ABVC BioPharma, Inc. (American BriVision (Holding) Corporation) — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; this is an annual report, not a standalone fourth-quarter report. The filing was signed March 16, 2021. The company described itself as an early-stage, clinical-stage biotechnology business with a CDMO services subsidiary, BioKey. Its drug and medical-device pipeline is largely licensed from or developed with related parties.
Financial and operating results
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $483,045 | $701,719 |
| Gross profit | $464,329 | $681,582 |
| Operating expenses | $8,970,105 | $4,140,360 |
| Loss from operations | $(8,505,776) | $(3,458,778) |
| Net loss | $(10,593,584) | $(3,933,240) |
| Basic and diluted loss per share | $(0.50) | $(0.21) |
| Net cash used in operating activities | $(4,563,919) | $(3,134,526) |
| Net cash provided by financing activities | $9,567,843 | $3,087,489 |
- Revenue was mainly from BioKey CDMO services; the company reported no royalty revenue to date. Gross margin was approximately 96% in 2020, but low revenue relative to operating costs resulted in substantial operating and net losses.
- Cash and cash equivalents were $4.27 million and restricted cash was $728,163 at year-end, versus $144,295 and $16,148, respectively, in 2019. Current assets were $6.17 million and current liabilities $4.84 million, producing working capital of $1.33 million, compared with a $5.94 million working-capital deficit in 2019.
- Total liabilities were $8.94 million. These included $1.63 million of short-term bank loans, $2.50 million of noncurrent convertible notes, $124,400 of PPP borrowing, and $1.77 million of operating lease liabilities. The October 2020 convertible note bears 10% interest, matures in 2022, and is convertible at $2.25 per share.
- Financing provided $9.57 million of cash, including $7.62 million from common-stock issuance and $2.50 million from convertible notes. Cash used by operations increased year over year.
Material changes versus 2019
- Revenue declined approximately 31%, which management attributed primarily to COVID-19-related postponements of BioKey customer projects.
- Operating expenses rose $4.83 million; stock-based compensation was $4.15 million, compared with $22,314 in 2019. Management linked the increase largely to professional and advisory services and compensation arrangements for deferred employee salaries and consulting fees.
- Net loss increased by $6.66 million. Other expenses included a $961,217 impairment loss, a $1.17 million loss on equity-method investments, and a $40,589 investment loss.
- Year-end cash improved following equity and debt financing. Common shares outstanding increased to 24,420,526 from 19,478,168; the company also issued warrants and options, creating potential dilution.
Outlook, pipeline, and risks
- Development outlook: Management planned to pursue a partner for Vitargus (ABV-1701) and expected to begin its pivotal study in Australia in the third quarter of 2021. It planned ABV-1703 pancreatic-cancer Phase II trials for the third quarter of 2021, ABV-1702 MDS Phase II trials for the fourth quarter of 2021, and an FDA 510(k) submission for corneal-storage device ABV-2002 before year-end 2021. These are forward-looking plans, not guaranteed outcomes.
- Clinical results: The filing reports that ABV-1504’s Phase II study met its primary endpoint at the high dose; the company planned to use that dose in Phase III. ABV-1505 Phase II Part I reported positive results in six patients, a very small study. Vitargus Phase I results were described as showing tolerability and preliminary efficacy. Further trials and regulatory review remain necessary.
- COVID-19: Management said the pandemic affected first-half 2020 revenue and could continue to disrupt trial enrollment, supply chains, partner diligence, and access to capital; the financial impact could not be reliably estimated.
- Financing and execution: The company warned it may need additional capital and may not obtain it on acceptable terms. It has no approved or commercialized pipeline drug or device, relies on partners and licensors, and faces clinical, regulatory, manufacturing, competition, and commercialization risks.
- Controls and related parties: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing inadequate segregation of duties due to a small finance staff. The auditor gave an unqualified opinion on the financial statements but was not engaged to audit internal controls. The filing describes related-party investments, loans, collaborations, and shared control relationships.
- Other notable items: BioKey’s drug-manufacturing license was stated to expire December 2, 2021. The company reported no material pending legal proceedings. Its proposed corporate name change to ABVC BioPharma, Inc. had received state approval but was still awaiting FINRA approval as of the filing.
Most important facts for investors to verify
- Current cash availability, cash burn, debt maturities, PPP forgiveness status, and the financing runway beyond year-end 2020.
- Whether the planned 2021 pivotal and Phase II studies and ABV-2002 510(k) filing commenced, and what updated trial data and regulatory feedback show.
- The basis and valuation assumptions for the $961,217 impairment and $1.17 million equity-method investment loss, including related-party investee condition and transactions.
- Remediation of ineffective disclosure and financial-reporting controls, and whether subsequent filings or audits identify control improvements or financial-statement issues.
- Potential dilution from outstanding warrants, options, convertible notes, and authorized but unissued shares, as well as the terms and conflicts of related-party arrangements.