BioVie Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2018 (the company’s fiscal second quarter, fiscal 2019). Financial statements are unaudited.
Business context
BioVie is a clinical-stage drug developer with no commercial revenue. Its lead candidate, BIV201 (continuous-infusion terlipressin), is being developed for ascites associated with liver cirrhosis. The company reported that by January 2019 all six planned patients had been treated or enrolled in its Phase 2a trial; it planned to complete Phase 2 work and initiate a larger Phase 2b trial, subject to financing.
Financial results and liquidity
- Revenue: $0 for both the three and six months ended December 31, 2018, and the comparable 2017 periods. Gross margin is not applicable.
- Three-month results: Operating expenses were $500,870 versus $494,807 a year earlier; net loss was $500,510 versus $502,682. Loss per share was reported as $(0.00) versus $(0.01), reflecting substantially higher weighted-average shares.
- Six-month results: Operating expenses were $992,297 versus $1,157,039; net loss was $940,381 versus $1,165,523. A $51,400 gain on debt settlement and $788 of interest income partly offset expenses. A $48,659 deemed dividend related to warrant repricing brought the loss attributable to common stockholders to $989,040.
- Cash flow: Cash used in operations was $1,211,017 for the six months, compared with $363,316 in the prior-year period. Financing provided net cash of $2,795,700, including $3.04 million of preferred-stock proceeds and $244,300 of debt repayments. Cash increased from $45,800 at June 30 to $1,630,483 at December 31.
- Balance sheet: Current assets were cash of $1,630,483; current liabilities were $104,836, implying working capital of approximately $1.53 million. Total liabilities were $104,836, with no long-term debt reported at December 31. Total assets were $3,645,486, and stockholders’ equity was $3,540,650. Accumulated deficit was $5,758,166.
- Capitalization: Common shares outstanding rose from 98,503,199 at June 30 to 315,053,673 at December 31. The company reported 216,440,548 outstanding warrants and 5,550,000 options at period-end, presenting substantial potential dilution.
Material changes and unusual items
- July 2018 financing generated $3.2 million in gross proceeds through Series A preferred stock and associated warrants. The preferred stock converted into 213,333,200 common shares after the company increased its authorized common shares.
- During the six months, the company settled $1,475,765 of debt, including $1,313,765 owed to related parties, by issuing 975,361 common shares valued at $1,150,135, as well as cash payments. Related-party settlements included releases of accrued compensation and consulting liabilities.
- Six-month R&D expense increased by $172,000 to $400,540, reflecting trial activity, research and planning, and hiring. SG&A declined by $336,586 to $477,069, largely because the prior-year period included professional fees paid in stock.
- On December 24, 2018, BioVie returned its partial ownership rights in PharmaIN’s modified terlipressin program and paid the remaining related debt; PharmaIN’s rights to BioVie’s program were unchanged.
Outlook, risks and contingencies
- Management stated that the company expects substantial future losses and no revenue in the foreseeable future. It identified a substantial doubt about its ability to continue as a going concern because continued operations depend on additional financing. Management warned that failure to raise funds could delay or reduce trials, curtail operations, or lead to bankruptcy or other alternatives.
- Acuitas may invest up to an additional $3 million for year-two operations if BIV201 development continues, reduced by any federal or FDA grant funding received. This is conditional, not assured funding. Management also cited possible equity or debt financing, grants, licensing, or partnerships, without assurance of success.
- The USPTO Patent Trial and Appeal Board instituted an inter partes review of BioVie’s U.S. Patent No. 9,655,945 after finding a reasonable likelihood that at least one claim may be unpatentable. BioVie said it would defend the patent and/or pursue settlement; the outcome was undetermined, and no contingency accrual was recorded.
- The company disclosed royalty obligations on future BIV201 sales and on certain terlipressin products, including a University of Padova royalty capped at $200,000 per year. Its office lease is month-to-month at $1,000 per month.
- Management said disclosure controls were effective at the reasonable-assurance level and that previously reported material weaknesses had been remediated through hiring a CFO and establishing an audit committee. The filing states no material off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the six-patient Phase 2a trial produces adequate results and supports the planned Phase 2b program.
- Available cash runway, expected trial spending, and whether additional financing—including the conditional Acuitas investment or grants—will be secured.
- The outcome and potential effects of the patent review, including any related warrant or pricing adjustments under the financing agreement.
- The full dilution and capitalization implications of the 216.4 million warrants, options, and any additional share issuances.
- The terms and accounting treatment of related-party debt settlements and the financing proceeds, including the distinction between gross proceeds and cash received.