BridgeBio Pharma, Inc. — Q1 2020 Form 10-Q Summary
Business context and reporting period
BridgeBio is a clinical-stage biopharmaceutical company developing medicines for Mendelian diseases and genetically driven cancers through a portfolio of wholly owned, majority-owned and consolidated variable-interest entities, including Eidos Therapeutics. The filing covers the unaudited three months ended March 31, 2020, with comparison to March 31, 2019. BridgeBio has no products approved for commercial sale and generated no product revenue.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Product revenue | $0 | $0 | No change |
| Research and development expense | $68.2 million | $44.9 million | +$23.4 million |
| General and administrative expense | $34.3 million | $18.9 million | +$15.4 million |
| Total operating expenses | $102.5 million | $63.8 million | +$38.7 million |
| Net loss | $104.1 million | $69.4 million | +$34.6 million loss |
| Net loss attributable to BridgeBio common stockholders | $91.9 million | $61.2 million | +$30.7 million loss |
| Basic and diluted loss per share | $0.78 | $0.66 | Higher loss per share |
| Net cash used in operating activities | $83.9 million | $59.1 million | +$24.8 million use |
Operating and net margins are not meaningful because the company had no product revenue. Interest expense increased to $4.0 million from $1.7 million, primarily because of higher debt balances and the March 2020 convertible notes. The 2019 period included a $4.6 million equity-method loss related to PellePharm; no comparable loss was recorded in 2020.
Balance sheet, liquidity and debt
- Cash and cash equivalents were $757.0 million at March 31, 2020, compared with $363.8 million at December 31, 2019.
- Cash, cash equivalents and marketable securities totaled $928.4 million, including $196.5 million held by Eidos for Eidos-specific operations.
- Working capital was approximately $860.0 million. Management stated that available cash, cash equivalents and marketable securities are expected to fund operations for at least the next 12 months under current plans.
- Net cash used in operating activities was $83.9 million. Investing activities provided $38.0 million, primarily from $42.5 million of marketable-security maturities. Financing activities provided $439.2 million.
- On March 9, 2020, BridgeBio issued $550.0 million principal amount of 2.50% convertible senior notes due 2027 and received approximately $537.0 million of net proceeds. The notes had a net carrying value of $368.9 million because of the equity component and issuance-cost accounting.
- BridgeBio also had $75.0 million of Hercules term loans and Eidos had $17.5 million of term debt. Consolidated debt was reported at approximately $461.3 million net of discounts and issuance costs; principal debt was approximately $642.5 million including the 2027 Notes.
- BridgeBio used approximately $49.3 million of note proceeds for capped-call transactions and $75.0 million to repurchase 2.4 million common shares at $31.06 per share.
Material changes versus the prior comparable period
- Research and development expense rose 52%, reflecting higher external development costs, headcount and activity across the expanding pipeline. The largest reported program expenses were QED’s BBP-831 at $20.8 million and Eidos’s BBP-265 at $17.8 million.
- General and administrative expense increased 81%, primarily from increased headcount and public-company compliance costs.
- Operating cash use increased 42% to $83.9 million, while stock-based compensation increased to $10.2 million from $2.2 million.
- Cash and marketable securities increased substantially following the convertible-note financing, partially offset by the capped-call purchase and share repurchase.
- BridgeBio adopted ASC 842 lease accounting on January 1, 2020, recognizing operating lease right-of-use assets and liabilities. The adoption did not materially affect accumulated deficit, operations or cash flows.
- The company’s accumulated deficit increased to $531.9 million from $440.0 million at December 31, 2019.
Guidance, outlook, commentary and risks
- Management expects continuing net losses for the next several years because of ongoing discovery, preclinical and clinical development spending and commercial launch-readiness costs.
- BridgeBio continued to anticipate completing the rolling NDA submission for fosdenopterin in 2020 and submitting an NDA for infigratinib in 2020.
- COVID-19 caused delays or temporary suspensions in clinical-trial enrollment and was expected to delay planned trials, nonclinical experiments and toxicology studies. Updated expectations included completion of ATTRibute-CM enrollment in the first half of 2021, initiation of the ATTR-PN Phase 3 trial in the second half of 2020, BBP-589 topline data in 2021 and initiation of a zuretinol Phase 2/3 trial in 2021.
- Key risks include clinical-trial failure or delay, regulatory nonapproval, manufacturing and supply-chain disruptions, reliance on third-party CROs and manufacturers, intellectual-property challenges, competition, reimbursement uncertainty, additional capital needs and volatility in the company’s common stock.
- Potential obligations not recorded as liabilities included up to $23.6 million of milestone compensation arrangements, contingent license and collaboration milestones, and up to $184.4 million of future share-settled milestone payments associated with the April 2020 equity-award exchange program.
- Subsequent to quarter-end, BridgeBio amended its Hercules loan agreement. The amendment extended the interest-only period to July 1, 2022 and the maturity date to November 1, 2023, subject to conditions, and provided potential additional borrowing capacity of up to $125.0 million subject to Hercules approval and other requirements.
- Management reported effective disclosure controls as of March 31, 2020 and no material changes to internal control over financial reporting during the quarter. Prior material weaknesses identified by BridgeBio and Eidos were stated to have been remediated as of December 31, 2019.
Most important facts for investors to verify
- Whether COVID-19-related trial delays alter the stated 2020 NDA plans and the revised clinical milestones.
- The distinction between consolidated liquidity and cash held by Eidos or other subsidiaries that may be restricted to entity-specific use.
- Actual future cash burn relative to the approximately $928.4 million consolidated cash and marketable-securities balance.
- Conversion, dilution and potential cash-settlement effects of the $550.0 million 2027 convertible notes, including the 12.9 million shares initially underlying the notes.
- Terms, conditions and availability of the amended Hercules facility and any future incremental borrowings.
- Progress, safety and regulatory status of BBP-265, infigratinib, BBP-589, fosdenopterin and other leading programs.
- Contingent milestone, licensing, manufacturing and employee-compensation obligations that may become payable as development milestones are achieved.