BioCryst Pharmaceuticals, Inc. — Q3 2014 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2014. Amounts below are in U.S. dollars; financial statement amounts are shown in millions unless stated otherwise.
Business context
BioCryst is a clinical-stage biotechnology company focused on developing small-molecule medicines, including treatments for rare diseases. It reported no product-sales revenue in the periods presented; revenue primarily came from government research reimbursements, collaboration revenue, and peramivir royalties.
Financial results and liquidity
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Total revenue | $3.238 | $2.389 | $8.162 | $6.764 |
| Research and development expense | $13.036 | $7.735 | $33.286 | $26.477 |
| General and administrative expense | $1.812 | $1.579 | $5.413 | $4.589 |
| Loss from operations | $(11.610) | $(6.925) | $(30.615) | $(24.383) |
| Net loss | $(8.731) | $(8.001) | $(33.517) | $(24.679) |
| Net loss per share | $(0.12) | $(0.14) | $(0.52) | $(0.46) |
Revenue growth reflected BCX4430 reimbursements under the NIAID/HHS contract, partly offset by the expiration of the BARDA/HHS peramivir development contract on June 30, 2014. Nine-month revenue included $1.951 million of royalties, $5.323 million of government research revenue, and $0.888 million of other collaboration revenue.
Research and development spending rose as work advanced on BCX4161, second-generation HAE compounds, and BCX4430. The nine-month net loss also included a $0.732 million foreign-currency hedge gain, versus a $3.168 million gain in the prior-year period; in Q3, the gain was $4.082 million versus $0.097 million. Interest expense was $3.684 million for nine months, primarily related to the PhaRMA Notes. The filing does not provide a clear operating or gross margin measure; gross margin is not a meaningful reported metric for this development-stage business.
Net cash used in operating activities was $24.661 million for the first nine months, compared with $22.015 million in 2013. At September 30, cash and cash equivalents were $121.157 million and investments were $6.279 million. Working capital was $85.3 million. Total assets were $137.125 million, and stockholders’ equity was $83.454 million.
The June 2014 public offering generated $106.6 million in net proceeds. Common shares outstanding were 71.861 million at quarter-end, up from 59.092 million at December 31, 2013. PhaRMA Notes principal of $30 million and $4.824 million of interest payable were classified as current liabilities following an event of default.
Material changes, outlook, and commentary
- Outlook: Management expected 2014 operating cash usage at the lower end of its previously guided $35–$43 million range and operating expenses of $48–$59 million, excluding stock-based compensation. It expected existing cash and investments to fund operations into 2016; continuing beyond 2016 would require additional funding, licensing, approvals, spending reductions, or restructuring.
- Peramivir: The FDA had accepted the U.S. i.v. peramivir NDA and was expected to act by December 23, 2014. Approval and availability faced uncertainty because the contract manufacturer had received an FDA Warning Letter and Form 483; a satisfactory GMP inspection and resolution of the issues were required for approval.
- BCX4161: The OPuS-1 Phase 2a trial met its primary endpoint, with a statistically significant reduction of 0.45 attacks per week versus placebo (p<0.001). The company was preparing OPuS-2, a 12-week trial of two dose regimens against placebo, and had begun chronic toxicology work.
- BCX4430: NIAID/HHS funding could total $28.7 million if all options were exercised; $22.3 million had been awarded under exercised options. An Ebola non-human-primate dose-ranging study showed significantly prolonged survival at the highest dose, but no animals survived beyond 21 days.
- PhaRMA Notes default: Royalty Sub did not pay all interest due by the September 1, 2014 payment date, triggering an event of default. It also missed a separate $4.2 million 2014 interest payment. Noteholders may accelerate the debt, foreclose on collateral, or pursue other remedies. The notes are non-recourse to BioCryst except for its pledged interest in Royalty Sub; management expected no significant effect on BioCryst’s future results or cash flows, but warned of possible lost future royalties, legal costs, and hedge-liquidation costs.
- Key risks: The company expected continuing losses and future financing needs. Results and liquidity depended on clinical and regulatory outcomes, government reimbursements and contract continuation, third-party manufacturing and development vendors, and commercialization by partners. NIAID/HHS funding could be reduced, delayed, audited, or terminated. The foreign-currency hedge may cause earnings volatility and require collateral or premium payments.
Most important facts for investors to verify
- Whether the FDA approved peramivir by the stated action date, and whether the manufacturer resolved its inspection findings and could supply the product.
- Developments in the PhaRMA Notes default, including any acceleration, foreclosure, settlement, or effect on future Shionogi royalties.
- Actual 2014 cash usage and expenses versus guidance, and whether the stated runway into 2016 remained achievable.
- Progress, safety, efficacy, funding, and timing for BCX4161 OPuS-2, second-generation HAE candidates, and BCX4430.
- Changes in NIAID/HHS funding and reimbursement, and whether additional financing or partnerships were needed.