BioVie(BIVI) - 2022 Q4 - Annual Report

Part I Business BioVie Inc. is a clinical-stage company developing drug therapies for chronic debilitating conditions, focusing on liver and neurodegenerative diseases, protected by patents and subject to extensive regulation Company Overview and Pipeline BioVie is a clinical-stage company developing therapies for chronic conditions, focusing on liver disease and neurodegenerative diseases[10] - The company's liver disease candidate, BIV201 (terlipressin), targets refractory ascites and is in a Phase 2b trial with top-line results expected in mid-2023[11] - The neurodegenerative disease candidate, NE3107, acquired from NeurMedix, is being evaluated for Alzheimer's Disease (Phase 3 trial) and Parkinson's Disease (Phase 2 trial)[13][14] Liver Cirrhosis Program (BIV201) BIV201 is an orphan drug candidate for treating ascites due to chronic liver cirrhosis, with a Phase 2b study initiated in June 2021 and a potential pivotal Phase 3 trial planned for 2023[18][21] - The company has developed a proprietary novel liquid formulation of terlipressin with confirmed room temperature stability for 18 months, a key differentiator from other terlipressin products requiring refrigeration[22] - BIV201 has received FDA Fast-Track status and Orphan Drug designation for ascites and hepatorenal syndrome (HRS), with the total addressable market for ascites estimated to exceed $650 million[23] Neurodegenerative Disease Program (NE3107) NE3107 is a novel, orally administered small molecule designed to inhibit inflammation-driven insulin resistance, believed to play a fundamental role in Alzheimer's and Parkinson's Disease[33] - A potentially pivotal Phase 3 study for NE3107 in mild to moderate Alzheimer's disease was initiated on August 5, 2021, with primary completion targeted for mid-2023[33] - A Phase 2 study (NM201) for NE3107 in Parkinson's disease patients was initiated on January 20, 2022, to assess safety, tolerability, and pro-motoric impact, with topline results expected by the end of calendar year 2022[44] Intellectual Property BIV201 has Orphan Drug Designations in the U.S. for hepatorenal syndrome and ascites, and the company has filed a PCT application for its novel liquid formulation of terlipressin[50] NE3107 U.S. Patent Portfolio Summary (as of Aug 22, 2022) | Category | Count | | :--- | :--- | | Issued U.S. Patents | 15 | | Pending U.S. Patent Application | 1 | | Pending U.S. PCT Application | 1 | | Issued Foreign Patents | 6 | Government Regulation The company's products are subject to extensive regulation by the FDA in the U.S. and comparable foreign authorities, covering research, development, testing, manufacturing, and marketing[55] - The U.S. drug development process involves preclinical testing, an Investigational New Drug (IND) application, and three phases of human clinical trials (Phase 1, 2, and 3) to establish safety and efficacy before submitting a New Drug Application (NDA) or Biologics License Application (BLA)[58][61][62][63] - The company may utilize programs like Orphan Drug Designation, which provides seven years of market exclusivity for a rare disease, and Fast Track designation to expedite the review process for drugs addressing unmet medical needs[75][76][78] Risk Factors The company faces significant risks, including no revenue, substantial losses, dependence on clinical trial success, and the need for significant additional capital to fund operations - Business & Financial Risks: The company has no approved products, has never generated revenue, and will require substantial additional capital to fund operations; failure to raise funds could force a cessation of operations[86][87][106] - Clinical & Regulatory Risks: Drug development is a lengthy and uncertain process, product candidates may be found unsafe or ineffective in clinical trials, and failure to obtain FDA approval would prevent commercialization; the COVID-19 pandemic could also disrupt clinical trials and supply chains[113][117][119] - Competitive & Market Risks: The company faces competition from established pharmaceutical companies, and even if approved, its products may not be adopted over existing treatments; failure to protect intellectual property could compromise its competitive advantage[155][158][143] - Stock & Ownership Risks: Investors face potential dilution from future equity offerings and milestone-based share issuances, while executive officers and directors beneficially own approximately 81.8% of outstanding common stock, giving them significant control over management and company affairs as of September 13, 2022[167][170][172] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[191] Properties The company leases office space for its headquarters in Carson City, Nevada, and maintains an office in San Diego, California - The company's headquarters is located at 680 W. Nye Lane, Carson City, Nevada, under a 12-month lease that began November 1, 2021, with an annual rent of $2,200[192] - The company leases an office at 5090 Shoreham Place, San Diego, California, under a 38-month lease that commenced on March 1, 2022, with monthly base rent of $4,175 starting June 1, 2022[193] Legal Proceedings The company reports that it is not a party to any material legal proceedings - The company is not a party to any material legal