Bridgebio Pharma, Inc. quarterly report, Q3 FY2020

BridgeBio Pharma, Inc. 2020 Q3 Form 10-Q Summary

Business context and reporting period

BridgeBio is a clinical-stage biopharmaceutical company developing medicines for Mendelian diseases and genetically driven cancers through wholly owned, majority-owned and consolidated variable-interest entities. The company had more than 20 development programs, no products approved for commercial sale, and no product-sales revenue. This unaudited Form 10-Q covers the three and nine months ended September 30, 2020, compared primarily with the same periods in 2019.

Financial performance and liquidity

Metric	Three months ended September 30	Nine months ended September 30
License revenue	$8.1 million, versus $26.7 million	$8.1 million, versus $26.7 million
Research and development expense	$92.1 million, versus $55.3 million	$246.9 million, versus $152.5 million
General and administrative expense	$36.0 million, versus $23.5 million	$108.2 million, versus $59.4 million
Loss from operations	$119.9 million, versus $54.5 million	$347.0 million, versus $187.6 million
Net loss	$130.2 million, versus $60.7 million	$370.5 million, versus $204.4 million
Net loss attributable to BridgeBio common stockholders	$115.9 million, versus $60.0 million	$328.7 million, versus $187.1 million
Basic and diluted loss per share	$0.98 loss, versus $0.51 loss	$2.79 loss, versus $1.86 loss
Net cash used in operating activities	Not separately presented	$303.5 million, versus $177.4 million

Revenue declined approximately 70% year over year in both the quarter and year-to-date period because 2019 included a $26.7 million Alexion-related upfront payment, while 2020 primarily reflected the $8.0 million Navire-LianBio upfront payment and $0.1 million of Eidos clinical supply revenue. With no product sales and substantial development spending, the company remained deeply loss-making; the filing does not present a meaningful operating margin, but operating expenses substantially exceeded license revenue.

Research and development spending increased 66% for the quarter and 62% year to date, driven by higher external development costs and headcount. General and administrative expense increased 53% for the quarter and 82% year to date, reflecting organizational growth and public-company compliance costs. Stock-based compensation was $17.7 million in the quarter and $46.3 million year to date, compared with $5.8 million and $11.4 million, respectively, in the comparable periods.

At September 30, 2020, cash and cash equivalents were $367.0 million, short-term marketable securities were $343.7 million, and total cash, cash equivalents and marketable securities were $710.7 million. Working capital was $669.7 million. Management stated that available cash, cash equivalents and marketable securities were expected to fund operations for at least the next 12 months under current plans, although additional financing could be required sooner if plans or forecasts change.

Debt and capital structure

• BridgeBio issued $550.0 million of 2.50% convertible senior notes due 2027 in March 2020 and received approximately $537.0 million of net proceeds.
• The notes had a $550.0 million principal balance and a $378.5 million net carrying amount at September 30, 2020 because of the equity component, debt discount and issuance costs. The initial conversion price was approximately $42.71 per share, corresponding to approximately 12.9 million shares, subject to adjustment.
• BridgeBio spent approximately $49.3 million on capped calls and $75.0 million to repurchase 2.4 million common shares in connection with the notes.
• Consolidated debt was $642.5 million at principal value, or $471.9 million net of discounts and issuance costs. The filing separately reports $92.5 million of variable-rate debt, including BridgeBio’s $75.0 million Hercules term loan and Eidos’ $17.5 million term loan.
• The Hercules facility was amended to extend the interest-only period to July 2022 and maturity to November 2023, subject to further extensions and conditions. Up to $125.0 million of additional borrowing capacity was available subject to Hercules approval; none had been drawn by September 30, 2020.

Material changes versus the prior comparable period

• Net loss increased $69.5 million, or approximately 81%, in the third quarter and $166.0 million, or approximately 81%, year to date.
• Operating cash burn increased $126.1 million year to date, primarily reflecting the larger net loss and higher development spending.
• Financing cash flow increased to $442.7 million from $355.9 million, primarily because of the 2027 Notes issuance, partially offset by capped-call purchases and the share repurchase.
• The company adopted ASC 842 on January 1, 2020, recognizing operating lease right-of-use assets of $9.2 million and lease liabilities of $11.5 million at adoption. Operating lease liabilities totaled $11.9 million at September 30, 2020.
• The April 2020 Stock and Equity Award Exchange Program increased BridgeBio-level equity awards and resulted in significant performance-based compensation arrangements. Potential milestone compensation under employee arrangements was up to $230.2 million, including awards under the exchange program.
• BridgeBio increased investment in consolidated development entities, including QED, Origin, Phoenix Tissue Repair, ML Bio, Navire and other entities. The filing states that aggregate investments in these entities totaled approximately $296.0 million during the first nine months of 2020.

Guidance, outlook, risks and unusual items

• Management expects continued net losses for the next several years as clinical development, preclinical research and commercialization-readiness activities continue. No profitability or product-sales forecast was provided.
• Because of COVID-19, the company experienced clinical-trial enrollment delays and temporary suspensions, as well as potential delays in trial starts, nonclinical work, toxicology studies, manufacturing and regulatory activities. Management expected top-line data from Part A of the Phase 3 acoramidis ATTR-CM trial in late 2021 or early 2022, subject to pandemic-related uncertainty.
• On October 5, 2020, after the reporting date, BridgeBio agreed to acquire the remaining Eidos shares. Eidos holders could elect 1.85 BridgeBio shares or $73.26 in cash per Eidos share, subject to a $175.0 million aggregate cash cap. The transaction required stockholder, regulatory and other approvals and could result in dilution, cash usage, integration costs and termination fees of up to $100.0 million payable by BridgeBio in specified circumstances.
• After the reporting date, BridgeBio entered into leases with approximately $5.7 million of future rent for a Montreal facility and approximately $11.9 million of future rent under a San Francisco sublease.
• Potential contingent obligations include up to $68.2 million of performance-based milestone compensation disclosed in contractual-obligation discussions, additional contingent license and collaboration milestones and royalties, and termination charges under certain clinical and manufacturing agreements. These amounts are generally excluded from recorded liabilities because achievement or timing was not probable or estimable.
• The company reported no material legal proceedings and stated that disclosure controls were effective at the reasonable-assurance level as of September 30, 2020. BridgeBio’s previously identified material weaknesses in internal control had been remediated as of December 31, 2019, although future control deficiencies remain a risk.

Most important facts for investors to verify

• Whether cash and marketable securities remain sufficient to fund the rapidly increasing clinical and operating cash burn, particularly after the proposed Eidos acquisition and planned commercial preparations.
• The terms, conversion conditions and potential dilution associated with the $550.0 million convertible notes, including the effect of any triggered conversion or fundamental-change repurchase.
• The status, timing and financing impact of the Eidos merger, including the cash-election cap, expected stock dilution and potential termination fees.
• COVID-19’s continuing effect on trial enrollment, acoramidis timing, manufacturing capacity and regulatory milestones.
• The probability, timing and cash-versus-equity settlement of contingent employee milestone awards and license-related milestones.
• Clinical efficacy, safety, regulatory and manufacturing data for key programs, including acoramidis, infigratinib, fosdenopterin, BBP-589 and other pipeline candidates.