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    BIVI   US09074F2074

BIOVIE INC.

(BIVI)
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BIOVIE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

08/30/2021 | 05:17pm EDT

The following discussion of the Company's financial condition and the results of operations should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this report.



Overview


BioVie Inc. is a clinical-stage company developing innovative drug therapies to overcome unmet medical needs in chronic debilitating conditions.

In liver disease, our Orphan Drug candidate BIV201 (continuous infusion terlipressin) is being developed as a future treatment option for patients suffering from ascites and other life-threatening complications of advanced liver cirrhosis caused by NASH, hepatitis, and alcoholism. The initial target for BIV201 therapy is refractory ascites. These patients suffer from frequent life-threatening complications, generate more than $5 billion in annual treatment costs, and have an estimated 50% mortality rate within 6 to 12 months. The US Food and Drug Administration (FDA) has never approved any drugs to treat refractory ascites. A Phase 2a clinical trial of BIV201 was completed in 2019, and a multi-center, randomized and controlled Phase 2b trial is currently underway at several US medical centers including Vanderbilt University, the Mayo Clinic, and University of Pennsylvania (NCT NCT04112199). Top-line results are expected in early 2022, to be followed by a proposed single pivotal Phase 3 trial beginning in 2022. In June 2021, we received written feedback from the FDA in response to a Type B meeting request to conduct a pivotal US Phase 3 clinical trial in HRS-AKI, which is a life-threatening complication of advanced ascites. Based on the guidance received, we are revising certain elements of our proposed study and planning to initiate this study in late 2021.

In neurodegenerative disease, BioVie acquired the biopharmaceutical assets of NeurMedix, Inc., a privately held clinical-stage pharmaceutical company, in June 2021. The acquired assets include NE3107, a potentially selective inhibitor of inflammatory ERK signaling which, based on animal studies is believed to reduce neuroinflammation. NE3107is a novel orally administered small molecule that inhibits inflammation-driven insulin resistance and major pathological inflammatory cascades with a novel mechanism of action. There is emerging scientific consensus that both inflammation and insulin resistance play fundamental roles in the development of Alzheimer's and Parkinson's Disease, and NE3107 could represent an entirely new medical approach to treating these devastating conditions affecting an estimated 6 million Americans suffering from Alzheimer's and 1 million from Parkinson's. The FDA has authorized a potentially pivotal Phase 3 randomized, double-blind, placebo-controlled, parallel group, multicenter study to evaluate NE3107 in subjects who have mild to moderate Alzheimer's disease (NCT04669028). We initiated this trial on August 5, 2021 and are targeting primary completion in late 2022/early 2023. In addition to Alzheimer's disease, we plan to advance NE3107 in Parkinson's based on promising results from preclinical studies. Inflammation-driven insulin resistance is implicated in a broad range of serious diseases, including multiple myeloma and prostate cancer, and we plan to begin exploring these opportunities in the coming months using NE3107 or related compounds acquired in the NeurMedix asset purchase.


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Results of Operations



Comparison of the Year Ended June 30, 2021 to the Year Ended June 30, 2020



Net loss


The net loss for the year ended June 30, 2021 was approximately $130.3 million as compared to a net loss of approximately $16.7 million for the year ended June 30, 2020. The net increase in net loss of approximately $113.6 million was primarily comprised of the purchase of the biopharmaceutical assets from Neurmedix totaling approximately $130.6 million and expensed as purchased in process research and development ( IPR&D) in research and development expenses and the increase in other operating expenses of approximately $7.3 million offset by the change in the fair value of derivative liabilities of $17.5 million and the reduction in interest expense of approximately $4.2 million related to the embedded conversion derivative liability from warrants associated with the draws on the convertible debenture which were settled in September 2020.

Total operating expenses for the year ended June 30, 2021 was approximately $138.1 million as compared to approximately $2.7 million for year ended June 30, 2020. The increase of approximately $135.4 million was attributed to the purchase of the biopharmaceutical assets from Neurmedix, of approximately $130.6 million, increase in other research and development activities which resulted in an increase of approximately $1.4 million, primarily attributed to the preparation and launch of our Phase2b clinical trials as well as an increase in selling, general and administrative expenses of $3.5 million, primarily due to stock based compensation awarded to the board of directors.

Research and Development Expenses

Research and development expenses for the year ended June 30, 2021 totaled $133.2 million and included the purchased IPR&D of $130.6 million, compared to research and development for the year ended June 30, 2020 of $1.2 million. During the fiscal year ended June 30, 2021, the Company acquired biopharmaceutical assets under development from Neurmedix and Acuitas, which are related party affiliates. The assets acquired include, among others, those related to certain drug candidates being developed by NeurMedix, including NE3107, a small molecule orally administered inhibitor of insulin resistance and the pathological inflammatory cascade, with a novel mechanism of action that has potential applications for treatment against Alzheimer's Disease and Parkinson's Disease. The total cost of the asset purchase was approximately $130.6 million and comprised of the issuance of 8,361,308 shares of the Company's common stock, valued at $14.87 per share, the closing price on the date of the close and a cash payment of approximately $2.3 million to Acuitas and other expenses totaling approximately $4.0 million for due diligence, legal fees, transaction fees and the fairness opinion.

