FORM 10-Q
Quarterly Report Pursuant to Sectionx QUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d)
of the Securities Exchange Act of OF THE SECURITIES EXCHANGE ACT OF 1934
March 31, 2023
BIOCRYST PHARMACEUTICALS, INC.
| Delaware | 62-1413174 | ||||
| (State | (I.R.S. Employer | ||||
| incorporation or organization) | Identification No.) | ||||
| 4505 Emperor Blvd., Suite 200 | |||||
| Durham, North Carolina | 27703 | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(919) 859-1302
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock | BCRX | Nasdaq Global Select Market | ||||||
| Large accelerated filer | x | ||||||||||
| Accelerated filer | o | ||||||||||
| Non-accelerated filer | Smaller reporting company | ||||||||||
| Emerging growth company | o | ||||||||||||
| Page No. | |||||
September 30, 2017 and December 31, 2016thousands, except per share data)thousands)March 31, 2023 December 31, 2022 2017
(Unaudited) 2016
(Note 1)(Unaudited) (Note 1) Assets Assets Cash and cash equivalents $ 117,776 $ 22,104 Cash and cash equivalents $ 155,136 $ 304,767 Restricted cash 3,122 1,546 Restricted cash 1,463 1,472 Investments 43,848 32,546 Investments 243,022 119,543 Receivables from collaborations 8,985 8,768 Inventory — 500 Trade receivables Trade receivables 48,639 50,599 Inventory, net Inventory, net 27,466 27,533 Prepaid expenses and other current assets 1,421 1,438 Prepaid expenses and other current assets 15,157 12,586 Deferred collaboration expense 218 85 Total current assets 175,370 66,987 Total current assets 490,883 516,500 Investments 4,539 8,926 Property and equipment, net 9,613 9,922 Property and equipment, net 8,376 8,617 Deferred collaboration expense 15 199 Long-term investments Long-term investments 3,432 18,077 Other assets 1,955 3,813 Other assets 7,046 6,806 Total assets $ 191,492 $ 89,847 Total assets $ 509,737 $ 550,000 Liabilities and Stockholders’ Equity Liabilities and Stockholders’ Deficit Liabilities and Stockholders’ Deficit Accounts payable $ 4,603 $ 4,269 Accounts payable $ 6,254 $ 14,356 Accrued expenses 11,871 10,836 Accrued expenses 75,212 87,565 Interest payable 10,705 8,990 Deferred collaboration revenue 8,686 2,022 Deferred revenue Deferred revenue 1,200 1,224 Lease financing obligation 73 — Lease financing obligation 2,491 2,369 Senior credit facility 4,727 — Non-recourse notes payable 28,572 28,243 Total current liabilities 69,237 54,360 Total current liabilities 85,157 105,514 Deferred collaboration revenue 296 8,184 Deferred rent 178 244 Lease financing obligation 2,770 2,704 Lease financing obligation 5,934 5,804 Senior credit facility 18,379 22,777 Royalty financing obligations Royalty financing obligations 514,411 501,655 Secured term loan Secured term loan 232,522 231,624 Stockholders’ equity: Stockholders’ equity: Preferred stock, $0.001 par value; shares authorized — 5,000; no shares issued and outstanding — — Common stock, $0.01 par value: shares authorized — 200,000; shares issued and outstanding — 98,389 in 2017 and 73,782 in 2016 984 738 Preferred stock, $0.01 par value; shares authorized - 5,000; no shares issued and outstanding Preferred stock, $0.01 par value; shares authorized - 5,000; no shares issued and outstanding — — Common stock, $0.01 par value; shares authorized - 450,000; shares issued and outstanding – 188,883 as of March 31, 2023 and 187,906 as of December 31, 2022 Common stock, $0.01 par value; shares authorized - 450,000; shares issued and outstanding – 188,883 as of March 31, 2023 and 187,906 as of December 31, 2022 1,889 1,879 Additional paid-in capital 711,965 566,913 Additional paid-in capital 1,177,192 1,158,118 Accumulated other comprehensive loss (17 ) (12 ) Accumulated other comprehensive income Accumulated other comprehensive income 585 26 Accumulated deficit (612,300 ) (566,061 ) Accumulated deficit (1,507,953) (1,454,620) Total stockholders’ equity 100,632 1,578 Total liabilities and stockholders’ equity $ 191,492 $ 89,847 Total stockholders’ deficit Total stockholders’ deficit (328,287) (294,597) Total liabilities and stockholders’ deficit Total liabilities and stockholders’ deficit $ 509,737 $ 550,000
Three and Nine Months Ended September 30, 2017 and 2016
| Three Months | Nine Months | Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||
| Revenues | Revenues | $ | 68,778 | $ | 49,923 | ||||||||||||||||||||||||||||||||||
| Product sales | $ | 1,501 | $ | — | $ | 1,501 | $ | — | |||||||||||||||||||||||||||||||
| Royalty revenue | 442 | 3,501 | 7,252 | 6,020 | |||||||||||||||||||||||||||||||||||
| Collaborative and other research and development | 6,817 | 4,262 | 12,543 | 11,350 | |||||||||||||||||||||||||||||||||||
| Total revenues | 8,760 | 7,763 | 21,296 | 17,370 | |||||||||||||||||||||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||||||||||||
| Cost of products sold | 1,142 | — | 1,142 | — | |||||||||||||||||||||||||||||||||||
| Expenses: | Expenses: | ||||||||||||||||||||||||||||||||||||||
| Cost of product sales | Cost of product sales | 931 | 236 | ||||||||||||||||||||||||||||||||||||
| Research and development | 17,509 | 14,105 | 50,038 | 48,850 | Research and development | 48,388 | 65,360 | ||||||||||||||||||||||||||||||||
| General and administrative | 3,343 | 2,756 | 9,235 | 8,692 | |||||||||||||||||||||||||||||||||||
| Selling, general and administrative | Selling, general and administrative | 47,867 | 34,282 | ||||||||||||||||||||||||||||||||||||
| Royalty | 115 | 143 | 431 | 247 | Royalty | 7 | 2 | ||||||||||||||||||||||||||||||||
| Total operating expenses | 22,109 | 17,004 | 60,846 | 57,789 | Total operating expenses | 97,193 | 99,880 | ||||||||||||||||||||||||||||||||
| Loss from operations | (13,349 | ) | (9,241 | ) | (39,550 | ) | (40,419 | ) | Loss from operations | (28,415) | (49,957) | ||||||||||||||||||||||||||||
| Interest and other income | 225 | 109 | 537 | 695 | Interest and other income | 3,378 | 54 | ||||||||||||||||||||||||||||||||
| Interest expense | (2,140 | ) | (1,465 | ) | (6,334 | ) | (4,356 | ) | Interest expense | (27,396) | (23,837) | ||||||||||||||||||||||||||||
| Gain (loss) on foreign currency derivative | 130 | (931 | ) | (892 | ) | (6,561 | ) | ||||||||||||||||||||||||||||||||
| Foreign currency losses, net | Foreign currency losses, net | (229) | (177) | ||||||||||||||||||||||||||||||||||||
| Loss before income taxes | Loss before income taxes | (52,662) | (73,917) | ||||||||||||||||||||||||||||||||||||
| Income tax expense | Income tax expense | 671 | 279 | ||||||||||||||||||||||||||||||||||||
