BioVie Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended June 30, 2019, with FY2018 comparisons. The filing is an annual report, not a standalone 2018 fourth-quarter report. It was signed September 26, 2019.
Business context
BioVie is a clinical-stage biotechnology company with no approved products or product revenue. Its principal program is BIV201, continuous-infusion terlipressin, under development for ascites associated with liver cirrhosis. The company completed a six-patient Phase 2a trial and reported top-line results in April 2019. The filing does not provide clear numerical trial results in the supplied text. BioVie also reported developing a liquid formulation; its separate antibiotics program was inactive.
Financial results and liquidity
| Metric | FY2019 / June 30, 2019 | FY2018 / June 30, 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $2.497 million | $2.372 million |
| Research and development | $1.008 million | $0.371 million |
| Selling, general and administrative | $1.259 million | $1.772 million |
| Operating loss | $2.497 million | $2.372 million |
| Net loss | $2.444 million | $2.413 million |
| Net cash used in operating activities | $2.502 million | $0.621 million |
| Cash and cash equivalents | $0.340 million | $0.046 million |
| Total assets | $2.574 million | $2.175 million |
| Total liabilities | $0.443 million | $2.064 million |
| Stockholders’ equity | $2.131 million | $0.111 million |
Margins are not meaningful because the company reported no revenue. Accumulated deficit was $7.262 million. Year-end liabilities consisted of current accounts payable and accrued expenses; the balance sheet showed no long-term liabilities at June 30, 2019. Cash flow from financing activities was $2.796 million, primarily reflecting $3.040 million of preferred-stock proceeds, partly offset by debt repayment. The filing reports no material off-balance-sheet arrangements.
Total operating expenses rose $125,000 year over year: the $637,000 increase in R&D, primarily for the Phase 2a trial and staffing, was partly offset by lower SG&A, including the absence of substantial stock-based professional-services compensation recorded in FY2018.
Material changes and financing
- Common shares outstanding increased from 98.5 million at June 30, 2018 to 507.3 million at June 30, 2019, largely reflecting financing-related conversions and warrant exercises. The filing reported 647.9 million shares outstanding as of September 24, 2019.
- During FY2019, the company settled $1.476 million of debt and accrued compensation by issuing shares with a reported fair value of $1.150 million. Related-party amounts accounted for $1.314 million of the debt settled.
- After year-end, on September 24, 2019, BioVie entered into a related-party bridge financing commitment of up to $2.0 million from Acuitas, its controlling stockholder; $500,000 had been drawn by the report date. The debentures carry a 10% original issue discount, 10% interest, and additional principal accrual of 6% annually, and are convertible on specified terms. The filing describes associated share and warrant issuances and possible further dilution.
Outlook, risks and unusual items
- Going concern: The auditor highlighted substantial doubt about BioVie’s ability to continue as a going concern, citing recurring losses and negative operating cash flow. Management said further capital was needed to continue development; failure to secure financing could delay, reduce or end programs. The financial statements include no adjustments for the going-concern uncertainty.
- Clinical and regulatory: Following its June 2019 FDA Type C meeting, BioVie planned a randomized next-stage study and aimed to proceed to Phase 2b/3 or Phase 3. July meeting minutes documented general agreement with the proposed study design, alongside FDA suggestions on endpoints and other design elements. The filing also notes FDA concerns about the adequacy of Phase 2a topline results and that an additional Phase 2 study may be advisable; final regulatory requirements were not assured. Progress depends on funding.
- Patent dispute: Mallinckrodt challenged BioVie’s U.S. patent covering BIV201. The PTAB instituted inter partes review after finding a reasonable likelihood that at least one claim was unpatentable. An oral hearing was held in August 2019; outcome and any settlement were uncertain. No related accrual or adjustment was recorded at year-end.
- Market and product risks: BIV201 remains investigational and requires successful trials, FDA approval, manufacturing readiness and market adoption. BioVie relies on third parties for manufacturing and has no commercial sales infrastructure. Orphan Drug and Fast Track designations do not guarantee approval or shorten the required evidence standard.
- Capital structure and related parties: Acuitas is controlled by the CEO and is both a major investor and lender. The filing describes conditional transactions that could issue substantial shares and warrants to Acuitas, as well as a proposed public offering and reverse stock split. Financing terms, ownership concentration and dilution warrant close review.
- The company reported a $51,400 gain on settlement of debt. The statements also include a deemed dividend of $48,659 related to warrant ratchet adjustments, affecting loss attributable to common stockholders.
The independent auditor expressed an unqualified opinion on the FY2019 financial statements, while emphasizing the going-concern uncertainty. Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2019.
Key facts for investors to verify
- Current cash, burn rate, remaining bridge availability and the status, terms and net proceeds of any subsequent public offering.
- Whether the planned BIV201 study proceeded, its final FDA-agreed design and endpoints, trial funding, and complete Phase 2a efficacy and safety data.
- The final PTAB decision or settlement concerning the ’945 patent and the resulting scope and enforceability of BioVie’s patent rights.
- Fully diluted share count and the actual or potential impact of Acuitas-related shares, warrants, convertible debt and other outstanding securities.
- Any later changes to the going-concern assessment, liquidity outlook or plans to reduce or suspend development spending.