BioCryst Pharmaceuticals, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. Financial statements are unaudited. Unless noted, amounts below are in millions of dollars.
Business context and reporting period
BioCryst is a biotechnology company developing small-molecule medicines, with a focus on rare diseases. The quarter included initial U.S. sales of RAPIVAB, approved by the FDA in December 2014, and continued development of HAE and antiviral candidates. The company remains loss-making and relies substantially on government research funding and external financing.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / prior balance date |
|---|---|---|
| Total revenue | $6.826 | $3.458 |
| Operating expenses | $21.256 | $10.844 |
| Operating loss | $(14.430) | $(7.386) |
| Net loss | $(15.164) | $(10.137) |
| Net loss per share, basic and diluted | $(0.21) | $(0.17) |
| Cash used in operating activities | $(3.726) | $(8.959) |
| Cash and cash equivalents | $48.367 | $54.540 at Dec. 31, 2014 |
| Investments | $60.276 | $59.348 at Dec. 31, 2014 |
| Stockholders’ equity | $64.371 | $75.635 at Dec. 31, 2014 |
- Revenue comprised $0.537 of net RAPIVAB sales, $1.518 of royalties, and $4.771 of collaborative and other R&D revenue. Product cost was $0.015; the filing does not provide a meaningful consolidated gross-margin measure.
- R&D expense was $17.120, including $6.246 for BCX4161, $5.881 for second-generation HAE compounds, and $2.674 for BCX4430. G&A expense was $4.061.
- Net working capital was $19.5 at quarter-end, down about $12.6 from year-end. Cash, investments and restricted cash totaled approximately $111.3; restricted cash was $2.637. Management estimated available liquidity would support planned operations through the middle of 2016.
- Cash from financing activities was $1.501; investing activities used $3.948. Cash and cash equivalents declined by $6.173 during the quarter.
- Royalty Sub had $30.0 of non-recourse PhaRMA Notes outstanding, bearing 14% interest. The notes were classified as current after a September 2014 payment default; interest payable was $7.241. The notes are secured by specified royalty and hedge-related rights, and are non-recourse to BioCryst other than its pledge of Royalty Sub equity.
Material changes versus the prior comparable period
- Revenue increased about 97%, principally from higher government-funded BCX4430 development reimbursements; RAPIVAB added its first reported U.S. product sales.
- Operating expenses nearly doubled. R&D rose from $9.183 to $17.120, reflecting increased HAE spending and, to a lesser extent, BCX4430. G&A rose from $1.588 to $4.061, primarily due to RAPIVAB administration, distribution and marketing costs and HAE advocacy grants.
- Net loss widened by $5.027, although operating cash use improved by $5.233. The quarter also included a $0.464 foreign-currency hedge gain, compared with a $1.526 loss in Q1 2014.
- Compared with Dec. 31, 2014, cash and cash equivalents fell $6.173, while restricted cash increased from $0.150 to $2.637. Total assets declined to $129.867 from $136.874.
Outlook, management commentary and key risks
- For 2015, management forecast operating cash usage of $65–$80 million and operating expenses of $75–$95 million; the expense range excludes equity-based compensation. Cash forecasts exclude royalty-monetization effects, hedge collateral and other non-routine cash flows.
- Management said substantially extending operations beyond mid-2016 would require additional government funding or procurement, licensing or milestone proceeds, additional capital, product approvals and revenue, spending reductions, and/or restructuring. The company retained access to approximately $160 million under effective shelf registrations.
- On March 31, BARDA awarded a BCX4430 contract with a $12.134 million base and up to $22.855 million in options, for potential total funding of $34.989 million. NIAID options exercised to date represented $25.021 million of potential funding under that contract.
- RAPIVAB commercialization remained uncertain, with management focused on a U.S. government stockpiling procurement contract. Product sales depend on seasonal demand, reimbursement, and limited commercial capabilities. Three specialty distributors represented over 90% of RAPIVAB sales to date; manufacturing and distribution also relied on limited or single-source providers.
- BCX4161’s OPuS-2 HAE trial was underway. BioCryst selected BCX7353 for development and expected Phase 1 entry in Q2 2015. BCX4430 had entered a Phase 1 intramuscular study; management also reported positive survival results in a rhesus macaque Ebola study, which do not establish human efficacy.
- Key risks include continued operating losses and financing needs, dependence on government contract reimbursements and options, clinical and regulatory uncertainty, and the possibility that contracts can be reduced or terminated. Holders of defaulted PhaRMA Notes could pursue acceleration or foreclosure. The yen hedge may require annual payments of up to $1.95 million in relevant years through 2020 and collateral of up to $11.7 million.
- The company reported no material change in internal control over financial reporting during the quarter and concluded disclosure controls were effective as of March 31, 2015. A Birmingham lease extension increased obligations by $5.6 million through 2026.
Important facts for investors to verify
- Whether current liquidity and actual cash burn remain consistent with management’s mid-2016 runway estimate and 2015 cash-use guidance.
- Whether BARDA and NIAID exercise further BCX4430 options, reimburse costs on schedule, and continue their programs.
- Progress, safety and efficacy results for OPuS-2, BCX7353 and BCX4430, and any regulatory or post-marketing requirements for RAPIVAB.
- RAPIVAB sell-through, distributor inventory, rebates and chargebacks, government stockpiling prospects, and supply continuity given manufacturer and distributor concentration.
- Status and potential remedies relating to the PhaRMA Notes default, future royalty receipts, and any cash or collateral requirements under the currency hedge.