| Net loss | $ | (15,134 | ) | $ | (11,528 | ) | $ | (46,239 | ) | $ | (50,641 | ) | Net loss | $ | (53,333) | $ | (74,196) | ||||||||||||||||||||||
| Foreign currency translation adjustment | Foreign currency translation adjustment | 59 | 78 | ||||||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on available for sale investments | Unrealized gain (loss) on available for sale investments | 500 | (69) | ||||||||||||||||||||||||||||||||||||
| Comprehensive loss | Comprehensive loss | $ | (52,774) | $ | (74,187) | ||||||||||||||||||||||||||||||||||
| Basic and diluted net loss per common share | $ | (0.18 | ) | $ | (0.16 | ) | $ | (0.58 | ) | $ | (0.69 | ) | Basic and diluted net loss per common share | $ | (0.28) | $ | (0.40) | ||||||||||||||||||||||
| Weighted average shares outstanding | 83,570 | 73,734 | 79,749 | 73,677 | Weighted average shares outstanding | 188,509 | 184,898 | ||||||||||||||||||||||||||||||||
| Unrealized loss on available for sale investments | (2 | ) | (24 | ) | (5 | ) | 228 | ||||||||||||||||||||||||||||||||
| Comprehensive loss | $ | (15,136 | ) | $ | (11,552 | ) | $ | (46,244 | ) | $ | (50,413 | ) | |||||||||||||||||||||||||||
Nine Months Ended September 30, 2017 and 2016
| 2017 | 2016 | |||||||
| Operating activities | ||||||||
| Net loss | $ | (46,239 | ) | $ | (50,641 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 522 | 311 | ||||||
| Loss on disposal of property and equipment | — | 21 | ||||||
| Stock-based compensation expense | 10,307 | 6,478 | ||||||
| Amortization of debt issuance costs | 658 | 335 | ||||||
| Amortization of premium/discount on investments | 125 | 499 | ||||||
| Change in fair value of foreign currency derivative | 1,858 | 7,372 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | (217 | ) | 275 | |||||
| Inventory | 500 | (620 | ) | |||||
| Prepaid expenses and other assets | 17 | 667 | ||||||
| Deferred collaboration expense | 51 | 43 | ||||||
| Accounts payable and accrued expenses | 1,303 | (12,066 | ) | |||||
| Interest payable | 1,715 | 817 | ||||||
| Deferred revenue | (1,224 | ) | (1,075 | ) | ||||
| Net cash used in operating activities | (30,624 | ) | (47,584 | ) | ||||
| Investing activities | ||||||||
| Acquisitions of property and equipment | (213 | ) | (5,278 | ) | ||||
| Change in restricted cash | (1,576 | ) | 106 | |||||
| Purchases of investments | (39,572 | ) | — | |||||
| Sales and maturities of investments | 32,527 | 38,272 | ||||||
| Net cash (used in) provided by investing activities | (8,834 | ) | 33,100 | |||||
| Financing activities | ||||||||
| Sale of common stock, net | 133,500 | — | ||||||
| Net proceeds from common stock issued under stock-based compensation plans | 1,491 | 204 | ||||||
| Proceeds from senior credit facility | — | 22,658 | ||||||
| Payment of foreign currency derivative collateral | — | (2,190 | ) | |||||
| Increase in lease financing obligation | 139 | 300 | ||||||
| Net cash provided by financing activities | 135,130 | 20,972 | ||||||
| Increase in cash and cash equivalents | 95,672 | 6,488 | ||||||
| Cash and cash equivalents at beginning of period | 22,104 | 28,899 | ||||||
| Cash and cash equivalents at end of period | $ | 117,776 | $ | 35,387 | ||||
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (53,333) | $ | (74,196) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 405 | 317 | |||||||||
| Inventory obsolescence | 236 | — | |||||||||
| Stock-based compensation expense | 14,007 | 9,601 | |||||||||
| Non-cash interest expense on royalty financing obligations and secured term loan and amortization of debt issuance costs | 20,216 | 19,003 | |||||||||
| Amortization of premium/discount on investments | (1,385) | 30 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Receivables | 2,019 | (7,048) | |||||||||
| Inventory | 131 | (354) | |||||||||
| Prepaid expenses and other assets | (2,547) | (2,320) | |||||||||
| Accounts payable and accrued expenses | (27,226) | (22,908) | |||||||||
| Deferred revenue | (35) | 75 | |||||||||
| Net cash used in operating activities | (47,512) | (77,800) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions of property and equipment | (160) | (406) | |||||||||
| Purchase of investments | (148,637) | (38,066) | |||||||||
| Sales and maturities of investments | 41,688 | — | |||||||||
| Net cash used in investing activities | (107,109) | (38,472) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net proceeds from common stock issued under stock-based compensation plans | 5,077 | 7,356 | |||||||||
| Net cash provided by financing activities | 5,077 | 7,356 | |||||||||
| Effect of exchange rate on cash, cash equivalents, and restricted cash | (96) | 40 | |||||||||
| Decrease in cash, cash equivalents and restricted cash | (149,640) | (108,876) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 306,239 | 507,734 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 156,599 | $ | 398,858 | |||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | 1,879 | $ | 1,158,118 | $ | 26 | $ | (1,454,620) | $ | (294,597) | |||||||||||||||||||
| Net loss | — | — | — | (53,333) | (53,333) | ||||||||||||||||||||||||
| Other comprehensive income | — | — | 559 | — | 559 | ||||||||||||||||||||||||
| Employee stock purchase plan sales, 176 shares, net | 2 | 1,573 | — | — | 1,575 | ||||||||||||||||||||||||
| Exercise of stock options, 801 shares, net | 8 | 3,494 | — | — | 3,502 | ||||||||||||||||||||||||
| Stock-based compensation expense | — | 14,007 | — | — | 14,007 | ||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | 1,889 | $ | 1,177,192 | $ | 585 | $ | (1,507,953) | $ | (328,287) | |||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | 1,843 | $ | 1,098,498 | $ | 177 | $ | (1,207,504) | $ | (106,986) | |||||||||||||||||||
| Net loss | — | — | — | (74,196) | (74,196) | ||||||||||||||||||||||||
| Other comprehensive income | — | — | 9 | — | 9 | ||||||||||||||||||||||||
| Employee stock purchase plan sales, 115 shares, net | 1 | 1,503 | — | — | 1,504 | ||||||||||||||||||||||||
| Exercise of stock options, 1,108 shares, net | 12 | 5,841 | — | — | 5,853 | ||||||||||||||||||||||||
| Stock-based compensation expense | — | 9,601 | — | — | 9,601 | ||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | 1,856 | $ | 1,115,443 | $ | 186 | $ | (1,281,700) | $ | (164,215) | |||||||||||||||||||
(Unaudited)
and Concentrations of Risk
Withroyalty payments to the funds available at September 30, 2017,Company. In addition to its approval in the United States, peramivir injection has received regulatory approvals in Canada, Australia, Japan, Taiwan and Korea.
eliminated from the consolidated financial statements.
