BioVie Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended March 31, 2020 (fiscal 2020 third quarter). The request metadata says “2019 Q3,” but the filing itself reports the period ended March 31, 2020. Financial statements are unaudited.
Business context
BioVie is a clinical-stage biotechnology company developing BIV201, a continuous-infusion formulation of terlipressin for ascites associated with liver cirrhosis. The company reported no revenue. Its operations and future prospects depend on clinical development, regulatory progress, and raising additional capital.
Financial performance and position
| Metric | Three months ended March 31, 2020 | Nine months ended March 31, 2020 | Comparable 2019 period |
|---|---|---|---|
| Revenue | None reported | None reported | None reported |
| Operating expenses | $699,253 | $2,115,918 | $848,289 and $1,840,586, respectively |
| Net income (loss) | $(366,402) | $2,477,409 | $(848,041) and $(1,788,422), respectively |
| Net loss attributable to common stockholders | $(366,402) | $(14,621,649) | $(848,041) and $(1,837,081), respectively |
| Operating cash flow | Not presented quarterly | $(1,268,208) | $(1,869,886) |
The nine-month net income included a noncash $8.1 million gain from the change in fair value of derivative liabilities. A $17.1 million deemed dividend for commitment shares caused the substantially larger loss attributable to common stockholders. Nine-month interest expense was $3.5 million, primarily related to the convertible debenture and associated instruments. No meaningful revenue-based margins can be calculated.
At March 31, 2020, cash was $3,715; current assets were $580,895 and current liabilities were $4,653,636. Accounts payable and accrued expenses were $1,300,119. The balance sheet included a $444,451 related-party loan payable, including accrued interest, and a $28,416 related-party convertible debenture net of discount. The company had drawn $932,000 under the bridge financing. Stockholders’ deficit was $2,344,459, and accumulated deficit was $21.9 million. Total assets were $2,309,177.
For the nine months, financing activities provided $932,000, comprising related-party loan and debenture proceeds. Cash declined by $336,208 from $339,923 at June 30, 2019. The filing states there were no material off-balance-sheet arrangements.
Changes versus prior comparable periods
- Third-quarter net loss narrowed by approximately $482,000 year over year, reflecting lower operating expenses and a derivative fair-value gain, partly offset by interest expense.
- Third-quarter operating expenses fell about $149,000. Nine-month operating expenses rose about $275,000, primarily due to clinical-trial closeout and preparation for future studies.
- Nine-month reported net income turned positive, largely because of the noncash derivative remeasurement gain; the deemed dividend instead produced a $14.6 million loss attributable to common stockholders.
- Cash fell sharply from $339,923 at June 30, 2019 to $3,715 at March 31, 2020, while current liabilities increased to $4.7 million.
Outlook, risks, contingencies, and unusual items
- Funding and going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern. It expected substantial future losses and said further financing is necessary. If financing is unavailable, BioVie may reduce spending or delay Phase 2 and Phase 3 trials; it could be forced to curtail or cease operations.
- Related-party bridge financing: The company’s controlling stockholder, Acuitas, committed up to $2.0 million in bridge financing; $932,000 had been drawn by March 31. Further draws were under discussion. The filing reports an additional $112,000 drawn after quarter-end. Bridge amounts are to be repaid with proceeds from a potential public offering.
- Clinical and regulatory outlook: In April 2020, the FDA provided written guidance on endpoints, dosing, quality-of-life measures, and other trial-design elements. The company said it expected to finalize its Phase 2 protocol soon; that study is intended to inform a pivotal Phase 3 design. The filing does not provide a firm trial start date or financing timetable.
- Patent risk: In November 2019, the Patent Trial and Appeal Board found all claims of BioVie’s U.S. Patent No. 9,655,945 unpatentable and denied the company’s motion to amend. Orphan Drug designations remained unchanged, and the company said the decision did not affect its pending application for a liquid terlipressin formulation.
- COVID-19: Management warned that economic disruption and market impacts from the pandemic could adversely affect its ability to raise funds.
- Other contingencies: The company disclosed royalty obligations on future product sales and a patent challenge; it reported no other material legal proceedings. Related-party financing included significant share and warrant terms, including a $17.1 million deemed dividend. After quarter-end, Acuitas’ related rights and arrangements were extended through July 31, 2020.
Key facts investors should verify
- Available cash, operating cash burn, and the timing and terms of additional financing, including any remaining Acuitas bridge draws and public offering.
- How the company will fund planned clinical studies and whether its protocol, trial start, and FDA pathway progress as expected.
- The fully diluted share count and potential dilution from Acuitas’ shares, warrants, convertible debt, and other equity-linked instruments.
- The impact of the invalidated ’945 patent and the status and scope of the pending formulation patent application.
- The composition and noncash nature of nine-month reported net income, the derivative fair-value gain, and the deemed dividend charged against common stockholders.