BioVie Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended March 31, 2017; filed May 8, 2017. Although the request metadata labels this “2016 Q3,” the filing covers fiscal third quarter 2017 and compares results with the periods ended March 31, 2016.
Business context
BioVie is a clinical-stage biotechnology company developing BIV201, a continuous-infusion terlipressin therapy for ascites associated with liver cirrhosis. The company had no revenue and was funding development and operations through equity financing and other potential sources.
Financial results and liquidity
| Metric | Three months ended Mar. 31, 2017 | Three months ended Mar. 31, 2016 | Nine months ended Mar. 31, 2017 | Nine months ended Mar. 31, 2016 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $400,527 | $57,854 | $1,109,680 | $162,409 |
| Operating loss | $400,527 | $57,854 | $1,109,680 | $162,409 |
| Net loss | $178,495 | $57,810 | $887,637 | $162,254 |
| Net loss per share, basic and diluted | $0.00 | $0.00 | $0.01 | $0.00 |
The quarter’s net loss was lower than its operating loss because the company recognized $222,028 of other income from forgiveness of salary debt. This was a nonrecurring item, not operating revenue. Interest expense was zero. No gross margin was reported because sales and cost of goods sold were both zero.
At March 31, 2017, cash was $35,309, down from $123,757 at June 30, 2016. Nine-month operating cash outflow was $498,447; financing provided $409,999, resulting in an $88,448 net cash decrease. Total assets were $2,451,722, largely intangible assets of $2,070,701 and goodwill of $345,711.
Current liabilities were $402,618, against current assets of $35,309, a working-capital deficit of $367,309. Long-term liabilities were $575,917, primarily interest-free related-party salary and consulting obligations deferred until December 31, 2019. A separate $10,000 related-party loan was payable on demand. Stockholders’ equity was $1,473,187. Shares outstanding were 91,685,000 at March 31, 2017.
Material changes versus the prior comparable period
- Nine-month operating expenses increased to $1,109,680 from $162,409, reflecting new research and development, amortization of acquired intellectual property, higher professional fees, and increased payroll.
- Research and development expense was $375,872 for the nine months, versus none in the prior-year period. Professional fees rose to $312,277 from $32,966; payroll expense rose to $214,044 from $121,107.
- Cash used in operations increased to $498,447 from $34,237 for the prior-year nine-month period.
- During the nine months, BioVie issued 4,524,999 common shares, raising reported proceeds of $409,999 and increasing shares outstanding from 87,160,001 at June 30, 2016.
Outlook, risks, and unusual items
- Funding and going concern: Management stated that available cash was insufficient for the next 12 months and disclosed substantial doubt about the company’s ability to continue as a going concern. It estimated a need for approximately $500,000 to $1,000,000 of additional near-term financing. Failure to raise funds could force delays or reductions in development, licensing or partnership transactions, or cessation of operations.
- Planned spending: Assuming successful financing, the company projected approximately $600,000 for R&D, $200,000 for corporate overhead, and $250,000 for staffing over the next 12 months.
- Development and regulatory status: In March 2017, the company said it received FDA notification allowing it to initiate a U.S. Phase 2a trial. In April 2017, after the reporting date, it signed a CRADA with the McGuire Research Institute/VA and said it planned to begin dosing patients in mid-2017. The filing also described remaining work toward an IND application; investors should verify the precise regulatory status and trial authorization.
- Financing arrangement: A January 2017 purchase agreement gives Aspire Capital the potential to purchase up to $12 million of common stock over 30 months, subject to contractual conditions, registration effectiveness, and minimum stock-price requirements. Funding is not assured and sales could dilute existing shareholders. Warrants and outstanding options also create potential dilution.
- Debt restructuring: In March, executives and a consultant deferred specified salary or consulting obligations to 2019 without interest if repaid by then; one executive forgave half of a salary claim, producing the $222,028 gain. These transactions reduced current obligations but did not eliminate the deferred liabilities.
- Other risks and controls: The company warned that development, regulatory compliance, financing, and execution risks could cause actual results to differ materially from forward-looking statements. Management concluded disclosure controls and procedures were not effective as of March 31, 2017. No material change in internal control over financial reporting was reported during the quarter.
Important facts for investors to verify
- Whether BioVie raised sufficient additional capital after quarter-end to fund the stated 12-month plan, and the resulting dilution and financing terms.
- The FDA’s exact authorization and IND status for the Phase 2a BIV201 trial, and whether patient dosing began as planned.
- The company’s cash runway, operating cash burn, and ability to meet current liabilities and deferred related-party obligations.
- The terms, availability, and actual use of the Aspire Capital facility, including any subsequent share sales or warrant exercises.
- Progress in remediating ineffective disclosure controls and the status of the going-concern uncertainty.