BioVie Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2019, the company’s fiscal first quarter of fiscal 2020. The filing was signed November 19, 2019. BioVie is a clinical-stage biotechnology company developing BIV201 (continuous-infusion terlipressin), initially for ascites associated with liver cirrhosis. The filing reports no revenue.
Key Financial Results
| Metric | Three months ended September 30, 2019 | Comparable 2018 period |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $706,218 | $491,427 |
| Research and development | $341,501 | $194,521 |
| Selling, general and administrative | $307,373 | $239,562 |
| Operating loss | $706,218 | $491,427 |
| Net loss | $3,821,227 | $439,871 |
| Net loss attributable to common stockholders | $20,920,285 | $488,530 |
| Basic and diluted loss per share | $0.04 | $0.00 |
| Net cash used in operating activities | $590,914 | $441,882 |
| Net cash from financing activities | $500,000 | $2,531,700 |
Balance sheet and liquidity: At September 30, 2019, cash was $249,009 and current assets were $765,388, versus current liabilities of $11,328,986. Current liabilities included $10,643,392 of warrant and debenture-conversion-option derivative liabilities. The company reported total assets of $2,608,358, a stockholders’ deficit of $8,720,628, and an accumulated deficit of $28.2 million. The $500,000 related-party debenture was presented net of a $498,466 discount.
Margins and debt: Operating and net margins are not meaningful because the company reported no revenue. The September 2019 related-party debenture carries 10% interest and accrues additional principal at 6% annually; it is convertible and is mandatorily redeemable upon closing of the contemplated public offering. The filing provides no conventional operating profitability measure.
Material Changes and Unusual Items
- Net loss rose by approximately $3.4 million year over year. Management attributed this mainly to about $3.5 million of financing-related interest expense and a roughly $214,000 increase in operating expenses, partly offset by a $363,000 gain from changes in derivative fair value.
- Operating expense growth reflected winding down the Phase 2a trial and preparing Phase 2b/3 protocols and study materials; SG&A also increased, including costs related to hiring and a potential capital raise and Nasdaq listing.
- The company issued 140,625,000 commitment shares to its controlling stockholder in connection with the bridge financing. It recorded a $17.1 million deemed dividend, which substantially increased the loss attributable to common stockholders but did not represent an equivalent cash outflow. Common shares outstanding increased from 507,305,147 at June 30 to 647,930,147 at September 30.
- BioVie drew $500,000 of a potential $2.0 million bridge facility from Acuitas. Additional draws were under discussion amid delays to the contemplated offering. The filing describes substantial dilution and related-party financing terms, including warrants and potential adjustments tied to the offering.
- Cash declined by $90,914 during the quarter. Operating cash use was partly offset by the $500,000 bridge draw; no financing proceeds from a public offering were reported in the period.
Outlook, Risks, and Contingencies
- Going concern: Management states that substantial doubt exists about the company’s ability to continue as a going concern. Continued operations depend on raising additional capital. If financing is unavailable, BioVie may reduce spending, delay the larger Phase 2b study, curtail operations, or cease operations.
- Development and regulatory outlook: The Phase 2a trial was complete. Following a June 2019 FDA Type C meeting, the FDA’s July meeting minutes documented general agreement with the proposed controlled study design and provided guidance on endpoints and other design matters. In October 2019, BioVie announced submission of a Phase 2b/3 protocol to the FDA. The filing provides no assurance of trial success, regulatory approval, or commercialization.
- Financing and listing: BioVie was pursuing a public offering intended to fund the Phase 2b study and at least twelve months of operations, but stated there was no assurance it could complete the offering on acceptable terms. A planned reverse split was terminated on November 7, 2019, and the offering and Nasdaq plans remained uncertain in the filing.
- Patent risk after quarter-end: On November 13, 2019, the Patent Trial and Appeal Board held all claims of U.S. Patent No. 9,655,945, “Treatment of Ascites,” unpatentable and denied BioVie’s motion to amend. The company said the patent was no longer valid or enforceable and was evaluating rehearing or appeal. It stated that its orphan-drug designations and pending liquid-formulation patent application were unaffected.
- Other disclosed risks include clinical-trial outcomes, regulatory approval, competition, capital needs, and the company’s ability to obtain suitable financing or commercial partners. The filing reports no material off-balance-sheet arrangements and no other material legal proceedings beyond the patent challenge.
Important Facts for Investors to Verify
- Whether BioVie subsequently secured financing or completed the contemplated offering, and the resulting dilution, use of proceeds, and repayment of the bridge debenture.
- The current status and timing of the Phase 2b/3 trial, including FDA feedback, protocol acceptance, funding, and trial initiation.
- The outcome of any rehearing or appeal concerning Patent No. 9,655,945, and the scope and status of the pending formulation patent application.
- The actual cash runway and near-term obligations, including the terms and availability of further related-party bridge draws.
- The full economic and control effects of Acuitas’s shares, warrants, conversion rights, and offering-related ownership provisions.