BioVie(BIVI) - 2021 Q4 - Annual Report

PART I Business Overview BioVie Inc. is a clinical-stage biopharmaceutical company focused on developing innovative drug therapies for chronic debilitating conditions, specifically liver disease (BIV201) and neurodegenerative diseases (NE3107) Pipeline Overview The company's mid-2021 clinical development pipeline includes programs for Liver Cirrhosis (BIV201) and Neurodegenerative Disease (NE3107) - The clinical development pipeline as of mid-2021 includes programs for Liver Cirrhosis (BIV201) and Neurodegenerative Disease (NE3107)[13] Liver Cirrhosis Program BioVie's BIV201, an orphan drug for ascites due to chronic liver cirrhosis, is in a Phase 2b trial with top-line results expected in early 2022, utilizing a proprietary liquid formulation - BIV201 (continuous infusion terlipressin) is an orphan drug candidate for ascites due to chronic liver cirrhosis, with a Phase 2a clinical trial completed in 2019 and a Phase 2b trial currently underway at several US medical centers[11][13][14] - Top-line results for the Phase 2b trial are expected in early 2022, to be followed by a proposed single pivotal Phase 3 trial beginning in 2022[11][14] - A proprietary novel liquid formulation of terlipressin has been invented, intended to improve convenience for outpatient administration and confirmed to have room temperature stability for 18 months (potential for up to two years)[17] - BIV201 has FDA Fast-Track status and Orphan Drug designation for ascites and hepatorenal syndrome (HRS), targeting an addressable ascites market exceeding $650 million[18] About Ascites and Liver Cirrhosis Liver cirrhosis affects 600,000 Americans, causing over 40,000 annual deaths, with ascites as a common complication involving kidney dysfunction and fluid accumulation - About 600,000 Americans and millions worldwide suffer from liver cirrhosis, which is the 11th leading cause of death in the US, killing over 40,000 people annually[20] - Ascites is a common complication of advanced liver cirrhosis, characterized by kidney dysfunction and the accumulation of large amounts of fluid in the abdominal cavity[20] The Need for an Ascites Therapy There is a critical unmet medical need for ascites therapy, with no FDA-approved medications, leading to high mortality and over $5 billion in annual treatment costs - No medications are approved by the FDA specifically for treating ascites, leading to a critical unmet medical need[21] - An estimated 40% of patients with ascites die within two years of diagnosis, and U.S. treatment costs for liver cirrhosis, including ascites, exceed $5 billion annually[21] The Ascites Development Pathway Ascites develops from portal hypertension, causing splanchnic vasodilation and low arterial blood volume, which activates neurohormonal systems leading to kidney salt and water retention - Ascites develops through portal hypertension, leading to splanchnic vasodilation and low arterial blood volume, which activates neurohormonal systems causing kidneys to retain salt and water[23] The BIV201 Mechanism of Action BIV201 aims to alleviate portal hypertension and correct splanchnic vasodilation, increasing effective blood volume and reducing kidney signals for fluid retention in ascites patients - BIV201 aims to alleviate portal hypertension and correct splanchnic vasodilation, increasing effective blood volume and reducing kidney signals to retain excess salt and water[24] - If successful, BIV201 could halt the cycle of accelerating fluid generation in ascites patients and reduce the need for frequent paracentesis procedures[24] Future Possible BIV201 Indications BIV201 has potential future applications in life-threatening liver cirrhosis conditions like Bleeding Esophageal Varices (BEV) and Hepatorenal Syndrome-Acute Kidney Injury (HRS-AKI) - BIV201 has potential future applications in Bleeding Esophageal Varices (BEV), which requires emergency treatment to avoid blood loss and death[25][26] - BIV201 has Orphan Drug designation for Hepatorenal Syndrome-Acute Kidney Injury (HRS-AKI), a deadly condition of kidney failure, and a pivotal US Phase 3 clinical trial is planned for late 2021[25][27] Neurodegenerative Disease Program BioVie acquired NE3107, a novel orally administered small molecule inhibiting inflammation-driven insulin resistance, for Alzheimer's and Parkinson's Disease, with a pivotal Phase 3 for Alzheimer's authorized by the FDA - BioVie acquired NeurMedix, Inc.'s biopharmaceutical assets in June 2021, including NE3107, a potentially selective inhibitor of inflammatory ERK signaling[12][28] - NE3107 is a novel orally administered small molecule believed to inhibit inflammation-driven insulin resistance and major pathological inflammatory cascades, with potential applications for Alzheimer's and Parkinson's Disease[12][28] - The FDA has authorized a potentially pivotal Phase 3 study for NE3107 in mild to moderate Alzheimer's disease (NCT04669028), planned to initiate in the second half of 2021[12][28] Alzheimer's Disease Alzheimer's disease affects 6 million Americans, linked to inflammation and insulin resistance, which NE3107's anti-inflammatory and insulin-sensitizing activity aims to disrupt - Alzheimer's disease (AD) affects an estimated 6 million Americans and is characterized by progressive cognitive deterioration[29] - Scientific evidence strongly links inflammation, type 2 diabetes, and inflammation-driven insulin resistance as drivers of AD pathology[30][32] - NE3107's combination of anti-inflammatory and insulin sensitizing activity has the potential to disrupt the forward-feeding cycle of AD pathology[33] Parkinson's Disease Parkinson's Disease affects 1 million Americans, with neuroinflammation playing a key role; NE3107 showed promise in preclinical studies by decreasing inflammation and increasing neuron survival - Neuroinflammation and activation of brain microglia, leading to increased proinflammatory cytokines, play a pivotal role in Parkinson's Disease (PD), which affects an estimated 1 million Americans[38] - In mouse models of PD, NE3107 decreased inflammation and TNF in the brain and increased neuron survival[39] - An unpublished marmoset study reported NE3107 decreased movement abnormalities, and in combination with levodopa, had a stronger effect while developing less levodopa-induced dyskinesia (LID)[39] Oncology NE3107 shows oncology potential by decreasing inflammatory cell signaling in vitro, animal models, and human