The remainder of the net increase in research and development expenses of $1.4 million was primarily due to an increase in research and development activities related to the preparation of the Phase 2b Clinical Trials. In June 2021, the Company enrolled its first patient into the Phase 2b trial of BIV201 (continuous infusion terlipressin) for the treatment of refractory ascites. The trial is being conducted in nine research centers.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were approximately $4.6 million for the year ended June 30, 2021 and $1.3 million for the year ended June 30, 2020. The net increase of $3.3 primarily consisted of an additional $2.8 million in stock compensation expense attributed to stock options granted to the members of the board of directors for their annual directors' compensation, additional expenses of approximately $475,000 related to being listed on a national exchange for listing fees, investor relations and other professional fees. Insurance expense of $24,000 primarily related to increased premiums for directors and officers and other liability policies.

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Other Income and Expense, Net


Other income, net increased from other expense, net of $14 million for the year ended June 30, 2020 to $7.8 million of other income, net for the year ended June 30, 2021. This change was primarily due to the change in fair value of derivatives of approximately $17.5 million and the decline in interest expense of approximately $4.2 million due to embedded derivative warrant liabilities.

Capital Resources and Liquidity

As of June 30, 2021, the Company had working capital of approximately $3.6 million, cash of $4.5 million, stockholders' equity of approximately $5.1 million, and accumulated deficit of approximately $224.9 million. In addition, the Company has not generated any revenues and no revenues are expected in the foreseeable future. The Company's future operations are dependent on the success of the Company's ongoing development and commercialization effort, as well as continuing to secure additional financing.

As described in Note 1 in the accompany financial statements, on June 10, 2021, the Company purchased biopharmaceutical assets from NeurMedix and issued 8,361,308 shares of the Company's common stock, valued at $14.87 per share at the closing price on June 10, 2021 and was required to make cash payments totaling approximately $6.3 million. These expenditures had a significant impact on the Company's cash position. On August 11, 2021 the Company closed a capital raise issuing 2.5 million shares of common stock at $8.00 per share and increased cash by the net proceeds of approximately $17.8 million. Although the increase in the cash balance could possibly sustain operations over the next 12 months if measures are taken to delay planned expenditures in our research protocols and slow the progress in the Company's clinical programs, the Company's current planned operations to meet certain goals and objectives, could result in the use of all available cash resources prior to that time based on current projections.

The future viability of the Company is largely dependent upon its ability to raise additional capital to finance its operations. We cannot assure you that our drug candidate will be developed, work, or receive regulatory approval; that we will ever earn revenues sufficient to support our operations or that we will ever be profitable. Furthermore, since we have no committed source of sufficient financing, we cannot assure that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company, if at all, to fund continuing operations. Management intends to attempt to secure additional required funding primarily through additional equity or debt financings. We may also seek to secure required funding through sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop and fund research and development efforts, or similar transactions. However, there can be no assurance that we will be able to obtain required funding. If we are unsuccessful in securing funding from any of these sources, we will defer, reduce or eliminate certain planned expenditures in our research protocols. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us.

The emergence of widespread health emergencies or pandemics such as coronavirus ("COVID-19") and its variants, may lead to continued regional quarantines, business shutdowns, labor shortages, disruptions to supply chains, and overall economic instability, including the duration and spread of the outbreak and restrictions and the impact of COVID-19 and its variants on the financial markets and the overall economy, all of which are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company's ability to raise funds may be materially adversely affected.

These circumstances raise substantial doubt on our ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.


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  Table of Contents

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company's financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Critical Accounting Policies and Estimates

Accounting for Stock-based Compensation

The Company follows the provision of ASC 718- Stock Compensation, which requires the measurement of compensation expense for all shared - based payment awards made to employees and non-employee director, including employee stock options. Share-based compensation expense is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is generally recognized as an expense over the requisite service period, net of forfeitures.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets and would be charged to earnings.

Purchase Accounting for Transactions with Related Party

Purchase accounting for transactions with related party, entities under common control, are recorded at the historical carrying cost with no step up in basis to the fair market value of the asset or liability are recognized.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2022 - - -
Net income 2022 -181 M - -
Net Debt 2022 - - -
P/E ratio 2022 -1,09x
Yield 2022 -
Capitalization 139 M 139 M -
Capi. / Sales 2022 -
Capi. / Sales 2023 -
Nbr of Employees 6
Free-Float 19,9%
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Mean consensus BUY
Number of Analysts 1
Last Close Price 5,60 $
Average target price 50,00 $
Spread / Average Target 793%
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Managers and Directors
Cuong Viet Do President, Chief Executive Officer & Director
Joanne Wendy Kim Chief Financial Officer & Secretary
Terren S. Peizer Chairman
Patrick Yeramian Chief Medical Officer
James D. Lang Independent Director
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