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Product sales, net | $ | 68,166 | $ | 49,546 | |||||||
| Collaborative and other revenues | 612 | 377 | |||||||||
| Total revenues | $ | 68,778 | $ | 49,923 | |||||||
Restricted Cash
| September 30, 2017 | ||||||||||||||||||||
| Amortized Cost | Accrued Interest | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||
| Obligations of the U.S. Government and its agencies | $ | 27,897 | $ | 96 | $ | — | $ | (7 | ) | $ | 27,986 | |||||||||
| Corporate debt securities | 8,230 | 39 | — | (8 | ) | 8,261 | ||||||||||||||
| Certificates of deposit | 12,108 | 34 | 4 | (6 | ) | 12,140 | ||||||||||||||
| Total investments | $ | 48,235 | $ | 169 | $ | 4 | $ | (21 | ) | $ | 48,387 | |||||||||
| December 31, 2016 | ||||||||||||||||||||
| Amortized Cost | Accrued Interest | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||
| Obligations of the U.S. Government and its agencies | $ | 20,266 | $ | 34 | $ | 2 | $ | (4 | ) | $ | 20,298 | |||||||||
| Corporate debt securities | 6,179 | 26 | 2 | (8 | ) | 6,199 | ||||||||||||||
| Certificates of deposit | 14,962 | 17 | 7 | (11 | ) | 14,975 | ||||||||||||||
| Total investments | $ | 41,407 | $ | 77 | $ | 11 | $ | (23 | ) | $ | 41,472 | |||||||||
The following table summarizes the scheduled maturity for the Company’s investments at September 30, 2017 and December 31, 2016.
| 2017 | 2016 | |||||||
| Maturing in one year or less | $ | 43,848 | $ | 32,546 | ||||
| Maturing after one year through two years | 4,539 | 8,926 | ||||||
| Total investments | $ | 48,387 | $ | 41,472 | ||||
Receivables from Collaborations
Receivables from collaborations are recorded for amounts due to the Company related to reimbursable research and development costs from the U.S. Department of HealthHHS, and Human Services, royalty receivables from the Company’s partners, including Shionogi, Green Cross, Corporation (“Green Cross”), Mundipharma International Holdings Limited (“Mundipharma”) and Seqirus UK Limited (“SUL”), and product sales to SUL. These receivables are evaluated to determine if any reserve or allowance should be established at each reporting date. At September 30, 2017 and December 31, 2016, the Company had the following receivables.
| September 30, 2017 | ||||||||||||
| Billed | Unbilled | Total | ||||||||||
| U.S. Department of Health and Human Services | $ | 63 | $ | 1,906 | $ | 1,969 | ||||||
| Shionogi & Co. Ltd. | 653 | — | 653 | |||||||||
| Green Cross Corporation | 48 | — | 48 | |||||||||
| Mundipharma International Holdings Limited | 46 | — | 46 | |||||||||
| Seqirus UK Limited | 5,794 | 475 | 6,269 | |||||||||
| Total receivables | $ | 6,604 | $ | 2,381 | $ | 8,985 | ||||||
| December 31, 2016 | ||||||||||||
| Billed | Unbilled | Total | ||||||||||
| U.S. Department of Health and Human Services | $ | — | $ | 3,495 | $ | 3,495 | ||||||
| Shionogi & Co. Ltd. | 3,451 | — | 3,451 | |||||||||
| Green Cross Corporation | 686 | — | 686 | |||||||||
| Seqirus UK Limited | 957 | 179 | 1,136 | |||||||||
| Total receivables | $ | 5,094 | $ | 3,674 | $ | 8,768 | ||||||
Monthly invoices are submitted to the U.S. Department of Health and Human ServicesHHS related to reimbursable research and development costs. The Company is also entitled to monthly reimbursement of indirect costs based on rates stipulated in the underlying contract. The Company’s calculations of its indirect cost rates are subject to audit by the U.S. Government.
Receivables
Receivablesthe time of sale.
recorded based on consideration of the current economic environment, expectations of future economic conditions, specific circumstances and the Company’s own historical collection experience. Amounts determined to be uncollectible are charged or written-off against the reserve.
In accordance with U.S. GAAP, the Company periodically reviews its property and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values. Property and equipment to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Patents and Licenses
Accrued Expenses
The Company generally enters into contractual agreements with third-party vendors who provide research and development, manufacturing, distribution, and other services in the ordinary course of business. Some of these contracts are subject to milestone-based invoicing, and services are completed over an extended period of time. The Company records liabilities under these contractual commitments when it determines an obligation has been incurred, regardless of the timing of the invoice. This process involves reviewing open contracts and purchase orders, communicating with applicable Company personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual cost. The majority of service providers invoice the Company monthly in arrears for services performed. The Company makes estimates of accrued expenses as of each balance sheet date in its financial statements based on the facts and circumstances.circumstances, which can include assumptions such as expected patient enrollment, site activation and estimated project duration. The Company periodically confirms the accuracy of its estimates with itsthe service providers and makes adjustments if necessary. Examples of estimated accrued expenses include:
include (i) fees paid to clinical research organizations (“CROs”) in connection with preclinical and toxicology studies and clinical trials; (ii) fees paid to investigative sites in connection with clinical trials; (iii) fees paid to contract manufacturers in connection with the production of the Company’s raw materials, drug substance, drug products, and product candidates; and (iv) professional fees.
Income Taxes
The liability method is used in
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss is comprised of unrealized gains and losses on available-for-sale investments and is disclosed as a separate component of stockholders’ equity. Amounts reclassified from accumulated other comprehensive loss are recorded as interest and other income on the Consolidated Statements of Comprehensive Loss. No reclassifications out of accumulated other comprehensive loss were recorded during the nine months ended September 30, 2017. Realized gains of $11 were reclassified out of accumulated other comprehensive loss during the nine months ended September 30, 2016.
Revenue Recognition
The Company recognizes revenues from collaborative and other research and development arrangements and royalties when realized or realizable and earned. Revenue is realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the seller’s price to the buyer is fixed or determinable; and (iv) collectability is reasonably assured.
Collaborative and Other Research and Development Arrangements and Royalties
Revenue from license fees, royalty payments, event payments, and research and development fees are recognized as revenue when the earnings process is complete and the Company has no further continuing performance obligations or the Company has completed the performance obligations under the terms of the agreement. Fees received under licensing agreementsdistributing inventories that are related to future performance are deferredproduct revenue during the respective period, including freight. In addition, shipping and recognized over an estimated period determined by management based on the terms of the agreement and the products licensed. Revisions to revenue or profit estimates as a result of changes in the estimated revenue period are recognized prospectively.
Under certain of the Company’s license agreements, the Company receives royalty payments based upon its licensees’ net sales of covered products. The Company recognizes royalty revenues when it can reliably estimate such amounts and collectability is reasonably assured.
