BioCryst Pharmaceuticals, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Amounts are in U.S. dollars; financial statement figures are in thousands unless stated otherwise.
Business context and operating developments
BioCryst is a biotechnology company developing small-molecule medicines, principally for rare diseases. Its revenue came from peramivir product sales and royalties, plus government-funded research and development. Key programs included BCX7353 for hereditary angioedema (HAE), BCX9930 for complement-mediated diseases, BCX9250 for FOP, and galidesivir.
- APeX-2 enrollment was complete; the company expected to report 24-week results in Q2 2019 and anticipated an NDA filing for BCX7353 in Q4 2019, subject to results and regulatory progress.
- After reporting positive Phase 2 ZENITH-1 topline results, BioCryst planned to meet with the FDA in Q2 and start a Phase 3 acute-HAE trial using a 750 mg dose in summer 2019.
- The company planned to begin a Phase 1 study of BCX9930 in Q2 2019 and report results in Q4; it also planned an IND submission for BCX9250 in the second half of 2019.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 | Change / context |
|---|---|---|---|
| Total revenue | $5.887 million | $3.976 million | Up 48%; included $1.679 million product sales, $2.322 million royalties and $1.886 million government R&D revenue. |
| Research and development | $27.493 million | $18.441 million | Higher spending on BCX7353, BCX9930, galidesivir and BCX9250. |
| General and administrative | $6.238 million | $7.609 million | Lower mainly because $4.7 million of prior-year merger-related costs did not recur; partly offset by commercial-launch preparation. |
| Operating loss | $29.330 million | $22.214 million | Loss increased as operating expenses grew faster than revenue. |
| Net loss | $31.054 million | $25.777 million | Basic and diluted loss per share was $0.28 versus $0.26. |
| Operating cash used | $26.998 million | $19.653 million | Cash use increased year over year. |
Gross profit on reported product sales was approximately $0.280 million, or 16.7% of product sales. The company-wide operating loss was approximately 498% of revenue and net loss approximately 527% of revenue; these loss-to-revenue ratios reflect the early-stage, R&D-intensive business.
At March 31, 2019, cash and cash equivalents were $34.804 million, restricted cash $2.394 million, and investments $84.408 million, for $119.212 million of cash, cash equivalents and investments before restricted cash. Net working capital was $51.3 million. Total assets were $142.338 million and stockholders’ equity was $22.507 million.
BioCryst had $50 million outstanding under its senior credit facility, at a 10.5% interest rate. The balance sheet reported $49.616 million of senior facility debt, reflecting carrying-value presentation. The non-recourse PhaRMA Notes had a $29.231 million carrying value, with $13.392 million of interest payable; the notes remained in default. The notes are obligations of Royalty Sub and are principally serviced from specified Shionogi royalty and milestone receipts.
Material changes, outlook and risks
- The February 2019 amended credit facility provides up to $100 million in three tranches. The first $50 million was funded; further $30 million and $20 million tranches depend on development and regulatory milestones. It requires at least $25 million of unrestricted cash, rising to $40 million after accessing the second tranche. Interest-only payments run through June 2020.
- Management forecast 2019 operating cash usage of $105–$130 million and operating expenses of $120–$145 million. The expense forecast excludes equity-based compensation; the cash forecast excludes royalty-monetization effects, hedge collateral and other non-routine cash flows.
- Management expected available resources to fund operations into 2020, but stated that continuing losses and negative operating cash flows raised doubt about the company’s ability to continue as a going concern through 2020. It expects 2019 expenses to exceed revenue and anticipates needing additional capital to complete development and commercialization.
- BioCryst and Seqirus (SUL) were in arbitration over issues under their peramivir agreement, including an EMA approval milestone and commercialization. The company cautioned that the outcome is uncertain. A separate Shionogi arbitration concerned sales milestones and escalating royalties; any recovery would primarily benefit Royalty Sub and PhaRMA Note holders.
- Foreign-exchange hedge mark-to-market produced a $0.406 million gain in Q1 2019, compared with a $1.804 million loss in Q1 2018. A hedge premium of up to $1.95 million may be payable in each applicable year through 2020 if the specified yen-dollar threshold is met; maximum potential collateral at March 31, 2019 was $3.9 million.
- Major risks include clinical-trial and regulatory uncertainty, reliance on government contract reimbursements and collaboration partners, single-source manufacturing, competition, financing and credit-covenant constraints, and potential dilution from future capital raises. Government contracts may be audited or terminated.
- Adoption of the new lease standard on January 1, 2019 resulted in a $3.621 million right-of-use asset and $4.822 million lease liability at adoption, with a $0.238 million retained-earnings adjustment. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether APeX-2 results supported the expected BCX7353 NDA filing and whether the company achieved the facility’s contingent funding milestones.
- Actual quarterly cash burn, government reimbursements and remaining liquidity against the 2019 forecasts and minimum-cash covenant.
- Developments and potential financial consequences of the SUL and Shionogi arbitrations, including the defaulted PhaRMA Notes and the allocation of any recoveries.
- Progress, safety and regulatory outcomes for BCX7353, BCX9930, BCX9250 and galidesivir, as well as manufacturing and partner commercialization performance.
- Additional financing needs, potential share dilution, and whether management’s plans address the disclosed going-concern uncertainty.