BioCryst Pharmaceuticals, Inc. — Q3 2012 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2012. BioCryst is a biotechnology company developing small-molecule drug candidates. The financial statements are unaudited.
Key financial metrics
| Metric | Q3 2012 | Nine months 2012 | Comparable 2011 period |
|---|---|---|---|
| Revenue | $5.8 million | $22.2 million | $5.2 million / $14.4 million |
| Research and development expense | $12.1 million | $40.4 million | $15.1 million / $43.0 million |
| General and administrative expense | $1.6 million | $4.9 million | $3.0 million / $9.9 million |
| Operating loss | $8.0 million | $23.2 million | $12.8 million / $38.5 million |
| Net loss | $9.7 million; $0.19 per share | $28.0 million; $0.57 per share | $14.5 million; $0.32 per share / $43.8 million; $0.97 per share |
| Cash used in operating activities | Not provided for the quarter | $30.4 million | $28.3 million |
Amounts are in U.S. dollars. The 2011 comparison columns show Q3 / nine-month figures, respectively. Gross margin is not presented; revenue primarily reflects collaboration reimbursements and licensing/royalty items rather than product sales.
At September 30, 2012, cash and cash equivalents were $24.0 million, restricted cash $0.3 million, and investments $19.6 million. Management reported working capital of $34.0 million. Total assets were $64.1 million and stockholders’ equity $9.8 million. Non-recourse notes payable remained $30.0 million, bearing 14% annual interest.
Changes versus prior period and unusual items
- Nine-month revenue rose $7.8 million year over year, including $7.8 million of deferred Mundipharma revenue recognized after completing a knowledge transfer; the associated $1.9 million expense was also recognized. These recognitions did not provide cash.
- Q3 included $2.8 million of RAPIACTA royalty revenue recognized after BioCryst gained sufficient information to estimate returns. The royalties are directed to Royalty Sub to service its notes and did not increase BioCryst’s cash balance.
- Lower R&D spending reflected reduced activity in ulodesine and peramivir, partly offset by increased spending on BCX4161 and BCX5191. G&A declined largely due to lower transition and professional costs and cost containment.
- Nine-month cash use from operations increased to $30.4 million from $28.3 million. Investing provided $21.2 million and financing provided $16.6 million, including $17.8 million of net proceeds from ATM stock sales. Cash and cash equivalents increased $7.5 million to $24.0 million.
- Foreign-currency hedge losses were $1.5 million for the first nine months, versus $2.9 million in 2011; $5.5 million of collateral was posted and the balance sheet included a $5.5 million derivative liability.
Outlook, developments, and risks
- Management estimated 2012 operating cash utilization of $37–$43 million and stated existing resources plus expected BARDA/HHS receipts were expected to fund operations at least through 2013. This estimate excluded the pending Presidio merger.
- On November 7, 2012, after the quarter end, the independent monitoring committee recommended stopping the hospitalized-patient peramivir Phase 3 trial for futility. Enrollment was suspended; the company planned a full analysis and further BARDA/HHS discussions, but said U.S. registration development was unlikely to continue. The development could affect BARDA/HHS funding.
- Royalty Sub’s September 2012 note interest payment was short by $0.6 million after use of royalty proceeds and the remaining interest reserve. The shortfall accrues interest at 14%; failure to pay it and accrued interest by September 1, 2013 could result in default. Management expected royalties to cover it but gave no assurance.
- A definitive Presidio merger agreement was signed October 17, 2012. The transaction contemplated 24.5 million BioCryst shares, a $25 million investor financing, and at least $35 million of additional equity offerings; completion depended on financing, shareholder approval, and other conditions. Management estimated about $60 million of available funding for the combined company if completed. Failure to close could involve a termination fee of up to $10 million and, in specified circumstances, funding to Presidio of up to $6 million in total.
- Ulodesine remained dependent on securing a partner; BioCryst said it did not plan to fund Phase 3 itself. The proposed Phase 3 plan anticipated approximately 1,800 patients. BCX4161 was planned to enter first-in-human trials before year-end 2012. The BCX5191 IND was withdrawn after FDA concerns about preclinical toxicity; additional studies were planned before deciding whether to continue.
- Key risks include ongoing losses and need for additional capital, dependence on BARDA/HHS reimbursements and collaborators, clinical and regulatory uncertainty, product and patent risks, potential equity dilution, and volatility in Japanese sales and the currency hedge. The company reported effective disclosure controls and no material quarterly change in internal control over financial reporting.
Investor verification priorities
- Review the full peramivir Phase 3 analysis and subsequent BARDA/HHS decisions, including their effects on funding and spending.
- Track RAPIACTA sales, royalty receipts, and Royalty Sub’s ability to meet the $0.6 million interest shortfall by September 1, 2013.
- Confirm the status and final terms of the Presidio merger, the required equity offerings, dilution, and any contingent funding or termination obligations.
- Assess cash burn, available liquidity, and financing needs against management’s stated runway and 2012 cash-utilization estimate.
- Monitor currency-hedge collateral, mark-to-market exposure, and potential future premiums, as well as progress in partnering ulodesine and advancing BCX4161.