Business context and reporting period
BioCryst Pharmaceuticals, Inc. is a biotechnology company focused on rare diseases. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2023. Its principal marketed product is ORLADEYO (berotralstat), an oral preventive treatment for hereditary angioedema (HAE); RAPIVAB/peramivir is also marketed. Unless noted, amounts below are in millions of U.S. dollars.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $86.7 | $75.8 | $238.0 | $191.3 |
| Operating loss | $(11.9) | $(17.4) | $(61.0) | $(102.1) |
| Net loss | $(36.1) | $(42.5) | $(164.8) | $(175.6) |
| Net loss per share, diluted | $(0.19) | $(0.23) | $(0.87) | $(0.95) |
- Revenue increased 14% in Q3 and 24% for the nine months year over year. ORLADEYO revenue, including royalties, was $85.7 million in Q3 and $235.1 million year to date, versus $66.0 million and $180.9 million, respectively.
- Operating-loss margins were approximately 14% in Q3 and 26% year to date; net-loss margins were approximately 42% and 69%, respectively.
- Research and development expense was $46.9 million in Q3 and $146.5 million for nine months; selling, general and administrative expense was $50.6 million and $149.5 million, respectively. Q3 interest expense was $27.3 million; nine-month interest expense was $83.7 million.
- Nine-month operating cash use was $86.2 million, down from $138.0 million in 2022. Investing activities used $103.0 million; financing activities provided $35.7 million. Cash, cash equivalents and restricted cash decreased $153.8 million during the period.
- At September 30, cash and cash equivalents were $150.9 million and investments were $246.7 million. Management reported working capital of $411.7 million and total assets of $522.9 million.
- Balance-sheet secured term loans were $298.0 million and royalty financing obligations were $535.2 million; lease financing obligations totaled $12.2 million. The Pharmakon loan’s principal, including capitalized interest, was $308.7 million; the balance-sheet loan amount is presented net of applicable financing costs.
- Stockholders’ deficit was $411.0 million. Shares outstanding were 189.8 million at quarter-end and 204.8 million as of October 31, 2023.
Material changes and unusual items
- Q3 revenue growth was driven by ORLADEYO, partly offset by lower other revenue. The comparison period included a RAPIVAB stockpiling sale to HHS; the HHS procurement contract was effectively completed, with 49,980 of 50,000 doses delivered by September 30, 2023.
- R&D expense declined year over year following discontinuation of the BCX9930 and BCX9250 programs, partly offset by increased spending on other research and development. SG&A increased with expansion of U.S. commercial and international operations.
- In April 2023, BioCryst borrowed $300 million under the Pharmakon agreement and used much of the proceeds to refinance Athyrium debt. Repayment of Athyrium debt generated a one-time $29.0 million loss on extinguishment during the nine-month period, including prepayment/final fees and write-off of deferred financing costs.
- ORLADEYO royalty monetization obligations increased to $535.2 million, including non-cash interest. The company revised sales and BCX10013 assumptions; the BCX10013 forecast changes included development delays and lower probability-of-success, pricing and market-share assumptions. OMERS royalty payments began for the quarter starting October 1, 2023.
Outlook, commentary and risks
- Management believes available financial resources are sufficient to fund operations for at least 12 months from September 30, 2023, but expects 2023 expenses to exceed revenues and anticipates continued operating losses and negative cash flows until revenue supports ongoing operations. No formal revenue or earnings guidance is provided in the filing.
- Management estimates ORLADEYO could reach a global peak market of $1 billion in annual net revenue, with 70%–80% of peak revenue expected from the U.S.; this is an expectation, not a guarantee or formal near-term forecast.
- Management reported BCX10013 trial-site activation and expected patient enrollment by year-end 2023; subsequent announcements cited first-patient enrollment and anticipated 2024 proof-of-concept data. Other pipeline plans and timelines remain subject to clinical and regulatory risks.
- The Pharmakon facility has variable-rate interest, collateral over substantially all company assets, covenants and potential prepayment premiums. The company reported covenant compliance at September 30, 2023. Reliance on a single U.S. specialty pharmacy and limited-source manufacturing, as well as continued losses and potential need for further financing, are material risks.
- Disclosure controls were deemed ineffective because of material weaknesses in accounting-function staffing, journal-entry review and account-reconciliation/close controls. Remediation efforts are underway; management stated the weaknesses were not yet remediated.
- Subsequent events: Baker-affiliated entities exercised remaining pre-funded warrants on October 23, issuing 14,997 shares; no warrants remained. On November 3, BioCryst announced a Clearside license for avoralstat, with a $5 million upfront fee, potential milestones and royalties.
Important facts for investors to verify
- Whether ORLADEYO growth, patient demand, reimbursement and international commercialization support management’s long-term market expectations.
- Cash burn and liquidity relative to the stated 12-month funding assessment, including future financing needs and any use of the optional Pharmakon tranches.
- The scale and duration of royalty-financing costs and debt service, and the effects of variable interest rates, covenants and future royalty payments.
- BCX10013 and other pipeline trial progress, safety and efficacy results, and whether development timelines or assumptions change.
- Progress and independent testing of remediation for the disclosed material weaknesses in internal control over financial reporting.