BioVie Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended December 31, 2020 (quarter ended December 31; comparative periods ended December 31, 2019). Financial statements are unaudited.
Business context
BioVie is a clinical-stage biopharmaceutical company developing BIV201, a continuous-infusion terlipressin candidate for ascites associated with liver cirrhosis. The company reported no product revenue; it is funding research and development and expects substantial losses as development continues.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2020 | Six months ended Dec. 31, 2020 |
|---|---|---|
| Revenue | No revenue reported | No revenue reported |
| Operating expenses | $3.063 million | $3.450 million |
| Loss from operations | $3.063 million | $3.450 million |
| Net income (loss) | $(3.058) million | $4.276 million |
| Net income (loss) attributable to common stockholders | $(3.058) million | $(49.322) million |
| Basic and diluted EPS | $(0.22) | $(4.95) |
The six-month net income figure does not reflect the amount attributable to common stockholders: a $53.598 million related-party deemed dividend resulted in a substantial loss attributable to common stockholders. Derivative fair-value changes and interest expense also materially affected reported results. These non-operating accounting items make net income a poor indicator of operating performance. Margins are not meaningful because no revenue was reported.
- Cash and liquidity: Cash was $11.876 million at December 31, 2020, versus $37,195 at June 30, 2020. Working capital was approximately $11.6 million; stockholders’ equity was $13.075 million.
- Cash flow, six months: Operating activities used $2.403 million; financing activities provided $14.242 million; cash increased by $11.839 million.
- Debt and liabilities: Total liabilities were $384,928, including a $62,500 PPP loan payable. The related-party convertible debenture and derivative liabilities were eliminated following the September 2020 offering and settlement.
- Funding and dilution: The September 22 registered offering sold 1,799,980 shares at $10 per share and generated approximately $15.6 million net of approximately $2.4 million in issuance costs. Approximately $1.8 million repaid the Acuitas debenture. BioVie also issued 6,909,582 shares to Acuitas under prior arrangements and warrant exercises. Outstanding shares rose from 5,204,392 at June 30 to 13,916,164 at December 31.
Changes versus the prior comparable periods
- For the December quarter, BioVie moved from $6.665 million net income in 2019 to a $3.058 million net loss in 2020. Operating expenses rose from $710,447 to $3.063 million, mainly reflecting higher R&D spending and $1.5 million of stock-based directors’ compensation.
- Quarterly R&D expense increased to $938,101 from $346,514; quarterly SG&A increased to $2.068 million from $306,589. Management also cited approximately $220,000 in consulting fees related to new business development pursuits.
- For the six-month period, net income increased to $4.276 million from $2.844 million, while operating expenses increased to $3.450 million from $1.417 million. The reported net income was affected by derivative fair-value and interest items; the $53.598 million deemed dividend drove the six-month loss attributable to common stockholders.
- Stock-based compensation was $1.537 million for the six months, compared with $11,162 a year earlier. The company recorded approximately $4.401 million in unrecognized compensation cost for nonvested options.
Outlook, risks and unusual items
- Management expected to begin treating patients in a Phase 2 study of BIV201 in the first calendar quarter of 2021. The study is intended to inform a pivotal Phase 3 design. The company said it had completed the protocol design and received FDA clearance to begin the study.
- Management believed existing funds would support operations through the next round of clinical trials through at least February 2022. Future funding may require equity or debt financing, licensing, or partnerships; management cautioned that funding is not assured and spending may be deferred or reduced if funding is unavailable.
- The filing identifies COVID-19-related economic and market disruption as a risk to financing access and operations.
- The Patent Trial and Appeal Board had ruled in November 2019 that all claims of BioVie’s U.S. Patent No. 9,655,945, “Treatment of Ascites,” were unpatentable. The company stated that its orphan-drug designations and pending application for a liquid terlipressin formulation were unaffected.
- The company’s $62,500 PPP loan bears 1% interest and may be eligible for forgiveness, but forgiveness was not assured. Low-single-digit royalty obligations and other royalty arrangements are also disclosed.
- BioVie reported effective disclosure controls as of period-end and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the Phase 2 BIV201 study began on schedule and its enrollment, design, and regulatory status.
- Cash burn and remaining liquidity relative to the company’s stated funding horizon through at least February 2022.
- The effects of Acuitas-related share issuances, warrants, options, and stock-based compensation on ownership and future dilution.
- The status and scope of BioVie’s pending formulation patent application and the consequences of the invalidated ’945 patent.
- How much of reported period earnings reflects noncash derivative accounting, deemed dividends, and other unusual items rather than operating activity.