trials, particularly for cancers dependent on inflammatory pathways - NE3107 has been observed to decrease inflammatory cell signaling in vitro, in animal models, and in human clinical trials, suggesting potential in certain cancers[41] - BioVie is developing clinical trial-enabling data for Multiple Myeloma and Prostate cancers, where inflammatory cell signaling is crucial for disease progression[42] Intellectual Property BioVie protects its products through patents, trade secrets, and FDA data exclusivity, holding Orphan Drug Designations for BIV201 and 15 issued U.S. patents for NE3107 - BIV201 was awarded Orphan Drug Designations in the U.S. for hepatorenal syndrome (Nov 2018) and ascites (Sept 2016)[44] - A PCT application covers novel liquid formulations of terlipressin (WO2020/237170), with patent protection sought in the United States, Europe, China, and Japan[44] - As of August 5, 2021, the company has 15 issued U.S. patents, 1 pending U.S. patent application, 1 pending U.S. provisional application, and 6 issued foreign patents protecting NE3107 and related compounds[46] Selected NE3107 Patent Expiration Dates | Title | Patent Number | Expiration Date | | :----------------------------------- | :------------ | :-------------- | | Steroids Having 7-Oxygen and 17-Heteroaryl Substitution | 8,569,275 | 2/14/2024 | | | 9,102,702 | 3/28/2024 | | | 9,115,168 | 3/28/2024 | | Unsaturated Steroid Compounds | 8,586,770 | 6/2/2026 | | Solid State Forms of a Pharmaceutical | 8,252,947* | 4/18/2030 | | Crystalline Anhydrate Forms of a Pharmaceutical | 9,555,046 | 4/3/2029 | | | 9,850,271 | 4/3/2029 | | | 10,995,112 | 4/3/2029 | | Pharmaceutical Solid State Forms | 8,518,922 | 9/24/2031 | | Methods of Preparing Pharmaceutical Solid State Forms | 9,314,471 | 6/28/2029 | | Steroid Tetrol Solid State Forms | 8,486,926 | 1/10/2030 | | Drug Identification and Treatment Method | 8,354,396 | 7/7/2031 | | Method For Preparing Substituted 3,7-Dihydroxy Steroids | 9,163,059** | 6/5/2029 | | | 9,994,608 | 6/5/2029 | | Treatment Methods Using Pharmaceutical Solid State Forms | 9,877,972 | 4/3/2029 | Government Regulation Drug development and commercialization are subject to extensive government regulation, primarily by the FDA, covering all stages from research to post-approval marketing, with critical compliance requirements - Government authorities extensively regulate the research, development, testing, manufacture, quality control, approval, labeling, marketing, and distribution of pharmaceutical products[49] - Failure to comply with applicable requirements can result in administrative or judicial sanctions, including refusal of approval, withdrawal of approval, clinical holds, fines, and product recalls[50] United States Drug Development Process The FDA regulates drugs under the FDCA, requiring preclinical tests, an IND, human clinical trials (Phase 1, 2, 3) adhering to GCPs, and an NDA or BLA for marketing approval - The FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (FDCA), requiring preclinical tests, an IND, and human clinical trials (Phase 1, 2, 3) before marketing[50][51][55][56][57] - Clinical trials must adhere to FDA's Good Clinical Practices (GCPs) and be reviewed and approved by an independent institutional review board (IRB)[52][54] U.S. Review and Approval Processes The FDA's NDA/BLA review assesses safety, efficacy, and cGMP compliance, potentially involving advisory committees and REMS, a lengthy process with possible 'complete response' letters - The FDA reviews NDAs/BLAs for safety, effectiveness, and cGMP compliance, potentially involving advisory committees and requiring a Risk Evaluation and Mitigation Strategy (REMS)[64][65] - The review process is lengthy and difficult, and the FDA may issue a 'complete response' letter if regulatory criteria are not satisfied, requiring additional data or trials[67] Orphan Drug Designation Orphan Drug designation is granted for products treating rare diseases (fewer than 200,000 US individuals), providing seven years of market exclusivity upon first FDA approval - Orphan Drug designation is for drugs treating rare diseases (fewer than 200,000 individuals in the US)[69] - First FDA approval for an Orphan designated product grants seven years of market exclusivity for that indication, with similar ten-year exclusivity in the European Union[70] Expedited Development and Review Programs The FDA offers Fast Track, Priority Review, and Accelerated Approval programs to expedite development and review for serious or life-threatening conditions with unmet medical needs - The FDA's Fast Track program expedites review for new drugs treating serious or life-threatening conditions with unmet medical needs[71] - Priority Review is for products offering significant treatment improvements, while Accelerated Approval is for serious illnesses based on surrogate endpoints, requiring post-marketing studies[73] Post-Approval Requirements Approved drugs are subject to continuous FDA regulation, including record-keeping, adverse event reporting, product sampling, and strict compliance with promotion, advertising, and cGMP manufacturing - FDA-approved products are subject to continuous regulation, including record-keeping, adverse event reporting, product sampling, and compliance with promotion and advertising standards[74] - Manufacturers must comply with cGMP regulations, and any issues can lead to product restrictions, suspension, or withdrawal from the market[75] Employees BioVie's business is managed by a dedicated executive team, including the CEO, CFO, and Executive VPs, who devote full-time efforts, supported by experienced scientific, medical, and regulatory consultants - The company's executive management team, including Cuong Do (CEO & President) and Wendy Kim (CFO), devote full-time efforts to company activities[78] - BioVie relies on a team of highly experienced scientific, medical, and regulatory consultants for product development[78] Risk Factors This section outlines significant risks that could materially and adversely affect BioVie's business, financial condition, operating results, and stock price - The company's business, financial condition, operating results, and prospects are subject to various risks that could materially adversely affect them[79] Risks Relating to Our Business and Industry Key business risks include no approved products or revenues, limited operating history, substantial capital needs, generic competition, drug development