BioCryst Pharmaceuticals, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. BioCryst is a biotechnology company focused on developing small-molecule treatments, particularly for rare diseases. The company reported continuing operating losses and negative operating cash flows.
Financial performance and liquidity
| Metric | Q1 2016 | Q1 2015 or comparison |
|---|---|---|
| Total revenue | $4.820 million | $6.826 million; down 29% |
| Research and development expense | $20.579 million | $17.120 million |
| General and administrative expense | $3.212 million | $4.061 million |
| Operating loss | $19.048 million | $14.430 million |
| Net loss | $22.832 million | $15.164 million |
| Basic and diluted loss per share | $0.31 | $0.21 |
| Net cash used in operating activities | $18.842 million | $3.726 million |
Revenue comprised $1.890 million in royalties, $2.930 million in collaborative and other R&D revenue, and no product sales. The company recorded a $2.753 million foreign-currency hedge mark-to-market loss, versus a $0.464 million gain in Q1 2015. Interest expense was $1.470 million, including approximately $1.338 million related to the PhaRMA Notes.
At March 31, cash and cash equivalents were $12.902 million, restricted cash $1.965 million, and investments $64.048 million. Together, these totaled $78.915 million. Receivables from collaborations were $7.384 million, including $5.209 million due from U.S. government agencies. Current liabilities were $63.070 million, exceeding current assets of $50.425 million; management reported a $12.6 million working-capital deficit. Operating cash use drove cash and cash equivalents down from $28.899 million at year-end 2015. Property and equipment increased to $8.362 million from $5.149 million, principally amid development of the Birmingham research facility.
Non-recourse notes payable were reported as $27.914 million current, with $7.974 million of interest payable. The PhaRMA Notes remain in default after Royalty Sub failed to make a full interest payment in 2014. The notes are non-recourse to BioCryst except for its pledge of its interest in Royalty Sub; noteholders may pursue acceleration or foreclosure. Royalties supporting the notes are not generally available to BioCryst for other uses while the notes remain outstanding.
Material changes and operating developments
- Revenue declined primarily because government-contract collaborative revenue was lower and BioCryst recorded no RAPIVAB product revenue after commercialization responsibility shifted to Seqirus UK Limited (SUL). Royalty revenue increased to $1.890 million from $1.518 million.
- R&D expense rose 20%, mainly due to higher HAE program and RAPIVAB post-approval study costs. Avoralstat expense was $8.365 million and BCX7353 expense was $4.616 million.
- G&A expense fell, in part because RAPIVAB marketing and commercial consulting costs ended as SUL assumed commercialization.
- OPuS-2 did not meet its primary efficacy endpoint: avoralstat did not significantly reduce HAE attack rates versus placebo. BioCryst discontinued the softgel formulation and redirected work to novel solid formulations.
- BCX7353 Phase 1 results supported plans to begin a Phase 2 HAE study in 2016. The company reported two drug-related skin-rash events among multiple-dose subjects, including one grade 3 event; both resolved.
- BioCryst reported encouraging BCX4430 preclinical Zika mouse results and generally tolerated intramuscular Phase 1 dosing in healthy volunteers. These findings are preliminary and do not establish clinical efficacy.
- The company submitted a Canadian RAPIVAB marketing application in January 2016. It retained post-approval commitments, including pediatric and elderly/high-risk studies.
Outlook, risks, and unusual items
Management forecast 2016 operating cash usage of $55–$75 million and operating expenses of $78–$98 million, excluding equity-based compensation. The company expected existing cash, restricted cash, and investments to fund planned operations through mid-2017. Continuing substantially beyond that point would require additional government funding or procurement, licensing or milestone proceeds, new capital, product approvals, spending reductions, and/or restructuring. These forecasts are subject to development costs, reimbursement timing, and other uncertainties.
Key risks include the need for additional financing; dependence on BARDA/HHS and NIAID/HHS contract funding and reimbursement; clinical and regulatory uncertainty; reliance on partners for commercialization and royalties; and dependence on a limited number of third-party manufacturers and service providers. Government contracts may be audited, reduced, delayed, or terminated. The foreign-currency hedge can create earnings volatility and may require annual payments of up to $1.950 million if specified exchange-rate conditions are met; potential collateral requirements were up to $9.750 million, with none posted at quarter-end. Management said disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, timing, and results of the redesigned avoralstat program and the planned BCX7353 Phase 2 trial, including safety findings.
- Actual cash burn against the 2016 forecast, government-contract reimbursement and awards, and whether the mid-2017 runway estimate remains supportable.
- Status of the PhaRMA Notes default, any creditor action, and the extent to which Shionogi royalties remain unavailable to BioCryst.
- RAPIVAB regulatory commitments and Canadian/EU approval progress, U.S. government stockpiling opportunities, and SUL commercialization and royalty performance.
- Potential dilution or financing needs, including the company’s shelf registration capacity and any future equity or debt issuance.