $27.661 million, restricted cash was $0.955 million, and investments totaled $28.684 million ($15.617 million current and $13.067 million long-term). Collaboration receivables were $5.852 million, including $4.876 million unbilled from HHS. Working capital was $36.8 million, versus $26.6 million at year-end 2011. Total assets were $80.085 million and stockholders’ equity was $23.150 million.
Non-recourse notes payable remained $30.0 million. The Royalty Sub notes carry 14% annual interest and are secured principally by Shionogi royalties and milestone payments; they are without recourse to BioCryst except for its pledge of its Royalty Sub equity. Q1 interest expense was $1.160 million. BioCryst reported $3.890 million of collateral posted under its currency hedge.
Changes versus the prior-year quarter
- Revenue rose $6.786 million, mainly because of the one-time recognition of deferred Mundipharma revenue; BARDA/HHS revenue declined.
- R&D expense increased $2.038 million, including $1.864 million of recognized deferred forodesine expense. Lower BCX4208 spending was offset by higher spending on peramivir and preclinical programs.
- G&A expense fell $1.750 million, primarily because the 2011 quarter included headquarters relocation costs and other administrative expenses.
- Net loss narrowed by $6.975 million. The comparison also reflects a favorable foreign currency derivative result: a $0.038 million gain in Q1 2012 versus a $1.342 million loss in Q1 2011.
- Operating cash use decreased by $2.079 million. Q1 2012 investing activities provided $11.540 million, largely from investment maturities, and financing activities provided $11.925 million, including $11.678 million net proceeds from an at-the-market stock sale.
Outlook, management commentary and risks
- Management expected 2012 operating expenses to exceed revenue and stated available resources, expected BARDA/HHS receipts and other financing sources were expected to fund operations at least through March 2013. The company also said additional capital would likely be required to complete development and commercialization of its candidates; funding availability and terms were uncertain.
- The BARDA/HHS peramivir contract totals approximately $234.852 million and runs through December 31, 2013. Reimbursement and continuation depend on contract performance; HHS may audit costs or terminate the contract, including without cause.
- BioCryst was enrolling patients in its final Phase 3 intravenous peramivir trial. An interim analysis was planned after the 2012 Southern Hemisphere flu season. Management said the study could continue, expand enrollment up to 320 patients, or be terminated depending on the analysis; success and regulatory approval were not assured.
- After an April 2012 FDA meeting, BioCryst was incorporating feedback into a proposed BCX4208 Phase 3 plan. It anticipated a study of approximately 1,800 patients, while continuing regulatory discussions and seeking development partners; the program’s funding and timing remained uncertain.
- BCX4161 and BCX5191 were undergoing 28-day GLP safety studies, with first-in-human trials targeted before the end of 2012. BioCryst also reported a patent dispute concerning Biota’s patent claims covering BCX5191 and had asked the USPTO to declare an interference.
- Important risks include clinical-trial failure or delay, regulatory uncertainty, reliance on BARDA/HHS and other partners, future financing needs and dilution, competition, intellectual-property disputes, and dependence on third-party manufacturers and research providers. The company had not achieved profitability and warned it might never do so.
Management reported effective disclosure controls as of March 31, 2012 and no material change in internal control over financial reporting during the quarter. The filing gives no formal numerical earnings or revenue guidance.
Important facts for investors to verify
- Review the peramivir Phase 3 interim-analysis timing, enrollment decisions, results and any effect on BARDA/HHS funding.
- Assess liquidity and cash burn against management’s March 2013 funding horizon, expected BARDA reimbursements and additional capital needs.
- Track Shionogi royalty receipts against the $30 million, 14% PhaRMA Notes and the September 2012 interest payment. The MD&A states that approximately $1.9 million had accumulated from RAPIACTA sales “since September 1, 2012” as of March 31, 2012, a chronology that is unclear and should be checked against the underlying filing.
- Reconcile the foreign-exchange hedge gain: the financial statements report $0.038 million, while a passage in MD&A gives $37,588. Confirm the intended amount and monitor collateral and potential future hedge payments.
- Monitor dilution and share count following the Q1 issuance of approximately 2.905 million shares through the at-the-market facility, and any further use of the remaining shelf capacity.