BioCryst Pharmaceuticals, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted. BioCryst is a biotechnology company developing small-molecule medicines, with a focus on rare diseases.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Total revenue | $2.9 | $1.4 | $7.7 | $7.3 |
| Research and development expense | $27.5 | $27.7 | $57.4 | $55.2 |
| Selling, general and administrative expense | $13.9 | $8.7 | $29.7 | $14.9 |
| Operating loss | $(38.5) | $(34.9) | $(79.5) | $(64.2) |
| Net loss | $(38.6) | $(37.6) | $(76.2) | $(68.7) |
| Basic and diluted loss per share | $(0.24) | $(0.34) | $(0.48) | $(0.62) |
| Cash used in operating activities | — | — | $(54.3) | $(51.5) |
- Q2 revenue growth reflected higher U.S. government reimbursement for galidesivir development and Torii collaboration revenue; prior-year Q2 included more peramivir royalties.
- For the first half, higher galidesivir and Torii revenue was largely offset by lower peramivir product sales and royalties. Revenue remained small relative to operating expenses; Q2 had no product-sales revenue or cost of product sales.
- At June 30, cash and cash equivalents were $173.5, investments $15.9, and restricted cash $2.2. Net working capital was $101.2, versus $72.0 at year-end 2019. Operating cash use exceeded the prior-year first half.
- Reported senior credit facility debt was $50.8 carrying value ($50.0 principal), with an 8.5% interest rate and a $25.0 minimum unrestricted-cash requirement. Non-recourse PhaRMA Notes were reported at $29.8, plus $17.8 of interest payable. The notes remained in default.
- Stockholders’ equity was $76.5, compared with $38.3 at December 31, 2019. The June offering raised $107.7 net through common shares and pre-funded warrants.
Material changes and unusual items
- SG&A increased substantially year over year in the first half, primarily due to preparation for a potential U.S. ORLADEYO launch and arbitration-related legal costs. R&D spending shifted toward BCX9930 and galidesivir, while ORLADEYO spending declined as the program approached launch.
- The company recorded an $8.9 million settlement gain in other income from its arbitration with Seqirus (SUL), and $5.0 million of associated legal and other expenses in SG&A. The tribunal terminated the SUL agreement, restored peramivir rights to BioCryst, and awarded a $5.0 million milestone payment plus interest. U.S. commercialization transition was scheduled for August 1, 2020, and Australia for November 1, 2020.
- The company issued 22.0 million common shares and pre-funded warrants for 3.5 million shares in June. The financing materially increased liquidity but diluted existing shareholders.
Outlook, commentary and risks
- Management forecast 2020 net operating cash use of $150–$165 million and operating expenses of $180–$195 million, excluding equity-based compensation. It said available cash and investments were expected to fund operations through Q2 2021, while also stating that planned operations raised doubt about the company’s ability to continue as a going concern through 2021.
- BioCryst expected 2020 expenses to exceed revenue and anticipated continued operating losses and negative cash flows until revenue supports operations. It may seek government funding, licensing or collaboration payments, additional equity or debt, or spending reductions.
- ORLADEYO’s U.S. NDA had an FDA action date of December 3, 2020; Japan’s review was expected to yield a decision in December 2020, subject to reimbursement pricing conditions for a potential Torii milestone. The company cited potential global peak annual sales above $500 million, an estimate subject to significant uncertainty. EU review was underway.
- Management expected BCX9930 data from higher-dose treatment-naïve PNH patients in Q3 2020 and data from poor responders to C5 inhibitors by year-end. The filing also described a galidesivir COVID-19 trial in Brazil and expected information from its first part by the end of Q3. These are forward-looking expectations, not reported outcomes.
- Key risks include clinical and regulatory uncertainty, commercialization and reimbursement execution, reliance on government contracts and third-party manufacturers, COVID-19 disruption, potential need for further financing and dilution, and restrictive credit-facility covenants.
- The PhaRMA Notes had been in default since 2014 and were due at final maturity on December 1, 2020; management did not expect Royalty Sub to repay them at maturity. The filing said they were non-recourse to BioCryst, but holders could pursue remedies against collateral and Royalty Sub.
Important facts for investors to verify
- Whether the FDA, PMDA and EMA decisions for ORLADEYO occur on the expected timelines, and whether Japanese reimbursement meets the Torii milestone threshold.
- Actual 2020 cash use and expenses against management’s ranges, and the company’s financing plan beyond its stated Q2 2021 liquidity horizon.
- Progress and safety results for BCX9930 and galidesivir, including whether anticipated trial readouts are delivered.
- Peramivir rights transition, commercial performance after the SUL arbitration, and any remaining arbitration or collection issues.
- Status and consequences of the PhaRMA Notes default and maturity, and compliance with the senior credit facility’s cash minimum and other covenants.
- Further share issuance, warrant exercises, or other dilution following the June 2020 financing.