proceedings[194] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[195] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities During the fiscal year ended June 30, 2022, the company did not engage in any issuer repurchases of its common stock - There were no issuer repurchases of common stock during the year ended June 30, 2022[197] Management's Discussion and Analysis of Financial Condition and Results of Operations For FY 2022, the company's net loss decreased to $26.1 million from $130.2 million due to a one-time IPR&D expense in 2021, while operating expenses increased from clinical trials and expanded operations, leading to substantial doubt about its going concern ability Results of Operations Comparison of Operations (Year Ended June 30) | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Net Loss | $26.1M | $130.2M | -$104.1M | | Total Operating Expenses | $27.3M | $138.1M | -$110.8M | | Research & Development | $17.3M | $2.5M | +$14.8M | | Selling, General & Admin | $9.8M | $4.6M | +$5.2M | - The decrease in net loss was primarily due to a one-time $130.6 million In-Process Research and Development (IPR&D) expense recorded in June 2021 related to the NeurMedix asset acquisition[205][206] - R&D expenses increased by $14.8 million, driven by clinical operations for the Alzheimer's Phase 3 trial, initiation of the Parkinson's Phase 2 trial, and an expanded clinical team[207] - SG&A expenses increased by $5.2 million due to higher employee compensation (including $2.4 million in stock-based compensation), legal fees, and investor relations costs associated with expanded operations[209] Capital Resources and Liquidity Financial Position as of June 30, 2022 | Metric | Amount | | :--- | :--- | | Working Capital | $14.6 million | | Cash | $18.6 million | | Stockholders' Equity | $3.7 million | | Accumulated Deficit | $251 million | - The company's ability to continue as a going concern is in substantial doubt, as its future viability depends on raising additional capital to finance operations[217][221] - Subsequent to the fiscal year-end, the company raised capital through a Controlled Equity Offering Sales Agreement (net proceeds of $5.9 million as of Sep 12, 2022) and a private placement with Acuitas (gross proceeds of $6 million)[212][213][214] Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of June 30, 2022 - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[230] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2022[231] Part III Directors, Executive Officers and Corporate Governance The company's leadership includes CEO Cuong Do and Chairman Terren Peizer, with an eight-member board, six independent directors, and three standing committees, all operating under a code of ethics - The executive team is led by Cuong Do (CEO & President), Terren Peizer (Chairman), Joanne Wendy Kim (CFO), and Joseph M. Palumbo, MD (Chief Medical Officer)[235] - The Board of Directors has determined that six of its eight members are independent: Messrs. Lang, Sherman, Berman, Gorlin, Hariri, and Rogich[270] - The Board has three standing committees: Audit, Compensation, and Nominating and Corporate Governance, each composed solely of independent directors[272] Board Diversity Matrix (As of September 13, 2022) | Category | Count | | :--- | :--- | | Total Directors | 8 | | Gender Identity | | | Male | 8 | | Female | 0 | | Demographic Background | | | Asian | 1 | | White | 4 | | Did Not Disclose | 3 | Executive Compensation For fiscal year 2022, CEO Cuong Do's total compensation was $4.54 million, largely from stock and option awards, while non-employee directors received stock options, all under the 2019 Omnibus Equity Incentive Plan FY 2022 Named Executive Officer Compensation | Name and Position | Salary | Bonus | Stock/Option Awards | Total Compensation | | :--- | :--- | :--- | :--- | :--- | | Cuong Do (CEO & President) | $300,000 | $400,000 | $3,842,821 | $4,542,821 | | Joanne Wendy Kim (CFO) | $235,000 | $127,656 | $582,343 | $944,999 | | Joseph Palumbo (CMO) | $333,333 | $239,167 | $244,465 | $816,965 | - Non-employee directors received compensation in the form of option awards, with grant date fair values ranging from approximately $399,000 to $425,000 for fiscal year 2022[299] - As of June 30, 2022, there were 3,705,157 shares available for new awards under the 2019 Omnibus Equity Incentive Plan[305] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of September 13, 2022, the company's ownership is highly concentrated, with Chairman Terren Peizer holding approximately 81.3% and all directors and executive officers as a group owning approximately 82.5% of outstanding common stock Beneficial Ownership (as of September 13, 2022) | Beneficial Owner | Percentage Ownership | | :--- | :--- | | Terren Peizer (Chairman) | 81.3% | | All directors and executive officers as a group | 82.5% | - The percentage ownership is based on 30,165,319 shares of common stock outstanding as of September 13, 2022[309] Certain Relationships and Related Transactions, and Director Independence The company engaged in a significant related party private placement with Acuitas, an entity controlled by Chairman Terren Peizer, for $6 million in stock and warrants, with all such transactions subject to audit committee or Board approval - On July 15, 2022, the company entered into a securities purchase agreement with Acuitas (an entity controlled by Chairman Terren Peizer) for a private