For arrangements that involve the delivery of more than one element, eachhandling costs for product service and/or right to use assets is evaluated to determine whether it qualifies as a separate unit of accounting. This determination is based on whether the deliverable has “stand-alone value” to the customer. The consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price of each deliverable. The estimated selling price of each deliverable is determined using the following hierarchy of values: (i) vendor-specific objective evidence of fair value, (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of selling price (“BESP”). The BESP reflects the Company’s best estimate of what the selling price would be if the deliverable was regularly sold by the Company on a stand-alone basis. In most cases the Company expects to use TPE or BESP for allocating consideration to each deliverable. The consideration allocated to each unit of accounting is recognized as the related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation.
In June 2015, the Company entered into a License Agreement (the “SUL Agreement”) granting SUL and its affiliates worldwide rights, excluding Israel, Japan, Korea and Taiwan, to develop, manufacture and commercialize RAPIVAB. The SUL Agreement provides for various types of payments, including a non-refundable upfront fee, milestone payments, and future royalties. Analysis of the SUL Agreement identified three deliverables: (i) license rights, (ii) inventory and (iii) regulatory support to obtain Canadian and European Union (“EU”) marketing approvals. The Company received an upfront payment of $33,740 from SUL, of which $7,000 was determined to be contingent upon EU marketing approval and will be deferred until that time. Approximately $21,777 of the upfront payment was allocated to the license rights and recognized as revenue in 2015. Approximately $3,740 of the upfront payment was allocated to the pending sale of inventory and was recognized in 2015, when the inventory transfer was completed. Approximately $1,223 of the revenue from the SUL Agreement will be recognized over the expected period of involvement in these regulatory support activities.
Milestone payments are recognized as licensing revenue upon the achievement of specified milestones if (i) the milestone is substantive in nature and the achievement of the milestone was not reasonably assured at the inception of the agreement; and (ii) the fees are non-refundable. Any milestone payments received prior to satisfying these revenue recognition criteriashipments are recorded as deferred revenue.
During the first nine monthsincurred. Finally, cost of 2017, the Company received a $2,000 milestone paymentproduct sales may also include costs related to the approval of RAPIVAB by Health Canada and a $5,000 milestone payment associated with the U.S. Food and Drug Administration (“FDA”) approval of a supplemental new drug application (“sNDA”) for RAPIVAB extending its availability for the treatment of acute uncomplicated influenza to pediatric patients two years and older. The Company evaluated each event based payment under the provisions of ASU 2010-17, Milestone Method of Revenue Recognition, and determined that each event based payment met the criteria to be considered substantive and represents a milestone under the milestone method of accounting. Under the terms of the SUL Agreement, the Company may receive an additional $5,000 payment related to the successful marketing approval by the European Medicines Agency (“EMA”) for an adult indication in the EU. No event-based payments were achieved during the first nine months of 2016.
Reimbursements received for direct out-of-pocket expenses related to research and development costs are recorded as revenue in the Consolidated Statements of Comprehensive Loss rather than as a reduction in expenses. Under the Company’s contracts with the Biomedical Advanced Research and Development Authority within the United States Department of Health and Human Services (”BARDA/HHS”) and the National Institute of Allergy and Infectious Diseases (“NIAID/HHS”), revenue is recognized as reimbursable direct and indirect costs are incurred.
The Company recorded the following revenues for the three and nine months ended September 30, 2017 and 2016:
| Three Months | Nine Months | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Product sales | $ | 1,501 | $ | — | $ | 1,501 | $ | — | ||||||||
| Royalty revenue | 442 | 3,501 | 7,252 | 6,020 | ||||||||||||
| Collaborative and other research and development revenues: | ||||||||||||||||
| U.S. Department of Health and Human Services | 1,490 | 3,813 | 4,305 | 9,846 | ||||||||||||
| Shionogi & Co. Ltd. | 296 | 296 | 888 | 888 | ||||||||||||
| Seqirus UK Limited | 5,031 | 153 | 7,350 | 616 | ||||||||||||
| Total collaborative and other research and development revenues | 6,817 | 4,262 | 12,543 | 11,350 | ||||||||||||
| Total revenues | $ | 8,760 | $ | 7,763 | $ | 21,296 | $ | 17,370 | ||||||||
Research and Development Expenses
Significant management judgment is also required in determining estimates of future stock price volatility and forfeitures to be used in the valuation of the options. Actual results, and future changes in estimates, may differ substantially from the Company’s current estimates.
Lease Financing Obligation
Based on the terms of the lease agreement for the research facility in Birmingham, Alabama, the Company had construction period risks during the construction period and the Company was deemed the owner of the building (for accounting purposes only) during the construction period. Accordingly, the Company recorded an asset of $1,589 at December 31, 2015, representing the Company’s leased portion of the building and recorded a corresponding liability. Upon completion of leasehold improvement construction, which ended in 2016, the Company did not meet the sale-leaseback criteria for de-recognition of the building asset and liability. Therefore, the lease is accounted for as a financing obligation. The asset will be depreciated over the expected duration of the lease of 20.5 years, and rental payments will be treated as principal and interest payments on the lease financing obligation liability. The underlying accounting for this transaction has no impact on cash flows associated with the underlying lease or construction in process. Interest expense$(167) for the three months ended September 30, 2017March 31, 2023 and 2016 includes $822022, respectively. When utilizing the effective interest method, in periods in which PIK interest was designated and $86, respectively,was added to the outstanding principal balance of the borrowing, the amortization of the deferred debt fees and issuance costs was accretive. The quarter ended December 31, 2022 was the last period eligible for the nine months ended September 30, 2017PIK Interest Payment designation under the Athyrium Credit Agreement.
Ateffective interest rate on a prospective basis. The assumptions used in determining the expected repayment term of the debt and amortization period of the issuance costs require that the Company make estimates that could impact the carrying value of each of September 30, 2017 and December 31, 2016, the lease financing obligation balance was $2,704 and was recordedliabilities, as a long term liability onwell as the consolidated balance sheets. At September 30, 2017 the remaining future minimum payments under the lease financing obligation are $4,444.
Currency Hedge Agreement
In connection with theperiods over which associated issuance by Royalty Subcosts will be amortized. A significant increase or decrease in forecasted net sales could materially impact each of the PhaRMA Notes,liability balances, interest expense and the Company entered into a Currency Hedge Agreement to hedge certain risks associated with changes in the value of the Japanese yen relative to the U.S. dollar. time periods for repayment.
development conducted on foreign soil.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.
2022.
