BioCryst Pharmaceuticals, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Financial statement amounts below are in millions of dollars unless noted. BioCryst is a biotechnology company developing small-molecule medicines, principally for rare diseases; it reported continuing operating losses and negative operating cash flow.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 or prior period |
|---|---|---|
| Total revenue | $4.8 | $5.9 |
| Operating expenses | $45.8 | $35.2 |
| Loss from operations | $(41.0) | $(29.3) |
| Net loss | $(37.6) | $(31.1) |
| Basic and diluted loss per share | $(0.24) | $(0.28) |
| Net cash used in operating activities | $(23.3) | $(27.0) |
| Cash, cash equivalents and restricted cash at quarter-end | $103.4 | $115.7 at December 31, 2019 |
- Revenue comprised $0.2 product sales, $1.9 royalties and $2.7 collaborative and other R&D revenue. The latter included $1.6 from HHS programs and $1.1 of Torii agreement revenue.
- R&D expense was $29.9, up from $27.5; SG&A was $15.9, up from $6.2. The filing attributes much of the SG&A increase to berotralstat launch preparation and SUL arbitration-related costs.
- Cash and cash equivalents were $101.9, with $11.2 of investments. Working capital was $32.8, down from $72.0 at year-end 2019. Total assets were $136.6 and stockholders’ equity was $3.6.
- Cash used in investing activities was $(10.7), primarily reflecting investment maturities; financing activities provided $0.3. Cash, cash equivalents and restricted cash decreased $12.3 during the quarter.
- At March 31, the senior credit facility had $50.0 principal outstanding and a 9.6% interest rate; the balance sheet reported $50.5 in current and long-term facility liabilities. The facility requires at least $25.0 of unrestricted cash and scheduled principal payments begin after the interest-only period ending June 2020.
- Non-recourse PhaRMA Notes had a $29.7 carrying value and remained in default. The notes bear 14% interest, mature December 1, 2020, and are expected by the company not to be repaid by Royalty Sub at maturity. Their fair value was estimated at approximately 3% of carrying value.
Material changes and unusual items
- Revenue declined 18% year over year, mainly from lower peramivir product sales and royalties, partly offset by Torii revenue. R&D spending rose 9%, and total operating expenses rose 30%.
- Net loss worsened by $6.5 million, despite lower operating cash use. Loss per share narrowed because weighted-average shares increased to 154.2 million from 110.2 million.
- A March 2020 partial arbitration award found that Seqirus UK Limited materially breached its peramivir agreement, terminated the agreement and restored rights to BioCryst effective March 17, subject to further proceedings. The award also included a $5.0 million milestone payment plus interest and legal-cost reimbursement. BioCryst recorded a $6.1 million settlement gain in other income and $4.7 million of related legal fees and other expenses in SG&A.
- The company reported $6.4 million of interest and other income, versus $0.6 million a year earlier, primarily reflecting the arbitration award. Interest expense was $3.0 million. The prior-year period included a $0.4 million foreign-currency hedge gain; Q1 2020 included a $0.02 million loss.
Outlook, developments and principal risks
- Management forecast 2020 operating cash usage of $125–$150 million and operating expenses of $135–$160 million. The expense forecast excludes equity-based compensation; the cash-use forecast excludes specified non-routine items, including possible hedge-related cash flows.
- The company said existing resources were expected to fund operations into 2021, but also stated that planned operations raise doubt about its ability to continue as a going concern through 2021. It expects 2020 expenses to exceed revenues and anticipates further losses and negative cash flows. Potential funding measures include government contracts, licensing, equity or debt financing, spending reductions and restructuring.
- Berotralstat: the FDA accepted the U.S. NDA and set a December 3, 2020 PDUFA date; the EMA validated the marketing application; and a Japanese application was submitted. Management expected Japanese approval in the second half of 2020. Its stated global peak-sales potential of over $500 million is an estimate, not assured guidance. These regulatory and sales expectations are subject to material uncertainty.
- BCX9930 advanced to a proof-of-concept study in PNH patients. The filing reported initial treatment-naïve patient enrollment and projected further cohort data in Q3 2020 and data from C5-inhibitor-resistant patients by year-end. BCX9250 Phase 1 results were expected in the second half of 2020. Galidesivir’s COVID-19 trial began after quarter-end and was funded by NIAID/HHS.
- COVID-19 had not materially affected the company’s financial condition, results or liquidity as of the filing’s assessment, but management warned that the pandemic could disrupt trials, suppliers, regulators, commercialization and access to capital.
- A $500 million shelf registration statement was filed April 24, 2020; once effective, it could enable future securities sales and potential dilution. A currency-hedge payment of up to $1.95 million could be required in May 2020 depending on the specified exchange rate.
- Other significant risks include reliance on government reimbursements and contracts, single-source manufacturers and third-party research providers, clinical and regulatory uncertainty, additional financing needs, senior-credit-facility covenants, and possible remedies by PhaRMA noteholders. The filing also cites legal, competitive, reimbursement and intellectual-property risks.
Important facts for investors to verify
- Whether available cash and planned financing are sufficient given forecast cash use and management’s going-concern warning.
- Progress and regulatory outcomes for berotralstat, including the U.S. PDUFA date, Japanese review and reimbursement conditions, and European review.
- Timing and results of BCX9930, BCX9250 and galidesivir trials, including any impact from COVID-19.
- Implementation of the SUL arbitration award, recovery of awarded amounts and the commercial implications of regaining peramivir rights.
- Royalty Sub’s PhaRMA Notes default, December 2020 maturity and potential consequences of creditor remedies; also monitor senior-facility repayment and cash-covenant compliance.
- Whether the company uses its new shelf registration or other financing, and the resulting dilution and liquidity impact.