BioCryst Pharmaceuticals, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing was signed March 13, 2020. Quarterly data below are unaudited. Amounts are in U.S. dollars unless stated otherwise.
Business context
BioCryst is a biotechnology company developing oral, small-molecule medicines, primarily for rare diseases. Its lead candidate, berotralstat, is an oral preventive treatment for hereditary angioedema (HAE). The company also develops BCX9930 for complement-mediated diseases, BCX9250 for fibrodysplasia ossificans progressiva, and galidesivir as a broad-spectrum antiviral. Peramivir (RAPIVAB and related brands) is approved in several markets; the company also earns royalties on forodesine (Mundesine), approved in Japan.
Financial performance and position
| Metric | 2019 | 2018 |
|---|---|---|
| Total revenue | $48.8 million | $20.7 million |
| Operating expenses | $148.3 million | $114.9 million |
| Operating loss | $99.5 million | $94.2 million |
| Net loss | $108.9 million | $101.3 million |
| Basic and diluted loss per share | $0.94 | $0.98 |
| Net cash used in operating activities | $89.6 million | $92.6 million |
| Cash and cash equivalents | $114.2 million | $26.7 million |
| Investments | $22.1 million | $100.1 million |
| Net working capital | $72.0 million | $44.9 million |
Revenue included $17.5 million of product sales, $6.3 million of royalties and $25.0 million of collaborative and research-and-development revenue. Product sales included approximately $13.9 million of RAPIVAB shipments to the U.S. government and $3.7 million of sales to licensing partners. Product sales less cost of products sold of $3.7 million imply approximately $13.8 million of product gross profit; the filing does not present this as a reported margin. Overall, the company remained loss-making.
At December 31, 2019, total assets were $175.3 million and stockholders’ equity was $38.3 million. The senior credit facility had $50.0 million outstanding principal; its reported balance-sheet carrying amount was $50.3 million. Non-recourse PhaRMA Notes had a $29.6 million carrying amount, with $14.9 million of interest payable separately reported. The PhaRMA Notes are in default and are classified as current liabilities.
Fourth-quarter revenue was $39.7 million and net loss was $2.6 million, compared with $2.7 million of revenue and a $27.4 million net loss in Q4 2018. The 2019 quarter included substantial Torii collaboration revenue and RAPIVAB sales.
Material changes versus 2018
- Revenue rose by $28.2 million, mainly from recognition of $20.1 million of the Torii upfront payment and $13.9 million of government RAPIVAB sales; 2018 included peramivir milestones that did not recur.
- R&D expense increased 26% to $107.1 million, led by BCX9930 spending, which rose to $26.6 million from $10.2 million. Berotralstat R&D was $57.1 million.
- SG&A increased to $37.1 million from $29.5 million, primarily reflecting preparation for a potential berotralstat launch. Interest expense increased to $11.9 million from $9.2 million.
- Operating cash use decreased to $89.6 million from $92.6 million, while net loss widened. Cash and investments increased overall, supported by financing and collaboration proceeds; the company raised $58.5 million net from common stock and $19.9 million from pre-funded warrants in 2019.
- Common shares outstanding increased from 110.1 million to 154.1 million at year-end, reflecting equity issuance and warrant financing.
Outlook, commentary and key risks
- 2020 outlook: Management forecast operating cash use of $125–$150 million and operating expenses of $135–$160 million. The expense range excludes equity-based compensation; the cash forecast excludes royalty-monetization effects, hedge collateral and other non-routine cash flows.
- Management expected available cash and investments to fund operations into 2021, but stated that 2020 expenses would exceed revenue and that planned operations raise doubt about the company’s ability to continue as a going concern throughout 2021. Additional financing, government funding, licensing proceeds or spending reductions may be needed; none is assured.
- Berotralstat’s Phase 3 APeX-2 trial met its primary endpoint: the 150 mg dose reduced HAE attack rate by 44% versus placebo. The FDA accepted the NDA for review in February 2020 and set a December 3, 2020 PDUFA date. The filing also reported a Japanese application submission and anticipated a possible Japanese approval in the second half of 2020. These are post-year-end developments and forward-looking expectations, not completed approvals.
- BCX9930 showed greater than 95% suppression of the alternative complement pathway at a tested dose in healthy volunteers; benign rash was observed in some multiple-dose cohorts. BCX9250 entered Phase 1. The company planned further clinical data and development in 2020.
- In March 2020, an arbitration panel found that Seqirus UK Limited materially breached its peramivir agreement, ordered termination and restoration of rights to BioCryst, and awarded $5.0 million plus interest for an unpaid milestone. Further proceedings remained on fees and the return of rights.
- The $50 million senior credit facility bears floating interest (9.7% at year-end), is secured by substantially all company assets and requires a minimum $25 million unrestricted cash balance. Interest-only payments ran through June 2020, followed by scheduled principal and interest payments.
- The PhaRMA Notes bear 14% interest, remain in default, and mature December 1, 2020. Management did not expect Royalty Sub to repay them at maturity. The notes are non-recourse except for the pledged equity in Royalty Sub, but holders may pursue remedies that could jeopardize future Shionogi royalties. A currency-hedge payment of about $2.0 million could be due in May 2020, depending on the exchange rate.
- Principal risks include ongoing losses and financing needs, clinical and regulatory uncertainty, commercialization and reimbursement challenges, reliance on third-party manufacturers and collaborators, competition, intellectual-property exposure, and government-contract termination or audit risk. The company also cited disruption risks from epidemic or pandemic outbreaks, including the then-emerging coronavirus outbreak.
Important facts for investors to verify
- Regulatory progress, labeling, safety requirements and launch timing for berotralstat in the U.S. and Japan, including reimbursement conditions tied to potential Torii milestones.
- Cash runway against actual operating cash burn, financing needs, credit-facility covenants and minimum-cash requirements.
- Status, maturity resolution and possible remedies concerning the defaulted PhaRMA Notes, and any resulting effect on Shionogi royalties or the currency hedge.
- Implementation of the Seqirus arbitration award, final recovery of the peramivir rights, and collection of the $5.0 million award and fees.
- Clinical results and safety follow-up for BCX9930, BCX9250 and galidesivir, and whether development timelines or spending change.
- Share dilution from equity offerings, outstanding pre-funded warrants and stock-based awards; shares outstanding were 154.1 million at December 31, 2019.