placement of 3,636,364 shares and warrants to purchase 7,272,728 shares for an aggregate price of $6 million, which closed on August 15, 2022[318] - The company has a formal procedure for the review and approval of related party transactions by either the audit committee or the Board of Directors[319] Principal Accountant Fees and Services EisnerAmper LLP, the company's principal accountant, billed $223,102 for audit services in FY 2022, an increase from the prior year, with all services pre-approved by the Audit Committee Auditor Fees | Fee Category | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $223,102 | $191,970 | | Total | $223,102 | $191,970 | - The Audit Committee is responsible for appointing, setting compensation, and overseeing the work of the independent registered public accounting firm, and has a policy to pre-approve all services[323] Part IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K report, including corporate governance documents, material agreements, and certifications - This section lists all exhibits filed with the annual report, including corporate governance documents, material agreements, and certifications[330][331][332] Financial Statements Report of Independent Registered Public Accounting Firm EisnerAmper LLP issued an unqualified opinion on the financial statements but included a "Going Concern" paragraph due to recurring losses and negative cash flows, identifying the valuation of notes payable and derivative liabilities as a critical audit matter - The auditor expressed an unqualified opinion that the financial statements are presented fairly in all material respects[338] - A 'Going Concern' paragraph was included, citing recurring losses and negative cash flows from operations, which raise substantial doubt about the company's ability to continue as a going concern[339] - The valuation and accounting for notes payable and related derivative liabilities were identified as a critical audit matter due to complexity and subjective judgment[346] Financial Statements Data The company's financial statements show a significant increase in cash to $18.6 million and total liabilities to $16.4 million as of June 30, 2022, while the net loss for FY 2022 significantly reduced to $26.1 million from $130.2 million in FY 2021, primarily due to a one-time IPR&D expense Balance Sheet Highlights (as of June 30) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Cash | $18,641,716 | $4,511,642 | | Total Assets | $20,114,594 | $6,046,689 | | Total Liabilities | $16,443,659 | $996,374 | | Total Stockholders' Equity | $3,670,935 | $5,050,315 | | Accumulated Deficit | ($250,969,890) | ($224,885,422) | Statement of Operations Highlights (Year Ended June 30) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Research and development expenses | $17,258,341 | $2,544,648 | | In process R&D expenses | $0 | $130,642,858 | | Selling, general and administrative | $9,765,259 | $4,637,256 | | Net Loss | ($26,084,468) | ($130,249,204) | | Net Loss Per Share (Basic & Diluted) | ($1.06) | ($14.82) | Cash Flow Highlights (Year Ended June 30) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,990,850) | ($10,453,047) | | Net cash provided by financing activities | $33,120,924 | $14,927,494 | | Net increase in cash | $14,130,074 | $4,474,447 | Notes to Financial Statements The notes provide critical details on accounting policies, related party transactions, debt, and equity, including the 'going concern' uncertainty, the NeurMedix asset acquisition, a $15 million loan with warrants and conversion options, and significant stock option grants Note 2. Liquidity and Going Concern The financial statements were prepared assuming the company will continue as a going concern, but recurring losses and negative cash flows raise substantial doubt about this ability[363] - The company's future viability is largely dependent on its ability to raise additional capital to finance operations[364] Note 5. Related Party Transactions In June 2021, the company acquired assets from NeurMedix, a related party affiliate, in exchange for 8,361,308 shares of common stock and approximately $2.3 million in cash, with the total consideration expensed as in-process R&D[387][388] - The NeurMedix APA includes contingent consideration of up to 18 million shares of common stock, issuable upon the achievement of four specific clinical, regulatory, and commercial milestones[388] Note 7. Notes Payable On November 30, 2021, the company entered into a loan agreement for up to $20 million, drawing an initial $15 million, bearing interest at the greater of 10.75% or prime + 7.00%[410] - The loan includes a conversion option for the lender to convert up to $5.0 million of principal into common stock at $6.98 per share[412] - In connection with the loan, the company issued warrants to purchase 361,002 shares of common stock at an exercise price of $5.82 per share[413] Note 9. Equity Transactions In August 2021, the company closed a public offering, issuing 2.5 million shares at $8.00 per share, resulting in net proceeds of approximately $17.8 million[433] - During fiscal year 2022, the company granted 2,724,689 stock options, primarily to the executive management team and independent directors[426] - Stock-based compensation expense was approximately $5.8 million for the year ended June 30, 2022, compared to $3.0 million in the prior year[429]