BioCryst Pharmaceuticals, Inc. — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011; quarterly figures below include the fourth quarter ended December 31, 2011. Financial amounts are in U.S. dollars; millions unless stated otherwise.
Business context
BioCryst is a clinical-stage biotechnology company focused on structure-guided drug discovery and development. Its principal programs were intravenous peramivir for hospitalized influenza (Phase 3), BCX4208 for gout (Phase 2), forodesine for oncology (Phase 2, licensed to Mundipharma), and preclinical candidates BCX4161 and BCX5191.
Financial performance and liquidity
| Metric | 2011 | 2010 |
|---|---|---|
| Total revenue | $19.6 million | $62.4 million |
| Operating expenses | $69.2 million | $96.7 million |
| Operating loss | $49.6 million | $34.4 million |
| Net loss | $56.9 million | $33.9 million |
| Basic and diluted loss per share | $1.26 | $0.76 |
| Cash used in operating activities | $32.3 million | $28.6 million |
Fourth-quarter 2011 revenue was $5.2 million and net loss was $13.2 million, or $0.29 per diluted share. There were no product sales in 2011; revenue was collaboration and research-and-development revenue, primarily BARDA/HHS reimbursement. The filing provides no meaningful product gross-margin measure for 2011.
Revenue fell 69% year over year, chiefly because reimbursed peramivir development activity declined and 2010 included peramivir-related sales, a $7.0 million Shionogi milestone, and higher collaboration revenue. R&D expense declined to $56.9 million from $83.9 million: peramivir and forodesine spending decreased, partly offset by higher BCX4208 spending. The operating loss nevertheless widened as revenue fell. 2011 net loss also included $3.8 million of PhaRMA Notes interest expense and a $4.0 million mark-to-market loss on the currency hedge.
At year-end, cash and cash equivalents were $16.4 million, investments were $40.7 million, and restricted cash was $0.6 million. Net working capital was approximately $26.6 million, down from $59.4 million. Collaboration receivables were $5.8 million, largely due from BARDA/HHS. Total assets were $82.2 million and stockholders’ equity was $14.8 million.
Royalty Sub had $30.0 million of non-recourse notes outstanding, bearing 14% annual interest and secured principally by certain Shionogi royalties and milestones. The notes are due in 2020; the parent pledged its interest in Royalty Sub. Contractual obligations total $113.0 million, including $67.5 million of assumed note principal and interest and $33.8 million of purchase obligations.
Material changes and developments
- BARDA/HHS added $55.0 million to the peramivir contract, bringing the total to $234.8 million and extending it through December 31, 2013. BioCryst had recognized $174.7 million of contract revenue through year-end 2011.
- The peramivir Phase 3 trial was expanded to a target of approximately 600 participants, with the primary efficacy analysis focused on about 160 patients not receiving neuraminidase inhibitors as standard care. Enrollment timing depends on influenza activity; a futility interim analysis was planned.
- BioCryst raised $30.0 million through Royalty Sub’s PhaRMA Notes and received approximately $22.7 million net proceeds after transaction costs and funding the interest reserve. The related currency hedge generated a $4.0 million 2011 loss; $3.5 million of collateral was posted.
- Under the amended forodesine agreement, Mundipharma obtained worldwide oncology rights and assumed future development and commercialization costs. BioCryst retained potential regulatory event payments of up to $15.0 million and tiered royalties. Knowledge transfer was expected to finish by June 30, 2012.
- BCX4208 met its Phase 2b primary endpoint: response rates for doses tested were 33%–49%, versus 18% for placebo. In the 24-week extension, 20 mg and 40 mg cohorts had discontinuations under CD4+ stopping rules; the 40 mg cohort was discontinued.
Outlook, risks and unusual items
Management forecast 2012 operating expenses of $57–$69 million and net operating cash usage of $32–$38 million, excluding potential out-licensing proceeds. It expected available resources, including anticipated BARDA/HHS receipts, to fund operations through 2012, while also stating that additional capital or partnerships would be needed to complete development and commercialization of current candidates. BCX4208 Phase 3 was targeted to begin in the second half of 2012, subject to regulatory discussions and funding or a partner. IND filings for BCX4161 and BCX5191 were expected in 2012.
Key risks include continued losses and uncertain future financing; reliance on BARDA/HHS reimbursement and the government’s ability to audit, reduce, or terminate the contract; peramivir trial enrollment, efficacy, and regulatory uncertainty; dependence on partners and third-party manufacturers; competition; and intellectual-property and commercialization risks. Shionogi royalties supporting the PhaRMA Notes may be insufficient for debt service, and the currency hedge may require further collateral or payments. BioCryst reported no legal proceedings or off-balance-sheet arrangements. The independent auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Peramivir Phase 3 enrollment progress, interim futility analysis timing and outcome, and whether the results support an NDA.
- Actual BARDA/HHS reimbursements, remaining contract funding, allowable-cost audit outcomes, and contract continuation.
- BCX4208 regulatory feedback, partner or financing arrangements, and the implications of dose-related CD4+ count stopping rules.
- Cash burn and liquidity against management’s 2012 forecast, including whether additional financing or dilution is required.
- Shionogi sales and royalty receipts, PhaRMA Notes debt service, and subsequent currency-hedge losses or collateral requirements.
- Completion of the Mundipharma knowledge transfer and the timing and collectability of any contingent payments or royalties.