BioCryst Pharmaceuticals, Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone quarterly filing; the filing also reports fourth-quarter results. Amounts below are in U.S. dollars unless stated otherwise.
Business context
BioCryst is a clinical-stage biotechnology company focused on oral small-molecule medicines for rare diseases. Its lead development program was BCX7353 for hereditary angioedema (HAE); other programs included BCX9930 for complement-mediated diseases, BCX9250 for fibrodysplasia ossificans progressiva, and government-funded galidesivir. Peramivir products were approved in several markets, with commercialization largely handled by partners. BioCryst reported approximately 100 employees as of January 31, 2019.
Financial performance and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $20.653 million | $25.186 million |
| Research and development expense | $84.888 million | $66.962 million |
| General and administrative expense | $29.514 million | $13.933 million |
| Operating loss | $94.220 million | $57.411 million |
| Net loss | $101.252 million | $65.782 million |
| Basic and diluted loss per share | $0.98 | $0.78 |
| Cash used in operating activities | $92.565 million | $41.143 million |
Revenue fell 18% year over year, while R&D spending rose 27% and G&A more than doubled. The operating-loss margin was approximately negative 456% of revenue (2017: negative 228%); net-loss margin was approximately negative 490% (2017: negative 261%). Product cost of sales was zero in 2018, but no conventional product gross margin is presented for the year because no product sales were recorded.
FY 2018 revenue comprised $6.101 million of royalties and $14.552 million of collaborative and other R&D revenue; there were no product sales. Peramivir royalties declined from $10.543 million in 2017. The filing attributes lower total revenue principally to nonrecurring 2017 revenue items and reduced government-contract reimbursements. Quarterly results for Q4 2018 were revenue of $2.729 million, net loss of $27.432 million, and loss per share of $0.25; Q4 2017 revenue was $3.890 million and net loss was $19.543 million.
At year-end, cash and cash equivalents were $26.731 million, investments were $100.112 million, and restricted cash was $1.544 million. Net working capital was $44.9 million, down from $50.6 million. Total assets were $146.841 million and stockholders’ equity was $49.235 million. Balance-sheet debt included $29.952 million under the senior credit facility and $29.121 million of non-recourse notes payable; interest payable was $11.848 million. The PhaRMA Notes carry 14% interest and remained in default. Operating cash burn was funded in part by a $53.4 million net public equity offering and credit-facility proceeds. Shares outstanding increased to 110.063 million at year-end from 98.411 million.
Material changes, outlook, and notable items
- Higher R&D costs reflected increased spending on BCX7353, BCX9930, and the FOP program. Management expected R&D costs to rise further as programs advanced.
- G&A included approximately $11 million of costs associated with the terminated Idera merger and a $4.9 million reserve relating to the disputed EMA peramivir approval milestone. The merger ended after BioCryst stockholders did not approve it.
- Management forecast 2019 operating cash use of $105–$130 million and operating expenses of $120–$145 million, excluding equity-based compensation. It expected available cash and investments, together with the February 2019 financing, to fund operations into 2020, while warning that 2019 expenses would exceed revenue and that its plans raised doubt about its ability to continue as a going concern through 2020.
- In February 2019, BioCryst entered a $100 million secured credit facility at LIBOR (minimum 0.5%) plus 8%. The first $50 million tranche was funded, including $30 million rolled over from prior debt; two additional tranches totaling $50 million depend on development milestones and financial covenants. Interest-only payments extend through June 2020, followed by scheduled principal and interest payments.
- BCX7353: APeX-2 enrollment was completed at approximately 120 patients; management expected to file an NDA in Q4 2019, although APeX-2 and APeX-S were amended to extend dosing to 96 weeks. February 2019 topline ZENITH-1 results, reported after year-end, showed the 750 mg acute-treatment dose superior to placebo on most evaluated endpoints; the company planned a Phase 3 trial in summer 2019, subject to regulatory discussions.
- BioCryst received a CDC contract in September 2018 for up to $34.7 million and 50,000 RAPIVAB doses over five years; it expected an approximately $7 million shipment in 2019. It also expected an exploratory galidesivir Yellow Fever trial to begin in 2019 and planned BCX9930 Phase 1 work and a BCX9250 IND submission in 2019.
- BioCryst and Seqirus were in arbitration over the peramivir agreement, including the EMA milestone and commercialization obligations. BioCryst was also pursuing arbitration with Shionogi over sales milestones and escalating royalties; any recovery would primarily benefit the Royalty Sub and PhaRMA noteholders.
- The company adopted ASC 606 in 2018, increasing reported collaborative revenue by $1.184 million and reducing reported R&D expense by $0.058 million versus the prior accounting basis; adoption increased opening equity by $1.126 million and did not affect total cash.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls were effective.
Key investor verification points
- Track APeX-2 and long-term safety results, the timing and requirements of any NDA, and the planned acute-treatment Phase 3 program.
- Assess the cash runway against the stated 2019 burn and expense ranges, conditional availability of credit tranches, and the company’s going-concern warning and potential need for further financing.
- Review the Seqirus and Shionogi arbitration outcomes, the disputed EMA milestone reserve, and whether future peramivir royalties or government stockpile deliveries generate expected cash.
- Monitor government-contract reimbursement and continuation for galidesivir, along with clinical and manufacturing costs across the pipeline.
- Consider debt-service obligations, the defaulted PhaRMA Notes, foreign-exchange hedge exposure, and potential dilution from additional equity issuance.