BioCryst Pharmaceuticals, Inc. — Q2 2013 Form 10-Q
Reporting period: Three and six months ended June 30, 2013. Financial amounts are in millions unless otherwise noted; interim statements are unaudited. BioCryst is a biotechnology company developing drug candidates, with revenue primarily from government-funded research and licensing and royalty arrangements.
Financial performance and position
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $0.8 | $4.2 | $4.4 | $16.4 |
| Research and development expense | $11.7 | $12.8 | $19.1 | $28.3 |
| General and administrative expense | $1.2 | $1.6 | $2.6 | $3.3 |
| Operating loss | $(12.1) | $(10.2) | $(17.5) | $(15.2) |
| Net loss | $(12.2) | $(12.3) | $(16.7) | $(18.3) |
| Net loss per share | $(0.23) | $(0.25) | $(0.32) | $(0.38) |
- Q2 revenue included $0.4 million of BARDA/HHS reimbursement, $0.3 million of collaboration revenue amortization and $0.1 million of royalties. Six-month revenue included $2.0 million of royalties and $1.8 million of BARDA/HHS reimbursement.
- The six-month operating cash outflow was $14.1 million, compared with $18.6 million in 2012. Investing provided $4.6 million and financing provided $8.4 million. Cash and cash equivalents declined $1.1 million to $19.8 million.
- At June 30, cash, investments and restricted cash totaled $31.3 million; working capital was $21.6 million. Total assets were $39.9 million and stockholders’ deficit was $9.0 million.
- Non-recourse notes payable were $30.0 million, bearing 14% interest and secured by specified peramivir royalties and related collateral. Approximately $152,000 of interest was in arrears at June 30. Hedge collateral posted was $2.4 million.
Changes versus the prior comparable period
- Revenue fell sharply: 2012 included $7.8 million of Mundipharma deferred revenue recognized after completion of a knowledge transfer, plus higher BARDA/HHS reimbursement. In 2013, BARDA/HHS activity and related reimbursable costs were lower.
- Six-month R&D expense declined by $9.2 million, reflecting lower spending on peramivir, BCX5191 and forodesine, reduced infrastructure after the 2012 restructuring, and the absence of the 2012 Mundipharma-related expense recognition. The decrease was partly offset by a $5.0 million write-off of deferred collaboration costs associated with the PNP licensing agreement.
- Operating losses widened despite lower expenses, as the decline in revenue exceeded expense reductions. Net loss improved year over year, aided by a $3.1 million six-month gain on the foreign currency hedge, compared with a $1.0 million loss in 2012.
Outlook, developments and risks
- Management forecast 2013 operating cash usage of $22–$26 million and operating expenses of $45–$55 million. The cash-usage forecast was unchanged from February; the expense range rose from $25–$35 million due to anticipated peramivir NDA costs and the PNP-related write-off.
- Management expected available resources to fund planned operations through 2014, based on June 30 liquidity, expected BARDA/HHS receipts and the subsequent offering. On August 6, 2013, BioCryst completed a 4.6 million-share offering at $4.40 per share, expected to generate $18.5 million in net proceeds.
- BARDA/HHS issued a peramivir stop-work order in March, then modified it on July 11 to permit up to $12.8 million of previously obligated funding for activities directly supporting an NDA filing. The company aimed to submit the NDA by year-end 2013 and expected some unreimbursed peramivir costs.
- BioCryst reported that BCX4161 Phase 1 objectives were met and expected to begin a Phase 2a HAE study in Q4 2013. The FDA had removed the clinical hold on BCX4161 by July 31. Ulodesine was ready for Phase 3 but the company intended to out-license it before proceeding.
- Key risks include continued losses and need for additional capital; dependence on BARDA/HHS reimbursement and government contract decisions; clinical, manufacturing and regulatory uncertainty; reliance on partners and third-party vendors; and volatility in peramivir royalties, which are dedicated to note service. Hedge mark-to-market changes can also cause earnings and collateral volatility.
Investor verification priorities
- Confirm the peramivir NDA timetable, BARDA/HHS funding availability and any unreimbursed development costs.
- Track actual cash burn, operating expenses and runway against management’s 2013 ranges and through-2014 liquidity expectation.
- Verify BCX4161 Phase 2a initiation and results, and whether BioCryst secures a partner for ulodesine.
- Monitor Shionogi royalty receipts, PhaRMA Notes interest arrears and hedge collateral or premium obligations.
- Assess dilution from the August 2013 offering and future financing needs.