BeyondSpring Inc. — FY2021 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a quarterly filing. Figures are in U.S. dollars unless otherwise noted; financial statements use U.S. GAAP.
Business context
BeyondSpring is a clinical-stage biopharmaceutical company with no approved products and no product-sales revenue. Its lead candidate, plinabulin, is being developed for chemotherapy-induced neutropenia (CIN), non-small cell lung cancer (NSCLC), and combinations with immuno-oncology therapies. Other programs include preclinical immune agents and SEED’s targeted protein degradation platform. Greater China rights to plinabulin are held through a subsidiary in which BeyondSpring owns 57.97%.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $1.351 million | $0.180 million | Up 651%; entirely attributed to the Lilly collaboration. No product-sales revenue. |
| Research and development expense | $36.888 million | $41.793 million | Down 12%, primarily from lower clinical-development and share-based compensation costs. |
| General and administrative expense | $30.703 million | $22.598 million | Up 36%, largely due to higher pre-commercialization costs, personnel, insurance and other expenses. |
| Operating loss | $66.240 million | $64.211 million | Loss widened 3%. |
| Net loss | $68.208 million | $63.821 million | Loss widened 7%; includes $3.570 million income-tax expense. |
| Net loss attributable to BeyondSpring | $64.179 million | $60.973 million | Basic and diluted loss per share was $1.64, versus $2.03. |
| Cash used in operating activities | $47.242 million | $43.745 million | Cash use increased $3.497 million; Hengrui’s upfront payment partly offset operating outflows. |
Margins: The filing does not provide a meaningful product or operating margin measure; revenue was collaboration-related and the company remains pre-commercial.
Balance sheet at December 31, 2021: Cash and cash equivalents were $41.625 million, and short-term investments were $30.743 million, totaling $72.368 million. Current assets were $75.123 million against current liabilities of $15.155 million; reported net current assets were $59.968 million. Total assets were $81.648 million, total liabilities $55.271 million, and total equity $20.923 million. Accumulated deficit was $341.997 million.
Debt and deferred revenue: Current loan balance was $1.569 million at year-end, relating to a China Construction Bank loan repaid in March 2022. Deferred revenue was $39.308 million, including the $31.039 million Hengrui upfront payment, which is to be recognized over time as the combined performance obligation is satisfied. Hengrui’s payment was not recognized as 2021 revenue.
Cash flows and financing: Investing activities used $20.413 million, mainly for short-term investments and property and equipment. Financing activities provided approximately $1,000, with no material equity proceeds in 2021. The company reported a $67.912 million net decrease in cash and cash equivalents during the year. Management stated that available financial resources were expected to fund operating expenses and capital expenditures through the second quarter of 2023.
Material changes and business developments
- FDA issued a Complete Response Letter in November 2021 for the plinabulin-plus-G-CSF CIN application. The FDA said the PROTECTIVE-2 results were not sufficiently robust and indicated a second well-controlled trial would be required.
- The CIN application remained under NMPA review at the filing date. Both U.S. and China applications had received priority review status; the company reported no FDA approval.
- In DUBLIN-3, a 559-patient Phase 3 NSCLC trial, the company reported positive topline results: median overall survival of 10.5 months with plinabulin plus docetaxel versus 9.4 months with docetaxel alone (hazard ratio 0.82; log-rank p=0.0399). The company expected a China NDA filing in the second half of 2022 and had begun discussions with the FDA on the future regulatory pathway.
- In August 2021, Wanchunbulin entered an exclusive Greater China commercialization and co-development agreement with Hengrui. Hengrui paid approximately $31 million upfront; up to approximately $171 million in regulatory and sales milestones may be payable. Wanchunbulin bears all clinical and regulatory costs for the first two indications; Hengrui bears commercialization costs and shares costs for additional indications.
- In January 2022, BeyondSpring announced a U.S. workforce reduction of approximately 35% to preserve cash following the FDA letter. It estimated approximately $1.0 million in one-time severance costs, mostly payable by the first quarter of 2022.
Outlook, risks and unusual items
- The company expects continued losses and negative operating cash flow and says it will need additional financing to advance clinical development and commercialization. Its runway estimate extends through Q2 2023, but management cautions that assumptions may prove incorrect and capital may not be available on acceptable terms.
- Key risks include the FDA’s requirement for additional CIN evidence; uncertainty over NSCLC regulatory acceptance, including applicability of trial results to U.S. patients; clinical, safety, enrollment and manufacturing risks; and dependence on plinabulin.
- BeyondSpring relies on third-party manufacturers and identifies BASF as the sole supplier of the stabilizing agent used in the current plinabulin formulation. A supply interruption could require reformulation and delay development.
- COVID-19 caused enrollment, data-processing and inspection delays; the filing also cites the potential impact of Russia-Ukraine hostilities on trial sites, supply chains and financing conditions.
- Other material risks include China-related regulatory, data-transfer, foreign-exchange and capital-repatriation restrictions, and possible U.S. trading restrictions under the Holding Foreign Companies Accountable Act because the PCAOB reported it could not fully inspect the company’s mainland China-based auditor.
- The company recorded a $3.570 million income-tax expense in 2021 despite its consolidated loss, attributed to current taxes associated with upfront collaboration payments. It also recorded $0.635 million of income from forgiveness of a Paycheck Protection Program loan and a $0.444 million unrealized gain on a forward contract.
- Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2021. The external auditor was not required to, and did not, attest to internal-control effectiveness.
Most important facts for investors to verify
- What clinical and regulatory pathway the FDA ultimately requires for the CIN indication, including the timing, design, cost and funding of any additional trial.
- Whether the NMPA approves the CIN application and what evidence or conditions it requires; confirm the status of any China NSCLC filing and the FDA’s pathway discussions.
- Cash, short-term investment balances, actual cash burn and financing needs after year-end, including the effect of the 2022 workforce reduction and severance.
- Hengrui agreement economics and execution: milestone conditions, net-sales sharing, Wanchunbulin’s cost obligations, and the effect of its minority ownership on value attributable to BeyondSpring shareholders.
- SEED collaboration revenue recognition, milestone probability and timing, preferred-share redemption terms, and whether potential Lilly milestones or royalties are realized.
- Auditor inspection and listing developments, along with the company’s evolving China data-security and cross-border transfer obligations.