All peramivir
Other than royalty revenues,distribution activities could adversely impact the Company’s primary sourcebusiness, results of revenue that has an underlying cash flow stream is the reimbursement of galidesivir (formerly BCX4430) development expenses earned under cost-plus-fixed-fee contracts with BARDA/HHSoperations and NIAID/HHS. financial condition.
whichthat potentially subject the Company to concentration of risk to the extent recorded on the Consolidated Balance Sheets. The Company deposits excess cash with major financial institutions in the United States. Balances may exceed the amount of insurance provided on such deposits. The Company believes it has established guidelines for investment of its excess cash relative to diversification and maturities that maintain safety and liquidity. To minimize the exposure due to adverse shifts in interest rates, the Company maintains a portfolio of investments with an average maturity of approximately 1812 months or less. Other thansalehas been received by the specialty pharmacy from one of its customers, which include pharmacy benefit managers, insurance companies, government programs and collaborative partner receivables discussed above, thegroup purchasing organizations.RecentIn November 2016,Three Months Ended March 31, 2023 2022 ORLADEYO: U.S. $ 60,849 $ 43,935 Outside of U.S. 7,565 5,769 Total ORLADEYO 68,414 49,704 Other revenues 364 219 Total revenues $ 68,778 $ 49,923 March 31, 2023 Amortized
CostAccrued
InterestGross
Unrealized
GainsGross
Unrealized
LossesEstimated
Fair ValueObligations of U.S. Government and its agencies $ 242,246 $ 160 $ 69 $ (585) $ 241,890 Corporate debt securities 3,362 13 — (21) 3,354 Certificates of deposit 1,224 7 — (21) 1,210 Total investments $ 246,832 $ 180 $ 69 $ (627) $ 246,454 December 31, 2022 Amortized
CostAccrued
InterestGross
Unrealized
GainsGross
Unrealized
LossesEstimated
Fair ValueObligations of U.S. Government and its agencies $ 129,940 $ 427 $ — $ (996) $ 129,371 Corporate debt securities 6,093 37 — (38) 6,092 Certificates of deposit 2,163 23 — (29) 2,157 Total investments $ 138,196 $ 487 $ — $ (1,063) $ 137,620 March 31, 2023 December 31, 2022 Maturing in one year or less $ 243,022 $ 119,543 Maturing after one year through two years 3,432 18,077 Total investments $ 246,454 $ 137,620 March 31, 2023 Billed Unbilled Total U.S. Department of Health and Human Services, net $ 286 $ 284 $ 570 Royalty receivables from partners 521 — 521 Total receivables $ 807 $ 284 $ 1,091 December 31, 2022 Billed Unbilled Total U.S. Department of Health and Human Services, net $ 7,218 $ 284 $ 7,502 Royalty receivables from partners 741 — 741 Other collaborations — 25 25 Total receivables $ 7,959 $ 309 $ 8,268 March 31, 2023 December 31, 2022 Raw materials $ 8,869 $ 8,906 Work-in-process 15,613 14,990 Finished goods 4,397 4,814 Total inventory $ 28,879 $ 28,710 Reserves (1,413) (1,177) Total inventory, net $ 27,466 $ 27,533 FASB”RPI”) issued Accounting Standards Update 2016-18: Statemententered into a Purchase and Sale Agreement (the “2020 RPI Royalty Purchase Agreement”), pursuant to which the Company sold to RPI the right to receive certain royalty payments from the Company for a purchase price of Cash Flows (Topic 230): Restricted Cash$125,000 in cash (the “2020 RPI Royalty Sale”). Under the 2020 RPI Royalty Purchase Agreement, RPI is entitled to receive tiered, sales-based royalties on net product sales of ORLADEYO in the United States and certain key European markets (collectively, the “Key Territories”), and other markets where the Company sells ORLADEYO directly or through distributors (collectively, the “Direct Sales”) in an amount equal to: (i) 8.75% of aggregate annual net sales of ORLADEYO for annual net sales up to $350,000 and (ii) 2.75% of annual net sales for annual net sales between $350,000 and $550,000. No royalty payments are payable on annual Direct Sales over $550,000.ASU 2016-18”OMERS”) (the “OMERS Royalty Purchase Agreement” and collectively with the RPI Royalty Purchase Agreements, the “Royalty Purchase Agreements”), pursuant to which the Company sold to OMERS the right to receive certain royalty payments from the Company for a purchase price of an additional $150,000 in cash.2020 RPI
Royalty
Agreement2021 RPI
Royalty
AgreementOMERS
Royalty
AgreementTotal Balance as of December 31, 2022 $ 164,981 $ 173,651 $ 163,023 $ 501,655 Deferred financing costs — — — — Non-cash Interest expense on Royalty financing obligations 9,309 5,680 4,329 19,318 Royalty revenues paid and payable (6,038) (524) — (6,562) Balance as of March 31, 2023 $ 168,252 $ 178,807 $ 167,352 $ 514,411 Effective interest rate 22.4 % 13.1 % 10.6 % new standard requiresquarter ended December 31, 2022 was the last period eligible for the PIK Interest Payment designation.statement1.00% commitment fee at its respective borrowing date.cash flows explainthis type, as well as customary events of default. Certain of the customary negative covenants limited the ability of the Company and certain of its subsidiaries to, among other things, grant liens, make investments, incur additional indebtedness, engage in mergers, acquisitions, and similar transactions, dispose of assets, license certain property, distribute dividends, make certain restricted payments, change during the periodnature of the Company’stotalUnited States for the four-fiscal quarter period ending on such Test Date to be less than the specified amounts set forth in the Athyrium Credit Agreement (collectively, the “Revenue Tests”). If the Company failed to satisfy the Revenue Tests as of cash, cash equivalentsany Test Date, it would have had a one-time right (the “Cure Right”) to repay in full the entire amount of the Term C Loan outstanding at such time together with all accrued and unpaid interest thereon plus the prepayment premium, exit fee, and any other fees or amounts generally describedpayable under the Athyrium Credit Agreement at such time. In addition, the Athyrium Credit Agreement contained a minimum liquidity covenant requiring the Company to maintain at all times, as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included withapplicable, at least $15,000 of unrestricted cash and cash equivalents when reconcilingif only the beginning-of-period and end-of-period total amounts shown on the statementTerm A Loan had been drawn; at least $20,000 of unrestricted cash flows. The standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.In August 2016, the FASB issued Accounting Standards Update No. 2016-15: Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The amendments in this update clarify how entities should classify certain cash receipts and cash payments onequivalents if the Consolidated StatementsTerm B Loan had been drawn but the Term C Loan had not been drawn; and at least $15,000 (or, if the Cure Right has been exercised, $20,000) of Cash Flows. The new guidance also clarifies how the predominance principle should be applied whenunrestricted cash receipts and cash paymentsequivalents if the Term C Loan had been drawn, subject to certain exceptions.aspects of more than one class of cash flows. ASU 2016-15 will be effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods, but early adoption is permitted. The Company is currently evaluatingpermitted the impact of this update