failure, COVID-19 impacts, and complex regulations - The company has no products approved for commercial sale and has never generated revenues, with profitability dependent on successful development, regulatory approval, and commercialization of product candidates[81][82] - As a development-stage company, BioVie faces inherent risks including lack of operating history, insufficient capital, expected substantial losses, and limited experience in regulatory, manufacturing, and marketing areas[83] - The company will need to raise substantial additional capital to fund operations, and failure to do so could lead to delays, reduction, or termination of research and development programs[100][102] - Drug development is a time-consuming and risky process; product candidates may fail in clinical trials due to safety or efficacy issues, or may not receive necessary regulatory approvals[108][113][114] - The company has no manufacturing experience and relies on third-party Contract Manufacturing Organizations (CMOs); failure to comply with cGMP or secure adequate manufacturing capacity could adversely affect the business[117][118][119][120] - The biotechnology and biopharmaceutical industries are highly competitive, characterized by rapid technological developments, and BioVie may be unable to compete with larger, better-resourced enterprises[152][154] RISKS RELATING TO OUR COMMON STOCK Risks related to BioVie's common stock include potential dilution from future capital raises, significant control by current officers, market price volatility, and the impact of restricted shares eligible for resale - Future issuance of additional common stock or preferred stock could result in substantial dilution of existing stockholders' ownership percentage[166][171] - Directors and executive officers own 79.7% of outstanding common stock, giving them significant influence over company affairs and matters requiring member approval[169] - The market price and trading volume of the common stock may be volatile due to various factors, including company performance, investor perceptions, and general economic conditions[172] - A large number of restricted shares held by affiliates are eligible for resale under Rule 144, which could reduce the market price of the shares[173][175] Unresolved Staff Comments There are no unresolved staff comments - There are no unresolved staff comments[192] Properties BioVie maintains a corporate office in Santa Monica under a month-to-month lease and assumed a lease in San Diego from NeurMedix effective July 1, 2021 - The company leases corporate office space in Santa Monica, CA, from a related party (Acuitas Group Holdings, LLC) on a month-to-month basis for $1,000 monthly[193] - Effective July 1, 2021, the company assumed NeurMedix's lease in San Diego, CA, requiring monthly payments of $8,782[193] Legal Proceedings To the company's knowledge, neither BioVie nor its officers or directors are party to any material legal proceedings or litigation, nor are there any judgments against them - Neither the company nor its officers or directors are party to any material legal proceeding or litigation, and there are no judgments against them[194] Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[195] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section provides information on the market for BioVie's common equity, related stockholder matters, and issuer purchases of equity securities, noting no issuer repurchases during the fiscal year ended June 30, 2021 Unregistered Sales of Securities All unregistered sales of securities during the fiscal year ended June 30, 2021, were previously disclosed in Quarterly Reports on Form 10-Q or Current Reports on Form 8-K - All unregistered sales of securities during the year ended June 30, 2021, were previously disclosed in a Quarterly Report on Form 10-Q or Current Report on Form 8-K[197] Issuer Purchases of Common Stock There were no issuer repurchases of common stock during the fiscal year ended June 30, 2021 - There were no issuer repurchases of shares of common stock during the year ended June 30, 2021[197] Reserved This item is reserved and contains no information - This item is reserved[198] Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews BioVie's financial condition and results, highlighting a significant increase in net loss for FY2021 due to the NeurMedix acquisition and ongoing liquidity challenges - The net loss for the year ended June 30, 2021, was approximately $130.3 million, a significant increase from $16.7 million in the prior year, primarily due to the $130.6 million purchase of biopharmaceutical assets from NeurMedix[203] - As of June 30, 2021, the company had working capital of approximately $3.6 million, cash of $4.5 million, stockholders' equity of $5.1 million, and an accumulated deficit of $224.9 million[210] - The company's future viability is largely dependent on its ability to raise additional capital, with a recent capital raise in August 2021 providing $17.8 million in net proceeds[211][212] Overview BioVie Inc. is a clinical-stage company developing innovative drug therapies for liver disease (BIV201) and neurodegenerative disease (NE3107), with both candidates in or planning advanced clinical trials - BioVie Inc. is a clinical-stage company developing innovative drug therapies for liver disease (BIV201) and neurodegenerative disease (NE3107)[199] - BIV201 is in a Phase 2b trial for refractory ascites, with a pivotal Phase 3 trial for HRS-AKI planned for late 2021[200] - NE3107, acquired in June 2021, is entering a potentially pivotal Phase 3 study for Alzheimer's disease, with preclinical results supporting advancement in Parkinson's and oncology[201] Results of Operations The company experienced a substantial increase in net loss for FY2021, primarily driven by expensing the NeurMedix biopharmaceutical asset acquisition as in-process research and development (IPR&D) - Total operating expenses for FY2021 increased by approximately $135.4 million to $138.1 million, primarily due to the $130.6 million purchase of NeurMedix biopharmaceutical assets[204] Net loss BioVie's net loss significantly increased to $130.3 million in FY2021 from $16.7 million in FY2020, primarily due to the $130.6 million expense from the NeurMedix asset acquisition Net Loss Comparison (Year Ended June 30) | Metric | 2021 (approx.) | 2020 (approx.) | | :----- | :------------- | :------------- | | Net Loss | $(130.3) million | $(16.7) million | | Increase in Net Loss | $(113.6) million | N/A | - The primary driver for the increase in net loss was the $130.6 million expensed as purchased in-process research and development (IPR&D) from the NeurMedix biopharmaceutical asset acquisition[203] Research and Development Expenses Research and development expenses surged to $133.2 million in FY2021 from $1.2 million in FY2020, predominantly due to the $130.6 million expensed for the NeurMedix asset acquisition, with a smaller increase attributed to BIV201 Phase 2b trial preparations Research and Development Expenses (Year Ended June 30) | Metric | 2021 | 2020 | | :----- | :-------------- | :-------------- | | R&D Expenses | $133.2 million | $1.2 million | | Increase | $132.0 million | N/A | - The increase was primarily due to $130.6 million for purchased in-process research and development (IPR&D) from the NeurMedix asset acquisition[205] - An additional $1.4 million increase in R&D expenses was attributed to preparations and launch of Phase 2b clinical trials for BIV201[204][206] Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $4.6 million in FY2021 from $1.3 million in FY2020, mainly driven by higher stock compensation for directors and increased costs associated with national exchange listing and professional fees Selling, General and Administrative Expenses (Year Ended June 30) | Metric | 2021 (approx.) | 2020 (approx.) | | :----- | :------------- | :------------- | | SG&A Expenses | $4.6 million | $1.3 million | | Increase | $3.3 million | N/A | - The increase primarily consisted of an additional $2.8 million in stock compensation expense for directors and approximately $475,000 for national exchange listing fees, investor relations, and other professional fees[207] Other Income and Expense, Net Other income, net, improved to $7.8 million in FY2021 from an expense of $14 million in FY2020, primarily due to a $17.5 million change in the fair value of derivative liabilities and a $4.2 million reduction in interest expense Other Income and Expense, Net (Year Ended June 30) | Metric | 2021 (approx.) | 2020 (approx.) | | :----- | :------------- | :------------- | | Other Income (Expense), Net | $7.8 million | $(14.0) million | | Change in Fair Value of Derivatives | $(8,279,919) | $9,211,686 | | Interest Expense | $559,455 | $4,772,429 | - The change was primarily due to a $17.5 million change in the fair value of derivatives and a $4.2 million reduction in interest expense related to embedded conversion derivative liability from warrants[203][209] Capital Resources and Liquidity BioVie faces substantial doubt about its ability to continue as a going concern due to recurring losses, negative cash flows, and a significant accumulated deficit. While a recent capital raise provided $17.8 million, current projections indicate cash depletion within 12 months without further expenditure delays or additional financing Key Financial Position Metrics (June 30, 2021) | Metric | Amount (approx.) | | :----- | :--------------- | | Working Capital | $3.6 million | | Cash | $4.5 million | | Stockholders' Equity | $5.1 million | | Accumulated Deficit | $(224.9) million | - The company has not generated any revenues and does not expect to in the foreseeable future, making future operations dependent on securing additional financing[210][212] - A capital raise on August 11, 2021, generated approximately $17.8 million in net proceeds, which could sustain operations for 12 months if planned expenditures are delayed[211] - These circumstances raise substantial doubt about the company's ability to continue as a going concern[215] Off-Balance Sheet Arrangements BioVie has no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on its financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources - The company has no off-balance sheet arrangements that are material to investors[217] Critical Accounting Policies and Estimates This section outlines BioVie's critical accounting policies and estimates, including those for stock-based compensation, impairment of long-lived assets, and purchase accounting for transactions with related parties Accounting for Stock-based Compensation The company follows ASC 718, measuring compensation expense for all share-based payment awards to employees and non-employee directors based on grant date fair value, recognized over the requisite service period - The company follows ASC 718, requiring measurement of compensation expense for all share-based payment awards to employees and non-employee directors based on grant date fair value[218] Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment when events indicate that their carrying amount may not be recoverable, with impairment recognized if the carrying amount exceeds the asset's fair value - Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable[219] Purchase Accounting for Transactions with Related Party Purchase accounting for transactions with related parties (entities under common control) records assets and liabilities at their historical carrying cost, without a step-up in basis to fair market value - Purchase accounting for transactions with related parties (entities under common control) records assets and liabilities at historical carrying cost, without a step-up in basis to fair market value[220] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - This item is not applicable[220] Financial Statements and Supplementary Data This section incorporates by reference the audited financial statements and supplementary data, including the balance sheets, statements of operations, changes in stockholders' equity, cash flows, and comprehensive notes, which provide detailed insights into the company's financial performance, position, and accounting policies - The financial information required by this item is indexed under Item 15 and incorporated by reference[221] Report of Independent Registered Public Accounting Firm – EisnerAmper LLP EisnerAmper LLP issued an unqualified opinion on BioVie's financial statements but highlighted 'going concern' doubt and identified related party transactions as a critical audit matter - EisnerAmper LLP expressed an unqualified opinion that the financial statements present fairly, in all material respects, the financial position and results of operations for the years ended June 30, 2021 and 2020[236] - The auditors noted a 'going concern' doubt due to the company's recurring losses from operations and negative