BridgeBio Pharma, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2020; filed August 11, 2020. BridgeBio is a clinical-stage biopharmaceutical company developing medicines for Mendelian diseases and genetically driven cancers through wholly owned and controlled subsidiaries. It had more than 20 development programs, no products approved for sale, and no product revenue.
Financial Results and Position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Research and development expense | $86.6 million | $154.8 million |
| General and administrative expense | $38.0 million | $72.2 million |
| Total operating expenses | $124.6 million | $227.1 million |
| Net loss | $136.2 million | $240.3 million |
| Net loss attributable to BridgeBio common stockholders | $121.0 million | $212.9 million |
| Net loss per share | $1.03 | $1.81 |
| Net cash used in operating activities | Not separately provided | $171.8 million |
- Revenue and margins: The company reported no product sales or meaningful operating revenue. Gross margin and operating margin are not meaningful because BridgeBio has no approved products and is focused on research and development.
- Liquidity: Cash and cash equivalents were $540.9 million; marketable securities were $300.0 million; total cash, cash equivalents and marketable securities were $840.9 million. Working capital was $769.3 million.
- Cash flow: Operating cash use increased to $171.8 million from $127.4 million in the comparable 2019 period. Investing cash use was $91.0 million, primarily reflecting purchases of marketable securities. Financing cash flow was $439.9 million, mainly from the 2027 Notes.
- Debt: The company issued $550.0 million of 2.50% convertible senior notes due 2027 and received approximately $537.0 million of net proceeds. Net carrying value of the notes was $373.7 million because of the equity component and debt discounts. Consolidated debt was reported by management as $466.6 million net of discounts and issuance costs, or $642.5 million on a principal-balance basis including subsidiaries.
- Equity and share count: BridgeBio stockholders’ equity was $265.8 million, down from $408.5 million at December 31, 2019, primarily reflecting accumulated losses, the capped-call cost and the $75.0 million share repurchase. Shares outstanding were 122.3 million at June 30, 2020 and 122.4 million as of August 5, 2020.
Material Changes Versus Prior Comparable Period
- R&D expense increased $34.3 million, or approximately 65%, in the second quarter and $57.6 million, or approximately 59%, in the first six months, reflecting expanded programs, external development costs and headcount.
- G&A expense increased $21.0 million in the second quarter and $36.3 million in the first six months due to organizational growth and public-company compliance costs.
- Second-quarter net loss increased from $74.3 million to $136.2 million; six-month net loss increased from $143.8 million to $240.3 million.
- Interest expense increased to $10.8 million in the second quarter and $14.8 million in the first six months, primarily because of the 2027 Notes and higher debt balances.
- Cash, cash equivalents and marketable securities increased from $521.1 million at December 31, 2019 to $840.9 million at June 30, 2020, principally because of the convertible-note issuance and Eidos’ $24.1 million at-the-market equity issuance.
- BridgeBio repurchased 2.4 million shares for $75.0 million and paid $49.3 million for capped-call transactions intended to reduce potential dilution from the convertible notes.
- Stock-based compensation increased to $28.6 million for the first six months from $5.6 million in the prior-year period, including $8.0 million related to performance-based awards under the 2020 Stock and Equity Award Exchange Program.
Outlook, Commentary, Risks and Unusual Items
- Management expects continued net losses for the next several years as clinical development, preclinical research and commercial launch-readiness spending continues.
- Based on current plans and forecasts, management expects available cash, cash equivalents and marketable securities to fund operations for at least the next 12 months. Additional funding may be required sooner if plans change or COVID-19 materially affects development activities.
- COVID-19 caused delays or temporary suspensions in patient enrollment and may delay planned clinical trials, laboratory work, regulatory activities and manufacturing. The ultimate financial and operational effect remained uncertain.
- The 2027 Notes are senior unsecured obligations with an initial conversion price of approximately $42.71 per share and an initial potential issuance of approximately 12.9 million shares. Holders may require repurchase at par upon certain fundamental changes.
- The amended Hercules facility extended the interest-only period to July 1, 2022 and maturity to November 1, 2023, with potential extensions subject to conditions. Up to $125.0 million of additional borrowing capacity was available subject to Hercules’ approval; no additional draws had occurred by June 30, 2020.
- Potential employee milestone compensation was up to $222.2 million under the financial-statement commitments disclosure; the MD&A contractual-obligations discussion separately identified up to $54.9 million of cash-settleable milestone compensation and excluded equity-settleable awards. License and collaboration milestones were also excluded because timing and achievement were not probable or estimable.
- Subsequent to quarter-end, BridgeBio filed a shelf registration and entered into an at-the-market agreement for up to $350.0 million of common stock; no shares had been issued under it through August 11, 2020. BridgeBio also entered into a LianBio license agreement for BBP-398, including an $8.0 million upfront payment, up to $382.1 million of development and sales milestones, and tiered royalties.
- The company adopted lease accounting guidance effective January 1, 2020, recognizing operating lease right-of-use assets and liabilities. Management concluded disclosure controls were effective as of June 30, 2020 and reported no material change in internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Verify the distinction between cash and marketable securities held by BridgeBio and the $174.8 million held by Eidos, which management stated was restricted to Eidos’ operations.
- Reconcile consolidated debt on a net carrying-value basis with the $642.5 million principal amount described in the risk factors, including subsidiary debt and convertible-note accounting.
- Assess quarterly cash burn and whether the stated 12-month liquidity runway remains appropriate as clinical programs advance and COVID-19 disruptions evolve.
- Review the conversion terms, potential dilution and fundamental-change repurchase provisions of the 2027 Notes, including the effect of the capped calls.
- Monitor progress, enrollment and regulatory timelines for key programs, particularly acoramidis, infigratinib, fosdenopterin and BBP-589.
- Evaluate contingent employee milestone awards, license milestones, royalties, manufacturing commitments and subsidiary-level liquidity restrictions that may not be fully reflected in current liabilities.
- Consider the risks associated with no approved products or product revenue, continuing losses, reliance on third-party manufacturers and CROs, rare-disease enrollment, regulatory approval, intellectual property and potential future equity or debt financing.