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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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.
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BIOVIE INC. 
