BioCryst Pharmaceuticals, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013; financial comparisons are primarily with 2012. Dollar amounts below are in U.S. dollars.
Business context and pipeline
BioCryst is a clinical-stage biotechnology company developing small-molecule drugs, primarily for rare and infectious diseases. It relies heavily on government contracts and collaboration partners; it has not achieved profitability and has no broadly commercialized product of its own.
- Peramivir: U.S. NDA for acute uncomplicated influenza in adults submitted in December 2013. The FDA accepted it for review on February 24, 2014, with action expected by December 23, 2014. Peramivir is approved in Japan and Korea. A separate Phase 3 trial in hospitalized influenza patients was terminated for futility in 2012.
- BCX4161: Phase 2a proof-of-concept trial in hereditary angioedema (HAE) began in November 2013; management expected results by June 30, 2014.
- BCX4430: Preclinical antiviral candidate. NIAID awarded $5.0 million initially, with options bringing obligated funding to $7.5 million by year-end; the contract could total $22.0 million.
- Other programs: Two next-generation HAE compounds entered preclinical development. Forodesine development is controlled and funded by Mundipharma. Ulodesine was not advancing to Phase 3 without a partner. The BCX5191 program was terminated in January 2013.
Financial performance and liquidity
| Metric | 2013 | 2012 |
|---|---|---|
| Revenue | $17.3 million | $26.3 million |
| Operating expenses | $48.0 million | $60.2 million |
| Operating loss | $30.7 million | $33.9 million |
| Net loss | $30.1 million | $39.1 million |
| Net loss per share | $0.55 | $0.79 |
| Net cash used in operations | $26.5 million | $37.4 million |
| Cash, cash equivalents and investments at year-end | $40.8 million | $37.1 million |
- 2013 revenue included $13.6 million of government-contract reimbursements, $2.6 million of peramivir royalties and $1.2 million of other collaboration revenue. Revenue fell 34% year over year, mainly because 2012 included $7.8 million of deferred forodesine revenue recognition.
- Research and development expense decreased to $42.7 million from $51.5 million; general and administrative expense fell to $5.2 million from $6.8 million. The company cited lower spending on certain programs and reduced infrastructure costs, partly offset by higher BCX4161 and BCX4430 spending. A $5.0 million write-off of deferred collaboration costs affected R&D expense.
- Quarterly 2013 figures: fourth-quarter revenue was $10.6 million, net loss was $5.4 million and loss per share was $0.09. The filing’s quarterly table does not clearly explain the fourth-quarter revenue composition.
- Year-end working capital was $26.9 million. Stockholders’ equity was negative $1.1 million; accumulated deficit was $422.7 million. The company raised approximately $23.6 million net from stock sales during 2013, including an August public offering and ATM sales.
- Operating cash use improved year over year, but cash and investments were expected to fund operations only into the first quarter of 2015. Management expected 2014 operating cash use of $35–$43 million and operating expenses of $48–$59 million, excluding stock-based compensation. The cash-use forecast excluded financing, hedge-collateral movements and other non-routine flows.
Debt, unusual items and material changes
- Royalty Sub had $30.0 million of non-recourse PhaRMA Notes outstanding, bearing 14% interest and secured principally by specified Shionogi peramivir royalties and milestones. These royalties generally are committed to debt service before any benefit flows to BioCryst.
- Royalty receipts were insufficient to pay all interest due in September 2013, leaving approximately $2.4 million in arrears. The shortfall accrues interest at 14%; it would become an event of default if not cured by the next payment date, September 1, 2014. Management estimated royalties would be sufficient to cure it, but gave no assurance.
- A foreign-currency derivative generated a $5.3 million mark-to-market gain in 2013, versus a $0.7 million loss in 2012, materially reducing the reported 2013 net loss. The derivative does not qualify for hedge accounting, so results may fluctuate with yen-dollar exchange rates. Potential annual premiums of about $2.0 million could apply from 2014 through 2020, subject to exchange-rate conditions.
- The December 2012 restructuring eliminated about 50% of the workforce. It reduced 2013 costs; the company reported no remaining restructuring accrual at year-end.
Outlook, risks and contingencies
- Management expected 2014 revenue to decline from 2013 as peramivir development under the BARDA contract was substantially complete and the BCX4430 contract was smaller. The peramivir contract was extended through March 31, 2014; $201.8 million had been recognized under it cumulatively through year-end 2013.
- BioCryst said it would need additional funding, government support, licensing or partnering proceeds, regulatory approvals, spending reductions, or restructuring to operate substantially beyond early 2015. Additional capital may be unavailable or dilutive.
- Key risks include clinical-trial failure or delay, FDA non-approval, dependence on government reimbursement and contract options, partner performance, manufacturing and supply constraints, competition, intellectual-property challenges, and continued operating losses.
- Government contracts are subject to audits, cost disallowances, performance reviews and termination at the government’s discretion. The BARDA audit record was stated to be open for fiscal years after 2009.
- Contractual obligations totaled $80.0 million, including $61.4 million of non-recourse notes and assumed interest through maturity, $10.2 million of purchase obligations and $1.4 million of lease obligations. Certain contingent license payments and hedge premiums are not included in that total.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls were effective.
Most important facts for investors to verify
- FDA review progress and outcome for the peramivir NDA, and whether any additional studies or manufacturing conditions are required.
- BCX4161 Phase 2a results and the development milestones and funding options for BCX4430.
- Actual cash burn versus guidance, government reimbursements and the timing and terms of any new financing or partnerships.
- Whether Shionogi royalties can cure the PhaRMA interest arrears by September 1, 2014, and how the secured royalty structure affects cash available to BioCryst.
- Potential dilution from equity issuance and the impact of foreign-exchange movements, hedge collateral and possible premiums.