cash flows from operating activities[237] - Related party transactions were identified as a critical audit matter due to their significance and the complexity of ensuring accurate recording and disclosure[243][244] Balance Sheets The balance sheets show BioVie's financial position as of June 30, 2021, and 2020, reflecting a significant increase in cash and total assets, a decrease in total liabilities, and a shift from a stockholders' deficit to positive equity, primarily driven by financing activities and the NeurMedix asset acquisition Balance Sheet Highlights (June 30) | ASSETS | 2021 | 2020 | | :----- | :------------ | :------------ | | Cash | $4,511,642 | $37,195 | | Total Current Assets | $4,605,129 | $412,980 | | Intangible assets, net | $1,095,849 | $1,325,226 | | Goodwill | $345,711 | $345,711 | | TOTAL ASSETS | $6,046,689 | $2,083,917 | | LIABILITIES | | | | Accounts payable and accrued expenses | $996,374 | $1,259,206 | | Derivative liability - warrants | — | $16,411,504 | | Derivative liability - conversion option on convertible debenture | — | $5,000,800 | | Convertible debenture - related party, net | — | $848,543 | | Total current liabilities | $996,374 | $23,520,053 | | Loan Payable | — | $62,500 | | TOTAL LIABILITIES | $996,374 | $23,582,553 | | STOCKHOLDERS' EQUITY (DEFICIT) | | | | Common stock, $0.0001 par value | $2,232 | $520 | | Additional paid in capital | $229,933,505 | $19,538,742 | | Accumulated deficit | $(224,885,422)| $(41,037,898) | | Total stockholders' equity (deficit) | $5,050,315 | $(21,498,636) | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $6,046,689 | $2,083,917 | Statements of Operations The statements of operations reveal a significant increase in net loss to $(130.2) million in FY2021 from $(16.7) million in FY2020, primarily driven by a substantial increase in research and development expenses due to the NeurMedix asset acquisition Statements of Operations Highlights (Year Ended June 30) | OPERATING EXPENSES | 2021 | 2020 | | :----------------- | :-------------- | :-------------- | | Amortization | $229,377 | $229,377 | | Research and development expenses | $133,187,506 | $1,150,581 | | Selling, general and administrative expenses | $4,637,256 | $1,312,930 | | TOTAL OPERATING EXPENSES | $138,054,139 | $2,692,888 | | LOSS FROM OPERATIONS | $(138,054,139) | $(2,692,888) | | OTHER EXPENSE (INCOME), NET | $(7,804,935) | $13,983,881 | | NET LOSS | $(130,249,204) | $(16,676,768) | | Deemed dividends - related party | $53,598,320 | $17,099,058 | | NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $(183,847,524) | $(33,775,826) | | NET LOSS PER COMMON SHARE - Basic | $(14.82) | $(6.85) | | WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - Basic | 12,403,159 | 4,929,497 | Statements of Changes in Stockholders' Equity (Deficit) The statements of changes in stockholders' equity (deficit) show a substantial increase in additional paid-in capital and a reduction in the accumulated deficit from FY2020 to FY2021, driven by proceeds from common stock issuance, warrant redemptions, and stock-based compensation, despite significant net losses and deemed dividends Stockholders' Equity (Deficit) Changes (Years Ended June 30) | Metric | Balance, June 30, 2021 | Balance, June 30, 2020 | | :----- | :--------------------- | :--------------------- | | Common Stock Shares | 22,333,324 | 5,204,392 | | Common Stock Amount | $2,232 | $520 | | Additional Paid in Capital | $229,933,505 | $19,538,742 | | Accumulated Deficit | $(224,885,422) | $(41,037,898) | | Total Stockholders' Equity (Deficit) | $5,050,315 | $(21,498,636) | - Key activities in FY2021 included $15.6 million from common stock issuance, $13.1 million from related party warrant redemption, $53.6 million in deemed dividends, $3.0 million in stock-based compensation, and $124.3 million for shares issued for in-process R&D expenses[253] Statements of Cash Flows The statements of cash flows indicate a significant increase in cash from financing activities in FY2021, offsetting substantial cash used in operating activities, resulting in a net increase in cash for the period, compared to a net decrease in the prior year Cash Flow Highlights (Year Ended June 30) | CASH FLOWS | 2021 | 2020 | | :--------- | :-------------- | :-------------- | | Net loss | $(130,249,204) | $(16,676,768) | | Net cash used in operating activities | $(10,453,047) | $(1,628,228) | | Net cash provided by financing activities | $14,927,494 | $1,325,500 | | Net increase (decrease) in cash | $4,474,447 | $(302,728) | | Cash, end of period | $4,511,642 | $37,195 | Non-Cash Financing Activities (Year Ended June 30) | Non-Cash Activity | 2021 | 2020 | | :---------------- | :------------ | :------------ | | Deemed dividends - related party | $53,598,320 | $17,099,058 | | Stock warrants classified as derivative liability | — | $7,530,308 | Notes to Financial Statements The notes to the financial statements provide detailed disclosures on BioVie's background, liquidity, significant accounting policies, intangible assets, related party transactions, fair value measurements, equity transactions, commitments, contingencies, income taxes, and subsequent events, offering crucial context for the financial figures 1. Background Information BioVie Inc. is a clinical-stage company developing BIV201 for liver disease and NE3107 for neurodegenerative disorders. BIV201 is in Phase 2b for ascites with Phase 3 planned, holding FDA Fast-Track and Orphan Drug status. The company acquired NeurMedix assets, including NE3107, in June 2021 for approximately $130.6 million, initiating a pivotal Phase 3 for Alzheimer's - BioVie is developing BIV201 (continuous infusion terlipressin) for ascites due to chronic liver cirrhosis, with a Phase 2a trial completed in 2019 and a Phase 2b trial underway as of July 2021[255][256] - BIV201 has FDA Fast-Track status and Orphan Drug designation for ascites and hepatorenal syndrome, with potential for 7 years of market exclusivity[257] - On April 27, 2021, BioVie acquired biopharmaceutical assets from NeurMedix, Inc. (a related party), including NE3107, for approximately $130.6 million (common stock and cash)[259][261] - NE3107 is a small molecule inhibitor of insulin resistance and inflammatory cascades, with potential applications for Alzheimer's and Parkinson's Disease[259] 2. Liquidity and Going Concern BioVie's recurring losses, negative cash flows, and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Despite