on its consolidated financial statements.In March 2016,lenders under the FASB issued Accounting Standards Update No. 2016-09: Compensation - Stock Compensation (Topic 718): ImprovementsAthyrium Credit Agreement to Employee Share-Based Payment Accounting (“ASU 2016-09”). The amendments in this update simplify several aspects ofdeclare the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements,outstanding principal as well as classificationaccrued interest and fees, to be immediately due and payable.statementfair value hierarchy.cash flows. ASU 2016-09 eliminatesMarch 31, 2023, deferred debt fees and issuance costs associated with all Athyrium Term Loans under the requirement that excess tax benefits be realizedAthyrium Credit Agreement totaled $11,930 and are being amortized as a reduction in current taxes payable beforeinterest expense on an effective interest rate method over the associated tax benefit can be recognized as an increase in paid in capital. Under ASU 2016-09, these previously unrecognized deferred tax assets were recognized on a modified retrospective basis as of January 1, 2017, the startremaining term of the yearAthyrium Term Loans. Deferred financing amortization of $898 and $(167), was recognized for the three months ended March 31, 2023 and 2022, respectively. When utilizing the effective interest method, in periods in which PIK interest was designated and added to the outstanding principal balance of the borrowing, the amortization of the deferred debt fees and issuance costs was accretive.adopted ASU 2016-09. The U.S. federalentered into the Pharmakon Loan Agreement and state net operating losses and credits recognized asused the proceeds of January 1, 2017 have been offset by a full valuation allowance. As a result, there is no cumulative-effect adjustmentan initial loan thereunder to, retained earnings as of September 30, 2017. The Company elected not to change its policy on accounting for forfeitures and continues to estimate the total number of awards for which the requisite service period will not be rendered. The Company adopted ASU 2016-09 as of January 1, 2017. Adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements.In February 2016, the FASB issued Accounting Standards Update No. 2016-02: Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require lessees, among other things, to recognizerepay the outstanding indebtedness under the Athyrium Credit Agreement. See “Note 12—Subsequent Events” for additional information about the Pharmakon Loan Agreement.Three Months Ended March 31, 2023 2022 Aggregate lease expense $ 727 $ 594 As of March 31, 2023 As of December 31, 2022 Weighted average remaining lease term 7.8 years 8.1 years Weighted average discount rate 10.8% 11.0% Balance Sheet Location As of March 31, 2023 As of December 31, 2022 Assets: Operating lease assets, net Other Assets $ 7,046 $ 6,806 Liabilities: Current operating lease liabilities Lease financing obligation – current liabilities $ 2,491 $ 2,369 Non-current operating lease liabilities Lease financing obligation – long-term liabilities 5,934 5,804 Total operating lease liabilities $ 8,425 $ 8,173 on the balance sheet for all leases with terms greater than 12 months. This update also introduces new disclosure requirements for leasing arrangements. ASU 2016-02 will be effectivewas $705 and $574 for the three months ended March 31, 2023, and 2022, respectively.2023 (remaining) $ 2,137 2024 2,175 2025 1,711 2026 824 2027 613 Thereafter 6,161 Total lease payments 13,621 Less imputed interest (5,196) Total $ 8,425 in fiscal year 2019, but early adoption is permitted. Thefiled an automatic shelf registration statement on Form S-3 with the SEC. This shelf registration statement became effective automatically upon filing and allows the Company is currently evaluating the impactto sell an indeterminate number of this updatesecurities, including common stock, preferred stock, depositary shares, purchase contracts, warrants, debt securities, and units, from time to time at prices and on its consolidated financial statements.In January 2016, the FASB issued Accounting Standards Update No. 2016-01: Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The amendments in this update address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In particular, the amendments in this update supersede, for public business entities, the requirement to disclose the methods and significant assumptions used in calculating the fair value of financial instruments requiredterms to be disclosed for financial instruments measureddetermined at amortized cost on the balance sheet. ASU 2016-01 will be effective fortime of sale.in fiscal year 2018, but early adoption is permitted. The Company does not expect this standard to have a material impact on its consolidated financial statements.In July 2015,entering into the FASB issued Accounting Standards Update No. 2015-11: Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”), which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The update does not apply to inventory that is measured using last-in, first-out or the retail inventory method. The update applies to all other inventory, which includes inventory that is measured using first-in, first-out or average cost methods. The amendments in ASU 2015-11 are effective for2021 RPI Royalty Purchase Agreement, the Company for fiscal years, and RPI entered into the interim periods within those years, beginning after December 15, 2016. The Company adopted ASU 2015-11 as of January 1, 2017. Adoption did not have a material impact on its consolidated financial statements.13In May 2014, the FASB issued Standards Update No. 2014-09: Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which provides a single, comprehensive revenue recognition model for all contracts with customers. The core principal of this ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the considerationCommon Stock Purchase Agreement, pursuant to which the entity expectsCompany issued 3,846 shares of the Company’s common stock to be entitled in exchangeRPI for those goods or services. ASU 2014-09 also requires additional disclosure aboutan aggregate purchase price of $50,000, at a price of $13.00 per share, calculated based on the nature, amount, timing and uncertainty20-day volume weighted average price. The $13.00 per share price represented a premium of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015,$1.11 over the FASB finalized a one year delay inclosing price of $11.89 of the effective date of this standard, which will now be effective January 1, 2018; however, early adoption is permitted any time afterCompany’s common stock on November 17, 2021, the original effective date, January 1, 2017. Companies can transitionlast trading day prior to the new standard underexecution of the full retrospective method orCommon Stock Purchase Agreement. The premium of $4,269 paid by RPI on the modified retrospective method. The Company will adoptpurchase of the standard effective January 1, 2018Company’s common stock has been deferred and expects to utilizeis being amortized as a component of interest expense of the modified retrospective methodology. The Company is continuing to evaluate the effect that the standard will have on its consolidated financial statements and related disclosures.
