BIOCRYST PHARMACEUTICALS INC quarterly report, Q3 FY2020

BioCryst Pharmaceuticals, Inc. — Q3 2020 Form 10-Q

Reporting period: Quarter and nine months ended September 30, 2020. Amounts below are in U.S. dollars; financial statement figures are converted from thousands to millions unless stated otherwise. BioCryst is a biotechnology company focused on small-molecule medicines, particularly for rare diseases.

Financial performance and liquidity

Metric	Q3 2020	Q3 2019	Nine months 2020	Nine months 2019
Revenue	$6.1 million	$1.8 million	$13.8 million	$9.1 million
Operating loss	$42.9 million	$35.1 million	$122.4 million	$99.3 million
Net loss	$46.1 million	$37.6 million	$122.3 million	$106.3 million
Basic and diluted loss per share	$0.26	$0.34	$0.75	$0.96
Cash used in operating activities	—	—	$92.6 million	$79.1 million

• Q3 revenue increased primarily on higher U.S. government reimbursement for galidesivir development. Nine-month revenue also included Torii Agreement revenue; lower peramivir royalties and partner sales partly offset the increases.
• Nine-month operating expenses were $136.1 million, up from $108.5 million. R&D was $87.6 million versus $80.3 million; SG&A was $46.9 million versus $26.6 million. Higher spending reflected BCX9930 and galidesivir development, commercial launch preparation for ORLADEYO, and arbitration-related legal costs.
• Cash, cash equivalents and investments totaled approximately $146.3 million at September 30, 2020 ($96.5 million cash and $49.8 million investments); restricted cash was an additional $2.2 million. Working capital was $50.7 million, down from $72.0 million at year-end 2019.
• Financing activities provided $103.8 million during the first nine months, including $107.7 million net proceeds from a June public offering of common stock and pre-funded warrants. Shares outstanding rose to 176.6 million at September 30, from 154.1 million at December 31, 2019.
• At September 30, the balance sheet reported $45.0 million principal under the senior credit facility, bearing 8.5% interest, and approximately $29.9 million of non-recourse notes payable. The credit facility requires at least $25 million of unrestricted cash and includes restrictive covenants.

Material changes and unusual items

• The International Chamber of Commerce arbitration with Seqirus resulted in termination of the commercialization agreement and restoration of peramivir rights to BioCryst. U.S. commercialization transitioned to BioCryst on August 1, 2020; Australia was scheduled to transition November 1. The tribunal awarded $5.0 million plus interest for an unpaid milestone and awarded fees and arbitration costs. BioCryst recorded an $8.9 million settlement gain in other income and $5.0 million of related legal and other expenses in SG&A for the nine-month period.
• BioCryst reported a $9.0 million net amount in interest and other income and expense for the first nine months, compared with $1.5 million in 2019, primarily reflecting the arbitration-related gain. Interest expense was $8.9 million, broadly unchanged year over year.
• The company issued 22.0 million common shares and 3.5 million pre-funded warrants in June, creating material dilution; the warrants have a $0.01 exercise price.
• Peramivir inventory was $6.2 million at September 30, 2020; there was no inventory balance at December 31, 2019.

Outlook, programs and principal risks

• Management estimated that available resources would fund planned operations through the second quarter of 2021, but stated that planned operations raise doubt about the company’s ability to continue as a going concern through 2021. BioCryst expects continued operating losses and negative operating cash flows and may need additional capital, government funding, licensing proceeds, spending reductions or restructuring.
• 2020 financial outlook: net operating cash use of $150–$165 million and operating expenses of $180–$195 million. The operating-expense range excludes equity-based compensation; the cash forecast excludes certain non-routine inflows and outflows.
• 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; an EU review was underway. The company had completed U.S. commercial infrastructure build-out and estimated potential global peak annual sales above $500 million, an internal estimate subject to significant uncertainty. The MHRA granted a positive EAMS scientific opinion on October 30, 2020, after quarter-end.
• For BCX9930 in PNH, BioCryst reported encouraging early biomarker and hemoglobin results and planned additional patients at doses up to 500 mg twice daily. COVID-19 slowed initiation of inadequate-C5-responder cohorts; data were expected in Q1 2021.
• Galidesivir’s COVID-19 trial in Brazil had completed enrollment in Part 1, with results expected in Q4 2020. Management said evidence of clinical and/or virologic activity was important to further program advancement. Government contracts support development, but agencies may terminate them and funding is conditional.
• Management expected BCX9250 Phase 1 results by year-end 2020. COVID-19 had slowed some clinical trial activity, including BCX9930 cohort startup, although the company said the pandemic had not materially affected its financial condition, results or liquidity to date.
• A separate non-recourse financing, the PhaRMA Notes, remained in default and had a December 1, 2020 final maturity. BioCryst did not expect Royalty Sub to repay at maturity. The company said the notes were non-recourse, but noteholders could pursue remedies against collateral and BioCryst’s interest in Royalty Sub, potentially affecting future Shionogi royalties and causing legal or other costs.
• Other key risks include continued financing needs, product approval and commercialization uncertainty, reliance on government contracts and third-party manufacturers and partners, clinical and regulatory delays, competition, intellectual-property disputes, and potential effects of COVID-19. The filing reported effective disclosure controls as of September 30, 2020.

Most important facts for investors to verify

• Whether ORLADEYO received FDA approval by its December 3, 2020 action date and the resulting launch, pricing, reimbursement and cash needs.
• Whether the company’s cash-use and expense guidance remained achievable, and whether additional financing was obtained before the stated second-quarter 2021 liquidity horizon.
• How the PhaRMA Notes’ December 2020 maturity and continuing default were resolved, including any effect on royalties, collateral or costs.
• Whether BCX9930 and galidesivir data met the milestones and expectations described, and whether COVID-19 continued to affect trial enrollment or timing.
• Whether government reimbursement and contract funding continued as planned, and whether peramivir rights transitions and the Seqirus arbitration award were implemented and collected as expected.
• The impact of the June equity issuance and outstanding warrants, options and other potential share issuances on dilution.