a recent $17.8 million capital raise, current projections indicate cash depletion within 12 months without further expenditure delays or additional financing, which management is actively pursuing Liquidity Metrics (June 30, 2021) | Metric | Amount (approx.) | | :----- | :--------------- | | Working Capital | $3.6 million | | Cash | $4.5 million | | Stockholders' Equity | $5.1 million | | Accumulated Deficit | $(224.9) million | - The company has not generated any revenues to date and expects no revenues in the foreseeable future, making future operations dependent on securing additional financing[263] - A capital raise on August 11, 2021, provided approximately $17.8 million in net proceeds, which could sustain operations for 12 months if planned expenditures are delayed[263] - These circumstances raise substantial doubt about the company's ability to continue as a going concern, and the financial statements do not include adjustments for this uncertainty[265] 3. Significant Accounting Policies This section details BioVie's significant accounting policies, including adherence to GAAP, the use of estimates for financial reporting, cash and other asset classifications, fair value measurements, and specific policies for research and development expenses, income taxes, net loss per common share, stock-based compensation, goodwill, and impairment of long-lived assets Basis of Presentation The financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and include all necessary adjustments for fair presentation - Financial statements are prepared in accordance with GAAP and include all adjustments necessary for fair presentation[267] Use of Estimates Management makes estimates and assumptions, based on historical experience and reasonable circumstances, that affect the reported amounts in the financial statements, particularly for share-based compensation, derivatives, and income taxes - The preparation of financial statements requires management to make estimates and assumptions, which affect reported amounts for share-based compensation, derivatives, and income taxes[268] Cash The company classifies highly liquid instruments with original maturities of three months or less as cash equivalents. Cash is held at two financial institutions, with balances sometimes exceeding federally insured limits, though no losses have been experienced - Highly liquid instruments with original maturities of three months or less are considered cash equivalents[269] - Cash is maintained at two financial institutions, and balances may at times exceed federally insured limits, but no losses have been experienced[269] Other Assets Other assets primarily consist of direct costs incurred for capital raises and registration statement filings, which are expected to be offset against future capital proceeds - Other assets consist of direct costs related to capital raises and registration statement legal and investment banking fees, which will be offset against future proceeds[270] Fair Value of Financial Instruments Fair value is defined as the price for an orderly transaction between market participants. The company categorizes inputs into a three-level hierarchy. The carrying amounts of cash and accounts payable approximate their fair value due to their short-term nature - Fair value is defined as the price received from selling an asset or paid to transfer a liability in an orderly transaction between market participants[270] - The fair value hierarchy prioritizes inputs as Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[270] - The carrying amounts of cash and accounts payable approximate their fair value due to their short-term nature[270] Loan Pursuant to Paycheck Protection Program BioVie received a $62,500 Paycheck Protection Program (PPP) loan in May 2020, which was subsequently forgiven on June 28, 2021, and recognized as a gain on extinguishment of debt - The company received a $62,500 PPP loan in May 2020, which was forgiven on June 28, 2021, and recognized as a gain on extinguishment of debt[271] Research and Development Research and development expenses, including costs for preclinical and clinical trials, personnel, supplies, and consultants, are expensed as incurred. In FY2021, this included $130.6 million for assets acquired from NeurMedix - Research and development expenditures are expensed as incurred, including costs for preclinical/clinical trials, personnel, supplies, and consultants[272] - In FY2021, the company recorded approximately $130.6 million for acquired in-process research and development (IPR&D) assets from NeurMedix as R&D expense[272] Income Taxes BioVie uses the asset and liability method for deferred income taxes, applying a full valuation allowance against net deferred tax assets due to the unlikelihood of their realization. The company has no current tax expense due to its losses - The company uses the asset and liability method for deferred income taxes and applies a full valuation allowance against net deferred tax assets due to unlikelihood of realization[273][342] - There is no current tax expense due to the company's losses[343] Net Loss per Common Share Basic net loss per common share is calculated by dividing net loss by weighted average common shares outstanding. Diluted net loss per common share excludes potentially outstanding shares (stock options, warrants, convertible debentures) when their effect is anti-dilutive due to a net loss - Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding[275] - Diluted net loss per common share excludes potentially outstanding shares (stock options, warrants, convertible debentures) when their effect is anti-dilutive due to a net loss[275] Outstanding Stock Options and Warrants (June 30) | Instrument | 2021 Number of Shares | 2020 Number of Shares | | :--------- | :-------------------- | :-------------------- | | Stock Options | 755,200 | 60,400 | | Warrants | 158,761 | 1,374,667 | | Total | 913,961 | 1,435,067 | Stock-based Compensation Stock-based compensation is accounted for using the fair-value based method (Black-Scholes model) for both employee and non-employee awards, with expense recognized over the service period. The company recorded $3.0 million in expense for FY2021 - Stock-based compensation is accounted for under FASB ASC 718, using the fair-value based method (Black-Scholes model) for awards to employees and non-employee directors[277] - Compensation expense is generally recognized over the requisite service