(in thousands):
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Incentive Plan | $ | 11,061 | $ | 8,078 | |||||||
| Inducement Plan | 2,475 | 1,225 | |||||||||
| ESPP | 471 | 298 | |||||||||
| Stock-based compensation expense | $ | 14,007 | $ | 9,601 | |||||||
| Awards Available | Options Outstanding | Weighted Average Exercise Price | |||||||||||||||||||||||||||
| Balance December 31, 2016 | 2,273 | 12,095 | $ | 6.55 | |||||||||||||||||||||||||
| Plan amendment | 1,000 | — | — | ||||||||||||||||||||||||||
| Awards Available | Options Outstanding | Weighted Average Exercise Price | |||||||||||||||||||||||||||
| Balance December 31, 2022 | Balance December 31, 2022 | 4,206 | 31,179 | $ | 8.56 | ||||||||||||||||||||||||
| Restricted stock unit awards granted | (16 | ) | — | — | Restricted stock unit awards granted | (146) | — | — | |||||||||||||||||||||
| Restricted stock unit awards cancelled | 3 | — | — | Restricted stock unit awards cancelled | 313 | — | — | ||||||||||||||||||||||
| Stock option awards granted | (2,591 | ) | 2,591 | 5.49 | Stock option awards granted | (215) | 215 | 10.55 | |||||||||||||||||||||
| Stock option awards exercised | — | (422 | ) | 3.49 | Stock option awards exercised | — | (529) | 5.52 | |||||||||||||||||||||
| Stock option awards cancelled | 912 | (912 | ) | 10.22 | Stock option awards cancelled | 437 | (437) | 10.32 | |||||||||||||||||||||
| Balance September 30, 2017 | 1,581 | 13,352 | $ | 6.19 | |||||||||||||||||||||||||
| Balance March 31, 2023 | Balance March 31, 2023 | 4,595 | 30,428 | $ | 8.60 | ||||||||||||||||||||||||
| Awards Available | Options Outstanding | Weighted Average Exercise Price | |||||||||||||||
| Balance December 31, 2022 | 947 | 5,341 | $ | 8.80 | |||||||||||||
| Restricted stock unit awards granted | (193) | — | — | ||||||||||||||
| Restricted stock unit awards cancelled | 21 | — | — | ||||||||||||||
| Stock option awards granted | (522) | 522 | 9.66 | ||||||||||||||
| Stock option awards exercised | — | (173) | 3.36 | ||||||||||||||
| Stock option awards cancelled | 260 | (260) | 8.62 | ||||||||||||||
| Balance March 31, 2023 | 513 | 5,430 | $ | 9.06 | |||||||||||||
Employees and Directors under the Incentive Plan
| 2017 | 2016 | 2023 | 2022 | ||||||||||||||||
| Expected Life in Years | 5.5 | 5.5 | Expected Life in Years | 5.5 | 5.5 | ||||||||||||||
| Expected Volatility | 82.0 | % | 82.0 | % | Expected Volatility | 84.2 | % | 84.1 | % | ||||||||||
| Expected Dividend Yield | 0.0 | % | 0.0 | % | Expected Dividend Yield | 0.0 | % | 0.0 | % | ||||||||||
| Risk-Free Interest Rate | 1.9 | % | 1.4 | % | Risk-Free Interest Rate | 3.7 | % | 1.9 | % | ||||||||||
(“ESPP”)1,4757,975 shares of common stock to be purchased under the ESPP, of which 3305,617 shares remain available for purchase at September 30, 2017.as of March 31, 2023. Eligible employees may authorize up to 15% of their salary to purchase common stock at the lower of 85% of the beginning or 85% of the ending price during six-month purchase intervals. No more than 3three thousand shares may be purchased by any one employee at the six-month purchase dates, and no employee may purchase stock having a fair market value at the commencement date of $25 or more in any one calendar year. TheDuring the three months ended March 31, 2023, and 2022, the Company issued 91176 and 115 shares during the first nine months of 2017 under the ESPP.ESPP, respectively. Compensation expense for shares purchased under the ESPP related to the purchase discount and the “look-back” option were determined using a Black-Scholes option pricing model.
U.S. Department of Health and Human Services (“BARDA/HHS”)Relationships
National Institute of Allergy and Infectious Diseases (“NIAID/HHS”). In September 2013, NIAID/HHS contracted with$15,000 milestone payment from Torii to the Company, forwhich was received in May 2021.
The contracts with BARDA/HHS and NIAID/HHS are cost-plus-fixed-fee contracts. That is,Torii Agreement, the Company is entitled to receive reimbursement for all costs incurredtiered royalty payments, ranging from 20% to 40% of annual net sales of ORLADEYO in accordance withJapan during each calendar year. Torii’s royalty payment obligations are subject to customary reductions in certain circumstances, but may not be reduced by more than 50% of the contract provisionsamount that are relatedotherwise would have been payable to the developmentCompany in the applicable calendar quarter. Torii’s royalty payment obligations commenced upon the first commercial sale of galidesivir plus a fixed fee, or profit. BARDA/HHSORLADEYO in Japan and NIAID/HHS will make periodic assessmentsexpire upon the later of progress and(i) the continuationtenth anniversary of the contract is based ondate of first commercial sale of ORLADEYO in Japan, (ii) the expiration of the Company’s performance,patents covering ORLADEYO, and (iii) the timeliness and qualityexpiration of deliverables, and other factors.regulatory exclusivity for ORLADEYO in Japan. The government has rights under certain contract clauses to terminate these contracts. These contracts are terminable by the government at any time for breach or without cause.
Seqirus UK Limited (“SUL”). On June 16, 2015, the Company and Seqirus UK Limited (“SUL”), a limited company organized under the laws of the United Kingdom and a subsidiary of CSL Limited, a company organized under the laws of Australia, entered into a License Agreement (the “SUL Agreement”) granting SUL and its affiliates worldwide rights to develop, manufacture and commercialize RAPIVAB (peramivir injection) for the treatment of influenza except for the rights to conduct such activities in Israel, Japan, Korea and Taiwan (the permitted geographies together constituting the “Territory”). Peramivir is an intravenous treatment for acute uncomplicated influenza and is currently approved for use in the United States, Canada, Japan, Taiwan and Korea. Peramivir is the first and only intravenous influenza treatment in the world and was approved by the FDA in December 2014 for the treatment of acute uncomplicated influenza in patients 18 years and older who have been symptomatic for no more than two days. The Company retains all rights and associated economics to procure pandemic stockpiling orders for RAPIVAB from the U.S. Government, while SUL has the right to pursue government stockpiling outside the U.S.
Pursuant to the SUL Agreement, RAPIVAB is commercialized by CSL's subsidiary, SUL, which specializes in influenza prevention through the supply of seasonal and pandemic vaccine to global markets. SUL manufactures, commercializes and exercises decision-making authority with respect to the commercialization of RAPIVAB within the Territory and is responsible for all related costs, including sales and promotion.
Under the terms of the SUL Agreement, the Company is responsible for fulfilling all post-marketing commitments in connectionsupplying Torii with the FDA's approvalits required amounts of ORLADEYO. The activities of the NDA, and upon fulfillment will transfer ownership of and financial responsibility forparties pursuant to the NDA to SUL. Pursuant to potential rights to sell RAPIVAB in the EU, the Company is also responsible for regulatory filings and interactions with the European Medicines Agency ("EMA") until marketing approval for RAPIVAB is obtained and assigned to SUL. In accordance with the SULTorii Agreement the Company and SUL formedare overseen by a joint steering committee, composed of an equal number of representatives from each party to oversee, review and coordinate the conductdevelopment and progress of the commercialization of RAPIVABORLADEYO in Japan. Torii launched ORLADEYO in Japan on April 23, 2021.
Undercommercialize ORLADEYO, (ii) regulatory approval support and (iii) reimbursement pricing approval support. These were each
performance obligations.
Mundipharma International Holdings Limited (“Mundipharma”). In February 2006, the
Albert Einstein College of Medicine of Yeshiva University and Industrial Research, Ltd. (“AECOM” and “IRL” respectively). In June 2000,17, 2023, the Company licensed a series of potent inhibitors of PNPsecured $450,000 in committed financing from AECOM and IRL, (collectively, the “Licensors”). The lead product candidates from this collaboration are forodesine and ulodesine.funds managed by Pharmakon Advisors, LP. The Company has obtained worldwide exclusive rightselected to developdraw $300,000 of the $450,000 available under the Pharmakon Loan Agreement on the closing date of the Pharmakon Loan Agreement. The remaining $150,000 of committed capital may be drawn at the Company’s option, subject to certain borrowing conditions, if requested on or prior to September 30, 2024.
