BioCryst Pharmaceuticals, Inc. — 2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014. The filing also reports fourth-quarter results. BioCryst is a clinical-stage biotechnology company focused on small-molecule drug development, particularly for rare diseases. RAPIVAB (peramivir injection) received U.S. FDA approval in December 2014 and became available through specialty distributors near year-end.
Financial performance and position
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Total revenue | $13.6 million | $17.3 million |
| Operating expenses | $59.4 million | $48.0 million |
| Operating loss | $45.8 million | $30.7 million |
| Net loss | $45.2 million | $30.1 million |
| Basic and diluted loss per share | $0.68 | $0.55 |
| Net cash used in operating activities | $38.6 million | $26.5 million |
| Cash, cash equivalents and investments at year-end | $114.0 million | $40.8 million |
Revenue comprised $3.0 million of peramivir royalties, $9.4 million of U.S. government contract reimbursement, $1.2 million of amortized collaboration revenue and approximately $33,000 of RAPIVAB sales. Product sales were minimal, so the filing does not provide a meaningful commercial-product margin picture. No operating margin guidance was provided.
Research and development expense rose to $51.8 million from $41.9 million, primarily reflecting higher HAE and BCX4430 spending and increased stock-based compensation; reduced peramivir activity partly offset the increase. General and administrative expense rose to $7.5 million from $6.0 million, mainly due to RAPIVAB distribution costs and grants to HAE patient advocacy groups. A $5.5 million foreign-currency hedge gain partially offset interest expense of $5.0 million; the hedge gain is a non-operating, mark-to-market item.
At December 31, 2014, total assets were $136.9 million, current assets $89.3 million and current liabilities $57.7 million, producing working capital of approximately $31.7 million. Stockholders’ equity was $75.6 million, compared with a deficit of $1.1 million a year earlier. Operating cash use increased year over year. Financing activities included $106.6 million of net proceeds from a June 2014 stock offering; weighted-average shares rose to 66.8 million from 55.2 million.
Material changes and development updates
- Revenue declined 21% year over year, mainly because the $234.8 million BARDA peramivir development contract expired on June 30, 2014. Government reimbursement fell to $9.4 million from $13.6 million.
- RAPIVAB was approved in the U.S. for acute uncomplicated influenza in adults symptomatic for no more than two days. BioCryst was pursuing a U.S. government stockpiling procurement contract; the filing does not report one secured.
- BCX4161 entered the OPuS-2 Phase 2 trial, testing two three-times-daily doses against placebo in approximately 100 HAE patients. The prior OPuS-1 Phase 2a study reported a statistically significant reduction in weekly attacks versus placebo.
- BioCryst selected BCX7353 for planned Phase 1 development in 2015 as a potential once-daily oral HAE treatment. The filing says it expected Phase 1 to begin in 2015.
- BCX4430 entered a Phase 1 study in healthy volunteers. A proof-of-concept Ebola study in rhesus macaques reported 10 of 12 treated animals surviving to Day 41 versus no survivors among controls; these are animal data, not evidence of human efficacy.
Outlook, liquidity, debt and key risks
Management expected 2015 operating cash use of $65 million to $80 million and operating expenses of $75 million to $95 million, excluding equity-based compensation. It expected existing cash and investments to fund planned operations through the middle of 2016. The company stated it would need additional funding, government support, partnering, product revenue, spending reductions or restructuring to operate substantially beyond that point. It expected 2015 operating expenses to exceed revenue.
The $30.0 million PhaRMA notes bear 14% interest and are secured principally by specified Shionogi royalties and milestone payments and a pledge of BioCryst’s interest in its royalty subsidiary. Following interest-payment shortfalls, an event of default occurred; the notes and related accrued interest were classified as current liabilities. The notes are non-recourse to BioCryst except for the pledged subsidiary interest, but holders may pursue acceleration or foreclosure, potentially eliminating future royalty benefits. Interest payable was $6.0 million at year-end. The associated yen hedge can generate mark-to-market volatility and may require annual payments of approximately $2.0 million in 2015–2020 under specified exchange-rate conditions; no collateral was posted at year-end.
- Funding and concentration: Operations depend heavily on government reimbursements and continued access to financing. The BARDA peramivir contract has ended; NIAID funding for BCX4430 is subject to options, performance review and government termination rights.
- Development and commercialization: Clinical results, regulatory approval, patient enrollment, reimbursement, market acceptance and future RAPIVAB sales are uncertain. BioCryst has limited commercialization infrastructure.
- Manufacturing and distribution: RAPIVAB relies on single-source manufacturers and a single distribution provider. The filing reports that its product manufacturer received an FDA Warning Letter and Form 483, creating potential supply and regulatory risk.
- Other commitments: The filing lists $31.5 million of purchase obligations due within one year and $6.4 million of contingent license obligations. It also describes a new Birmingham research-facility lease obligation of approximately $5.1 million through 2026.
- Unusual accounting and controls: The hedge gain affected reported results, stock-based compensation expense increased to $10.2 million, and RAPIVAB revenue was recognized using sell-through accounting. The auditors issued unqualified opinions on the financial statements and internal controls; management also concluded controls were effective.
Most important facts for investors to verify
- Whether BioCryst secured additional financing, partnerships or government contracts after the filing, and whether its stated mid-2016 liquidity runway changed.
- The status and resolution of the PhaRMA notes default, accrued interest, creditor remedies and any effect on future Shionogi royalty rights.
- RAPIVAB sales, any stockpiling procurement contract, post-marketing study obligations and the manufacturer’s progress addressing FDA observations.
- Clinical progress and complete data for OPuS-2, BCX7353 and the human BCX4430 study; distinguish early or animal findings from demonstrated clinical benefit.
- Actual cash burn, operating expense, dilution and the timing and funding of the new research-facility lease against management’s 2015 outlook.