period, net of forfeitures[277] - The company recorded approximately $3.0 million in stock-based compensation expense for the year ended June 30, 2021[319] Goodwill Goodwill is recorded when an acquisition's purchase price exceeds the fair value of net identified assets. Annual impairment tests are performed, and no goodwill impairments were recognized for the years ended June 30, 2021, and 2020 - Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of net identified tangible and intangible assets[278] - The company performs annual impairment tests of goodwill, and no impairments were recognized for the years ended June 30, 2021 and 2020[278] Impairment of Long-Lived Assets Long-lived assets, including intangibles, are reviewed for impairment when events or changes in circumstances suggest their carrying amount may not be recoverable. An impairment charge is recognized if the carrying amount exceeds the asset's fair value - Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable[279] - An impairment charge is recognized if the carrying amount of an asset exceeds its fair value, typically determined using discounted cash flows or appraisals[280] Purchase Accounting for Transactions with Related Party Transactions with related parties, specifically entities under common control, are recorded at their historical carrying cost, without a step-up in basis to the fair market value of the acquired assets or liabilities - Purchase accounting for transactions with related parties (entities under common control) records assets and liabilities at historical carrying cost, without a step-up in basis to fair market value[281] Recent Accounting Pronouncements The company has reviewed recent Accounting Standards Updates (ASUs) and does not expect any to have a material impact on its balance sheets or statements of operations - No recent Accounting Standards Updates (ASUs) are expected to have a material impact on the company's financial statements[281] 4. Intangible Assets BioVie's intangible assets consist of intellectual property acquired from LAT Pharma, Inc., which are amortized over an estimated useful life of 10 years. As of June 30, 2021, the net intellectual property stood at approximately $1.1 million Intangible Assets (June 30) | Metric | 2021 | 2020 | | :----- | :------------ | :------------ | | Intellectual Property | $2,293,770 | $2,293,770 | | Less Accumulated Amortization | $(1,197,921) | $(968,544) | | Intellectual Property, Net | $1,095,849 | $1,325,226 | - Amortization expense was $229,377 for both the years ended June 30, 2021 and 2020, with intellectual property amortized over an expected useful life of 10 years[283] Estimated Future Amortization Expense | Year ending June 30 | Amount | | :------------------ | :------------ | | 2022 | $229,377 | | 2023 | $229,377 | | 2024 | $229,377 | | 2025 | $229,377 | | 2026 | $178,341 | | Total | $1,095,849 | 5. Related Party Transactions This section details significant transactions with related parties, including the acquisition of NeurMedix assets for $130.6 million (expensed as IPR&D) and various equity and convertible debenture transactions with Acuitas Group Holdings, LLC, the company's controlling stockholder Asset Acquisition with NeurMedix On April 27, 2021, BioVie acquired biopharmaceutical assets from NeurMedix and Acuitas (related parties) for approximately $130.6 million, paid in common stock and cash. Due to common control, the total consideration was expensed as in-process research and development (IPR&D). The agreement also includes contingent stock consideration of up to 18 million shares upon milestone achievements - On April 27, 2021, BioVie entered an Asset Purchase Agreement with NeurMedix and Acuitas (related parties) to acquire assets, including NE3107[285] - The total cost of the asset purchase was approximately $130.6 million, comprising 8,361,308 common shares (valued at $14.87/share) and approximately $6.3 million in cash payments[261][288] - Due to the transaction being between entities under common control, the total consideration was expensed as in-process research and development (IPR&D)[272][288] - The company may be obligated to deliver contingent stock consideration of up to 18 million shares to NeurMedix upon achievement of four milestones[262][286] Equity Transactions with Acuitas On September 22, 2020, BioVie settled its debenture with Acuitas for approximately $1.8 million and issued 6,909,582 common shares to Acuitas, including shares from purchase agreement rights and automatic warrant exercises. This resulted in a deemed dividend of $17.1 million for FY2020 - On September 22, 2020, approximately $1.8 million was paid to Acuitas, satisfying all amounts owed on the Debenture[289] - Concurrent with the public offering close on September 22, 2020, BioVie issued 6,909,582 common shares to Acuitas, including 5.4 million from purchase agreement rights and 1.5 million from automatic warrant exercise[290] - The issuance of 1,125,000 common shares and warrants to Acuitas for bridge financing was accounted for as a deemed dividend of $17.1 million for FY2020[302] Convertible Debenture Transaction with Acuitas In September 2019, BioVie entered a Securities Purchase Agreement with Acuitas for a $2.0 million 10% OID Convertible Delayed Draw Debenture, issuing commitment shares and warrants. The debenture, which accrued principal and interest, was mandatorily redeemable upon the public offering's closing and was paid off in cash on September 22, 2020 - On September 24, 2019, BioVie entered a Securities Purchase Agreement with Acuitas for a 10% OID Convertible Delayed Draw Debenture of up to $2.0 million, due September 24, 2020[299] - The agreement included the issuance of 1,125,000 common shares and an equal number of warrants to Acuitas[299] - The debenture was convertible into common stock at $4.00 per share (or 80% of offering price post-IPO) and was mandatorily redeemable upon the closing of the public offering[299] - The related Debenture was paid off in cash on September 22, 2020, expiring the conversion option[308] 6. Fair Value Measurements This section details the fair value measurements of derivative liabilities, specifically warrants and the conversion option on the convertible debenture. These liabilities, valued at $21.4 million as of June 30, 2020, were automatically exercised or paid off by September 22, 2020, resulting in a change in fair value of $(8.3) million recorded as income in FY2021 - The