BioCryst Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2019. Unless otherwise noted, financial figures are in millions of dollars. The filing describes a biotechnology company developing small-molecule medicines, with a focus on rare diseases.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $1.8 | $1.5 | $9.1 | $17.9 |
| Operating expenses | $36.9 | $29.9 | $108.5 | $86.9 |
| Operating loss | $(35.1) | $(28.5) | $(99.3) | $(69.0) |
| Net loss | $(37.6) | $(29.6) | $(106.3) | $(73.8) |
| Basic and diluted loss per share | $(0.34) | $(0.28) | $(0.96) | $(0.73) |
| Operating cash flow | Not reported separately | Not reported separately | $(79.1) | $(68.6) |
- Revenue mix: Nine-month 2019 revenue comprised $2.0 million of product sales, $3.5 million of royalties and $3.6 million of collaborative and research reimbursements. Q3 included $0.3 million of product sales, $0.5 million of royalties and $0.9 million of research reimbursements.
- Margins: The filing does not present a standalone gross-margin measure. Revenue remained small relative to operating expenses, resulting in substantial operating losses.
- Cash and liquidity: At September 30, cash and cash equivalents were $29.9 million, restricted cash $1.5 million and investments $38.5 million. Cash, cash equivalents and restricted cash totaled $31.5 million. Net working capital was negative $3.4 million, versus positive $44.9 million at December 31, 2018.
- Debt and obligations: The senior credit facility had $50.0 million outstanding, at a 10.1% interest rate. The balance sheet also reported $29.5 million of current non-recourse notes payable and $13.4 million of interest payable. The PhaRMA Notes carry a 14% coupon, remain in default, and are non-recourse to BioCryst except for its pledge of Royalty Sub equity. Interest expense was $8.8 million for the first nine months, up from $6.8 million.
- Other balance-sheet data: Total assets were $90.5 million and stockholders’ equity was negative $41.3 million. The company reported $14.0 million of stock-based compensation for the first nine months, compared with $7.1 million a year earlier.
Changes versus the prior comparable period
- Nine-month revenue declined $8.8 million, primarily because 2018 included $7.0 million of deferred revenue and a $5.0 million milestone payment associated with peramivir EMA approval. Increased 2019 government-contract revenue and partner product sales partly offset the decline.
- Nine-month R&D expense rose $18.8 million to $80.3 million, driven mainly by complement-mediated disease and HAE programs. BCX9930 program expense increased to $20.0 million from $7.4 million; BCX7353 expense was $43.5 million versus $39.1 million.
- Nine-month SG&A increased to $26.6 million from $25.0 million; Q3 SG&A rose to $11.7 million from $7.9 million, reflecting commercial and medical-affairs spending to prepare for a planned U.S. BCX7353 launch.
- Nine-month operating cash use increased by $10.6 million. Financing included $19.5 million of senior-facility proceeds; investing cash inflow was $61.7 million, principally from investment maturities and sales.
- Investments declined to $38.5 million from $100.1 million at year-end 2018, while cash and cash equivalents increased to $29.9 million from $26.7 million.
Outlook, management commentary and material risks
- 2019 outlook: Management forecast operating cash use of $105–$130 million and operating expenses of $120–$145 million. The expense range excludes equity-based compensation; management expected approximately $1.0 million of additional stock-option expense in Q4. Management stated available resources were expected to fund operations into 2020, while also disclosing substantial doubt about the company’s ability to continue as a going concern through 2020.
- Financing and liquidity: The $100 million senior credit facility provided $50 million at closing; further tranches depend on development contingencies and financial conditions. It requires minimum unrestricted cash of $25 million, rising to $40 million if the second tranche is accessed. The facility’s interest-only period runs through June 2020, followed by scheduled principal and interest payments. Management cited potential additional government funding, licensing, financing, cost reductions or restructuring as possible liquidity measures.
- Clinical and commercial developments: APeX-2 met its primary endpoint; the 150 mg BCX7353 dose reduced HAE attack rate by 44% versus placebo. The filing said an NDA was expected in Q4 2019, subject to development and regulatory requirements. APeX-2 and APeX-S were extended to monitor longer-term safety. After quarter-end, BioCryst reported interim BCX9930 Phase 1 results and initiated a BCX9250 Phase 1 trial.
- Subsequent event: On November 5, 2019, BioCryst announced a Japan commercialization and license agreement for BCX7353 with Torii. It provides a $22 million upfront payment, contingent regulatory milestones of $20 million or $15 million depending on approval timing and reimbursement-price conditions, and tiered royalties. These are post-quarter developments, not Q3 recognized revenue.
- Partner and legal matters: BioCryst was in arbitration with SUL over several agreement issues, including an EMA approval milestone and commercialization. In August 2019, a separate Shionogi arbitration resolved in Shionogi’s favor; the milestone was deemed not achieved and the royalty rate remained unchanged.
- Key risks: Continued losses and cash burn, potential need for additional capital, debt covenants and minimum-cash requirements, clinical and regulatory uncertainty, reliance on government reimbursement and development contracts, partner performance, single-source manufacturing, competition, and the outcome of disputes. Government contracts may be terminated or audited, and reimbursement or funding could be delayed or reduced. Peramivir royalties subject to the PhaRMA Notes generally are not available for other company purposes until those obligations are repaid.
- Management reported disclosure controls and procedures were effective as of September 30, 2019, with no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether cash use and expenses remain within management’s 2019 outlook, and whether liquidity supports operations beyond the stated runway into 2020.
- Current unrestricted cash relative to the senior facility’s minimum-cash covenant, and the conditions for drawing additional credit tranches.
- BCX7353 NDA and regulatory progress, including longer-term safety data and the conditions attached to potential Japanese approval, reimbursement and Torii payments.
- Progress and funding status of BCX9930, BCX9250 and government-supported galidesivir development.
- Developments and potential financial effects of the SUL arbitration and the defaulted PhaRMA Notes.
- Whether partner commercialization, government contracts and product supply generate revenue and cash on the timing and terms management anticipates.