BioVie Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2019 (the second quarter of BioVie’s fiscal year ending June 30, 2020). Financial statements are unaudited. BioVie is a clinical-stage biotechnology company developing BIV201, a continuous-infusion terlipressin treatment candidate for ascites associated with liver cirrhosis. The filing reports no product revenue.
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2019 | Six months ended Dec. 31, 2019 |
|---|---|---|
| Revenue | No revenue reported | No revenue reported |
| Research and development expense | $346,514 | $688,015 |
| Selling, general and administrative expense | $306,589 | $613,961 |
| Total operating expenses / operating loss | $710,447 | $1,416,665 |
| Net income (loss) | $6,665,038 | $2,843,811 |
| Net income (loss) attributable to common stockholders | $6,665,038 | $(14,255,247) |
- Reported net income was driven by noncash gains from changes in the fair value of derivative liabilities: $7.396 million for the quarter and $7.759 million for the six-month period. The six-month result also included $3.499 million of interest expense. The filing’s $17.099 million deemed dividend for commitment shares and ratchet adjustments caused the six-month loss attributable to common stockholders despite reported net income.
- Operating expenses rose versus the prior-year periods: by about $210,000 for the quarter and $424,000 for six months. Management attributed the increase mainly to Phase 2a wrap-up and preparation for the next trial; higher insurance and other administrative costs also contributed.
- Cash was $3,108 at December 31, 2019, down from $339,923 at June 30, 2019. Six-month operating cash use was $866,815; financing provided $530,000, including related-party borrowings. No meaningful operating margin is available because the company reported no revenue.
- Current assets were $553,918 versus current liabilities of $4,383,972, implying a working-capital deficit of about $3.83 million. Stockholders’ equity was negative $2,044,428. Current liabilities included $2.674 million of warrant derivative liabilities, $573,200 of debenture conversion-option liability, $1.085 million of accounts payable and accrued expenses, and related-party debt.
- The company had a $500,000 commitment under a related-party convertible debenture initially drawn in September 2019, plus $30,000 in partial second-draw advances by December 31, according to the notes. The debenture commitment was up to $2.0 million. Amounts borrowed were to be repaid from proceeds of a potential public offering. The filing also describes subsequent advances; see verification items below.
Material changes and business developments
- BioVie submitted a Phase 2b/3 trial protocol to the FDA in October 2019 following a Type C meeting and July meeting minutes documenting general agreement with the proposed randomized, controlled design, along with FDA suggestions on endpoints and other trial features. The filing does not establish that the next trial had begun.
- On November 13, 2019, the Patent Trial and Appeal Board found all claims of BioVie’s U.S. Patent No. 9,655,945, “Treatment of Ascites,” unpatentable and denied the company’s motion to amend. The patent is no longer valid or enforceable. BioVie stated that its orphan-drug designations and pending patent application for a liquid terlipressin formulation were unaffected; any future patent protection remains contingent on issuance.
- On November 22, 2019, the company effected a 1-for-125 reverse stock split. Common shares outstanding were 5,183,724 at December 31, compared with 4,058,724 at June 30; 5,194,924 were reported outstanding as of February 5, 2020.
- Acuitas Group Holdings, LLC, controlled by the chairman and CEO, is the company’s controlling stockholder and bridge-financing counterparty. The financing included substantial commitment shares and warrants, and the company recorded a $17.1 million deemed dividend related to the issuance.
Outlook, risks and contingencies
- Management expects substantial future losses and states that additional financing is necessary to continue operations and fund clinical development. The filing says these circumstances raise substantial doubt about BioVie’s ability to continue as a going concern.
- Management was pursuing equity or debt financing, strategic transactions, licensing, or partnerships. If funding is unavailable, the company may reduce spending or delay the larger Phase 2b/3 trial; it warns that operations could be severely curtailed or cease.
- The filing provides no financial guidance. Clinical success, FDA clearance or approval, financing availability, competition, regulatory requirements, and commercialization remain key uncertainties.
- BioVie disclosed royalty obligations on future BIV201 or other covered terlipressin sales, including low-single-digit royalties and a University of Padova royalty capped at $200,000 per year. It reported no material legal proceedings apart from the patent challenge described above.
- Management concluded disclosure controls and procedures were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Reconcile the bridge-financing amounts: the notes report $530,000 drawn by December 31, while MD&A says $750,000 drawn “to date”; subsequent-event disclosure reports cumulative partial second-draw advances of $300,000 by February 12, 2020. Confirm actual borrowings, remaining availability, and repayment terms.
- Confirm the status, FDA clearance, funding, timing, and design of the planned Phase 2b/3 study, including the liquid formulation and manufacturing readiness.
- Assess the effect of the invalidated ’945 patent and the status and scope of the pending formulation patent application, as well as remaining orphan-drug protections and royalty obligations.
- Review the potential dilution and governance implications of the Acuitas financing and the February 2020 agreement, which extended certain rights through April 30, 2020 and contemplated 5,359,832 shares for Acuitas at the planned offering closing.
- Evaluate near-term liquidity and going-concern risk against the company’s very low cash balance, operating cash burn, current liabilities, and dependence on further financing.