BioCryst Pharmaceuticals(US:BCRX)2023-11-07 16:00Part I. Financial Information Item 1. Financial Statements The unaudited condensed consolidated financial statements for Q3 2023 reflect increased revenues, narrower net loss, and balance sheet changes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $150,905 | $304,767 | | Investments | $246,685 | $119,543 | | Total current assets | $502,466 | $516,500 | | Total assets | $522,924 | $550,000 | | Liabilities and Stockholders' Deficit | | | | Total current liabilities | $90,763 | $105,514 | | Royalty financing obligations | $535,186 | $501,655 | | Secured term loans | $297,995 | $231,624 | | Total stockholders' deficit | ($410,986) | ($294,597) | | Total liabilities and stockholders' deficit | $522,924 | $550,000 | Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $86,742 | $75,827 | $238,011 | $191,282 | | Total operating expenses | $98,663 | $93,272 | $299,050 | $293,406 | | Loss from operations | ($11,921) | ($17,445) | ($61,039) | ($102,124) | | Net loss | ($36,149) | ($42,520) | ($164,808) | ($175,575) | | Basic and diluted net loss per common share | ($0.19) | ($0.23) | ($0.87) | ($0.95) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($86,223) | ($138,001) | | Net cash used in investing activities | ($103,025) | ($205,453) | | Net cash provided by financing activities | $35,658 | $83,828 | | Decrease in cash, cash equivalents and restricted cash | ($153,750) | ($259,391) | | Cash, cash equivalents and restricted cash at end of period | $152,489 | $248,343 | Notes to Condensed Consolidated Financial Statements - The company believes its financial resources as of September 30, 2023, are sufficient to fund operations for at least the next 12 months, despite expecting 2023 expenses to exceed revenues43 Revenue Breakdown (in thousands) | Revenue Source | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | ORLADEYO (U.S.) | $75,268 | $60,106 | $208,934 | $162,743 | | ORLADEYO (Outside U.S.) | $10,416 | $5,866 | $26,173 | $18,155 | | Total ORLADEYO | $85,684 | $65,972 | $235,107 | $180,898 | | Other revenues | $1,058 | $9,855 | $2,904 | $10,384 | | Total revenues | $86,742 | $75,827 | $238,011 | $191,282 | - On April 17, 2023, the company entered into a new $450 million Loan Agreement with Pharmakon, drawing an initial $300 million; proceeds were used to repay the existing $241.8 million Athyrium Credit Agreement133223 - Upon repayment of the Athyrium Term Loans, the company incurred a one-time loss on extinguishment of debt of $29.0 million for the nine months ended September 30, 2023, which included prepayment fees and the write-off of unamortized financing costs150 - Subsequent to the quarter end, on October 23, 2023, Baker Bros. Advisors LP exercised all remaining pre-funded warrants, resulting in the issuance of 14,997 common shares; no warrants remain outstanding182 - On November 3, 2023, the company entered into a license agreement with Clearside Biomedical, Inc. to develop avoralstat for diabetic macular edema, involving a $5 million upfront fee and potential future milestones and royalties182183 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses rare disease strategy, ORLADEYO commercialization, financial results, and pipeline advancements Overview and Recent Developments - The company's strategy focuses on developing and commercializing first-in-class or best-in-class oral therapeutics for rare diseases, with a key product being ORLADEYO for hereditary angioedema (HAE)186187 - BioCryst anticipates the global commercial market for ORLADEYO has the potential to reach a peak of $1 billion in annual net revenues, with 70-80% expected from the U.S.188 - The company is advancing its complement program, including BCX10013 for renal complement-mediated diseases, and has introduced several new pipeline candidates190192 - Oral C5 Inhibitor: For generalized myasthenia gravis (gMG), with clinical trials expected to begin in 2025 - Bifunctional Complement Inhibitor: An anti-C2 monoclonal antibody for complex renal diseases, with clinical trials expected in 2025 - Oral C2 Inhibitor: For autoimmune hemolytic anemias, with a lead molecule selection expected in 2025 - BCX17725: A KLK5 inhibitor for Netherton syndrome, with clinical trials expected to begin in 2024 - Avoralstat: Licensed with Clearside's microinjector for diabetic macular edema (DME)200201202203204 Results of Operations Comparison of Results of Operations (in millions) | Metric | Q3 2023 | Q3 2022 | Change | 9M 2023 | 9M 2022 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $86.7 | $75.8 | +14.4% | $238.0 | $191.3 | +24.4% | | R&D Expenses | $46.9 | $52.7 | -11.0% | $146.5 | $180.1 | -18.7% | | SG&A Expenses | $50.6 | $36.9 | +37.1% | $149.5 | $109.2 | +36.9% | | Interest Expense | $27.3 | $24.8 | +10.1% | $83.7 | $72.6 | +15.3% | - The increase in Q3 and 9-month 2023 revenue was primarily driven by higher ORLADEYO net revenue, which grew by $19.7 million and $54.2 million respectively, partially offset by a decrease in other revenues due to a 2022 RAPIVAB stockpiling sale to HHS207214 - R&D expenses decreased in 2023 due to reduced investment following the discontinuation of the BCX9930 (Factor D) and BCX9250 (FOP) programs in late 2022209216 - SG&A expenses increased significantly due to investment in expanding the U.S. commercial team for ORLADEYO and growing international operations210217 Liquidity and Capital Resources - As of September 30, 2023, the company had principal liquidity sources of approximately $150.9 million in cash and cash equivalents and $246.7 million in available-for-sale investments226 - On April 17, 2023, the company entered into a new $450 million loan agreement with Pharmakon, drawing an initial $300 million to repay its previous Athyrium credit facility and for general corporate purposes; three additional tranches of $50 million each are available at the company's option through September 30, 2024223 - Management believes that based on current revenue and expense expectations, the company's financial resources are sufficient to fund operations for at least the next 12 months230 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate and foreign currency risks, with no material impact from inflation on results - The company is subject to interest rate risk from its Pharmakon Loan Agreement, which bears interest at a variable rate based on the three-month SOFR plus a margin; as of September 30, 2023, the effective interest rate was 13.24%267 - Foreign currency risk exists due to commercial sales in Europe (Euros, British Pound) and royalties from Japan (Japanese yen), as well as operations in other regions; the company does not currently engage in foreign currency hedging272273 Controls and Procedures Disclosure controls were ineffective due to material weaknesses in internal financial reporting from staffing issues; remediation is underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to material weaknesses in internal control over financial reporting276 - The material weaknesses stem from staffing issues and insufficient resources in the accounting function, leading to inadequate review of manual journal entries and general ledger account reconciliations276277 - Planned remediation includes hiring more accounting personnel, engaging a third-party specialist, and updating policies, procedures, and training related to internal controls278 - Despite the material weaknesses, management believes the condensed consolidated financial statements in the report are fairly presented in all material respects in conformity with U.S. GAAP280 Part II. Other Information Risk Factors The company outlines significant business, financial, development, regulatory, and market risks impacting its operations - Business Risks: The company has a history of losses and may need to raise additional capital; its success depends on advancing its pipeline, particularly BCX10013, and the commercial success of ORLADEYO, which faces intense competition290292296339 - Financial & Control Risks: The company has identified material weaknesses in its internal control over financial reporting, which could harm investor confidence and the stock price; the business is also subject to significant indebtedness under the Pharmakon Loan Agreement, which contains restrictive covenants414389 - Development & Regulatory Risks: Drug development is complex, lengthy, and expensive, with a high risk of failure; the company relies heavily on third parties for manufacturing and clinical trials, and obtaining and maintaining regulatory approvals is uncertain and subject to extensive requirements298305312 - International & Market Risks: International expansion exposes the company to varied legal, political, and financial risks, including foreign currency fluctuations and complex reimbursement environments; unpredictable market and economic conditions, such as inflation, rising interest rates, and geopolitical conflicts, could adversely affect operations and access to capital396398431 Other Information During Q3 2023, no director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - During the three months ended September 30, 2023, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement437 Exhibits This section provides a comprehensive list of all exhibits filed with the Form 10-Q