fair value of derivative liabilities (warrants and conversion option on convertible debenture) prior to redemption on September 22, 2020, was $13.1 million[308] - A change in fair value of $(8.3) million was recorded in the Statements of Operations for the year ended June 30, 2021[308] Estimated Fair Value of Derivative Liabilities (June 30) | Derivative Liability | 2021 (Total) | 2020 (Total) | | :------------------- | :----------- | :----------- | | Warrants | $0 | $16,411,504 | | Conversion option on convertible debenture | $0 | $5,000,800 | | Total Derivatives | $0 | $21,412,304 | - The warrants were valued using the Black-Scholes-Merton model, with assumptions including a stock price of $14 and exercise price of $4.00 at June 30, 2020[314] 7. Equity Transactions This section summarizes BioVie's equity transactions, including activity related to stock options and warrants, as well as the issuance of common stock for services and interest payments Stock Options BioVie's stock option activity for FY2021 shows a significant increase in outstanding options to 755,200 from 60,400 in FY2020, primarily due to grants to board members and executive clinical team. Stock-based compensation expense was $3.0 million in FY2021 Stock Option Activity (June 30) | Metric | 2021 Options | 2020 Options | | :----- | :----------- | :----------- | | Outstanding | 755,200 | 60,400 | | Granted | 698,000 | 10,400 | | Exercised or Forfeited | (3,200) | (8,000) | | Weighted Average Exercise Price | $4.34 | $11.06 | | Exercisable | 236,500 | N/A | - Stock-based compensation expense was approximately $3.0 million for FY2021, compared to $24,800 for FY2020[319] - As of June 30, 2021, unrecognized stock-based compensation cost was $3.0 million, expected to be recognized over approximately 2.5 years[319] Stock Warrants Stock warrant activity for FY2021 shows a decrease in outstanding warrants to 158,761 from 1,374,667 in FY2020, primarily due to the exercise of 1,453,250 warrants by Acuitas and other exercises, despite new grants Stock Warrant Activity (June 30) | Metric | 2021 Number of Shares | 2020 Number of Shares | | :----- | :-------------------- | :-------------------- | | Outstanding and exercisable | 158,761 | 1,374,667 | | Granted | 293,248 | 1,250,000 | | Exercised | (55,904) | — | | Exercised - Acuitas | (1,453,250) | — | | Weighted Average Exercise Price | $10.37 | $7.72 | | Aggregate Intrinsic Value | $1,765,437 | $13,799,331 | Issuance of common stock through exercise of Stock Options and Warrants During FY2021, BioVie issued common stock through various cashless and cash exercises of stock options and warrants, including 2,210 shares from stock options and multiple issuances from warrant exercises totaling over 55,000 shares - On July 28, 2020, 2,210 shares of common stock were issued via cashless exercise of stock options[322] - In January, March, and April 2021, the company issued common stock through cash and cashless exercises of warrants, including 27,000 shares at $12.50/share and 14,324 shares at $12.50/share[323] Issuance of Shares for Services In January 2020, BioVie issued 11,200 shares of common stock to board members as annual compensation and 4,422 shares to Acuitas for accrued interest on the Debenture - On January 2, 2020, 11,200 shares of common stock were issued to board members as part of their annual compensation[324] - On January 2, 2020, 4,422 shares of common stock were issued to Acuitas for $13,487 of accrued interest on the Debenture[325] Issuance of Stock Options BioVie granted various stock options during FY2020 and FY2021, including 691,600 shares to board members in December 2020 (vesting over 3 years) and smaller grants to executive clinical team members and consultants - On December 18, 2020, 691,600 stock options were granted to board members as annual compensation, with 25% vesting on grant date and the remainder over a 3-year period[331] - Other grants included 800 shares to an executive clinical team member (Nov 2019), 8,000 shares to board members (Jan 2020), and 4,800 shares to the Chief Operations Officer, an executive clinical team member, and key consultants (Jan 2021)[327][328][332] Issuance of warrants In FY2021, BioVie issued warrants to purchase 203,250 common shares to Acuitas under the Bridge Financing terms and 89,998 common shares to underwriters of the Offering - On July 13, 2020, warrants to purchase 203,250 common shares were issued to Acuitas, the controlling stockholder, under the Bridge Financing terms[333] - On September 22, 2020, warrants to purchase 89,998 common shares were issued to the underwriters of the Offering[333] 8. Commitments and Contingencies This section outlines BioVie's commitments and potential liabilities, including office lease agreements, the invalidation of a key US patent for ascites treatment, and ongoing royalty obligations related to BIV201 and terlipressin products Office Lease BioVie maintains a month-to-month lease for its Santa Monica office at $1,000 per month and, effective July 1, 2021, assumed NeurMedix's San Diego lease requiring $8,782 monthly payments - The company accrues monthly lease payments of $1,000 for its Santa Monica office under a month-to-month lease[334] - Effective July 1, 2021, BioVie assumed NeurMedix's lease in San Diego, requiring monthly payments of $8,782[335] Challenge to US Patent In November 2019, the U.S. Patent Trial and Appeal Board (PTAB) invalidated BioVie's U.S. Patent No. 9,655,945, 'Treatment of Ascites,' deeming all claims unpatentable due to prior art. This ruling does not affect the company's Orphan Drug designations for ascites and HRS or its pending patent applications for BIV201's liquid formulations - On November 13, 2019, the PTAB determined that all claims of BioVie's U.S. Patent No. 9,655,945 ('Treatment of Ascites') were not patentable due to prior art, rendering it no longer valid or enforceable[338] - This ruling is unrelated to the company's Orphan Drug designations for ascites and hepatorenal syndrome (HRS), which remain unchanged[339] - The ruling does not affect the company's rights in its pending patent application for proprietary liquid formulations of terlipressin[339] Royalty Agreements BioVie is obligated to pay low single-digit royalties on net sales of BIV201 to LAT Pharma members, PharmaIN Corporation, and The Barrett Edge, Inc. Additionally, it has an obligation to pay the University of Padova (Italy) a low single-digit royalty on net sales of terlipr