In May 2010, the Company amended the licensee agreement through which the Company obtained worldwide exclusive rights to develop and ultimately distribute any product candidates that might arise from research on a series of PNP inhibitors, including forodesine and ulodesine. Under the terms of the amendment, the Licensors agreed to accept a reduction of one-half in the percentage of future payments received from third-party sub licensees of the licensed PNP inhibitors that must be paid to the Licensors. This reduction does not apply to (i) any milestone payments the Company may receive in the future under its license agreement dated February 1, 2006 with Mundipharma and (ii) royalties received from its sub licensees in connection with the sale of licensed products, for which the original payment rate will remain in effect. The rate of royalty payments to the Licensors based on net sales of any resulting product made by the Company remains unchanged.
On June 19, 2012, the Company further amended its agreements with AECOM/IRL whereby the parties clarified the definition of the field with respect to PNP inhibition and AECOM/IRL agreed to exclusive worldwide license of galidesivir to BioCryst for any antiviral use.
The University of Alabama at Birmingham (“UAB”). The Company currently has agreements with UAB for influenza neuraminidase and complement inhibitors. Under the terms of these agreements, UAB performed specific research for the Company in return for research payments and license fees. UAB has granted the Company certain rights to any discoveries in these areas resulting from research developed by UAB or jointly developed with the Company. The Company has agreed to pay single digit royalties on sales of any resulting product and to share in future payments received from other third-party partners. The Company has completed the research under the UAB agreements. These two agreements have initial 25-year terms, are automatically renewable for five-year terms throughout the life of the last patent and are terminable by the Company upon three months’ notice and by UAB under certain circumstances. Upon termination both parties shall cease using the other parties’ proprietary and confidential information and materials, the parties shall jointly own joint inventions and UAB shall resume full ownership of all UAB licensed products. There is currently no activity between the Company and UAB on these agreements, but when the Company licenses this technology, such as in the case of the Shionogi, Green Cross and SUL agreements, or commercializes products related to these programs, the Company will owe sublicense fees or royalties on amounts it receives.
Note 4 — Royalty Monetization
Overview
On March 9, 2011, the Company completed a $30,000 financing transaction to monetize certain future royalty and milestone payments under the Shionogi Agreement, pursuant to which Shionogi licensed from the Company the rights to market RAPIACTA in Japan and Taiwan. The Company received net proceeds of $22,691 from the transaction after transaction costs of $4,309 and the establishment of a $3,000 interest reserve account by Royalty Sub, available to help cover interest shortfalls in the future. All50% of the interest reserve account has been fully utilized withon the September 2012 interest payment.
As partloans advanced on the closing date in-kind for the first eighteen months of the transaction, the Company entered into a purchase and sale agreement dated as of March 9, 2011 with Royalty Sub, whereby the Company transferredterm (subject to Royalty Sub, among other things, (i) its rightsan increase in margin from 7.00% to receive all non-governmental royalty and milestone payments from Shionogi arising under the Shionogi Agreement, and (ii) the right to receive payments under a Japanese yen/US dollar foreign currency hedge agreement (as further described below, the “Currency Hedge Agreement”) put into place by the Company in connection with the transaction. Royalty payments will be paid by Shionogi in Japanese yen and milestone payments will paid in U.S. dollars. The Company’s collaboration with Shionogi was not impacted as a result of this transaction.
Non-Recourse Notes Payable
On March 9, 2011, Royalty Sub completed a private placement to institutional investors of $30,000 in aggregate principal amount of its PhaRMA Senior Secured 14.0% Notes due 2020 (the “PhaRMA Notes”). The PhaRMA Notes were issued by Royalty Sub under an Indenture, dated as of March 9, 2011 (the “Indenture”7.25%), by and between Royalty Sub and U.S. Bank National Association, as Trustee. Principal and interest on the PhaRMA Notes issued are payable from, and are secured by, the rights to royalty and milestone payments under the Shionogi Agreement transferred byallowing the Company to Royalty Sub anddefer a portion of cash interest payments if any, made to Royalty Sub underuntil after this period. The Pharmakon Loan Agreement contains no scheduled amortization payments, with all outstanding principal due at the Currency Hedge Agreement. The PhaRMA Notes bear interest at 14% per annum, payable annuallymaturity date in arrears on September 1st of each year. The Company remains entitled to receive any royalties and milestone payments related to sales of peramivir by Shionogi following repayment of the PhaRMA Notes.
Royalty Sub’s obligations to pay principal and interest on the PhaRMA Notes2028. There are obligations solely of Royalty Sub and are without recourse to any other person, including the Company, except to the extent of the Company’s pledge of its equity interests in Royalty Sub in support of the PhaRMA Notes. The Company may, but is not obligated to, make capital contributions to a capital account that may be used to redeem, or on up to one occasion pay any interest shortfall on, the PhaRMA Notes.
On September 1, 2014, Royalty Sub was unable to pay the full amount of interest payable to avoid an event of default. Accordingly, the PhaRMA Notes and related accrued interest have been classified as current liabilities on the balance sheet. As a result of the event of default under the PhaRMA Notes, the holders of the PhaRMA Notes may pursue acceleration of the PhaRMA Notes, may foreclose on the collateral securing the PhaRMA Notes and the equity interest in Royalty Sub and exercise other remedies available to them under the Indenture in respect of the PhaRMA Notes. In such event, the Company may not realize the benefit of future royalty payments that might otherwise accrue to it following repayment of the PhaRMA Notes and it might otherwise be adversely affected. Due to the non-recourse nature of the PhaRMA Notes, in the event of any potential acceleration or foreclosure, the primary impact to the Company would be the loss of future royalty payments from Shionogi and legal costsno financial covenants associated with retiring the PhaRMA Notes. In addition, the Company may incur costs associated with liquidating the related Currency Hedge Agreement, which would no longer be required in the eventfinancing.
Note 5 — Senior Credit Facility
On September 23, 2016, the Company closed a $23,000 Senior Credit Facility with an affiliate of MidCap Financial Services, LLC (“MidCap”), as administrative agent (the “Senior Credit Facility”). The Senior Credit Facility was fully funded at closing and bears a variable interest rate of LIBOR (which shall not be less than 0.5%) plus 8%. The Senior Credit Facility includes an interest-only payment period through fiscal 2017 and scheduled monthly principal and interest payments for the subsequent 40 months. The Company has the option to repay the Senior Credit Facility at any time prior to the scheduled principal repayment date subject to prepayment fees. Final payment of the Senior Credit Facility is subject to a final payment fee equal to 5% of the principal funded under the Senior Credit Facility.
As of September 30, 2017, the Company had borrowings of $23,000 under the Senior Credit Facility bearing an interest rate of 9.2%. The carrying amount of the debt approximates its fair value based on prevailing interest rates as of the balance sheet date. Scheduled principal repayments of the Senior Credit Facility are as follows:
| Principal Payments | ||||
| 2017 | $ | — | ||
| 2018 | 6,900 | |||
| 2019 | 6,900 | |||
| 2020 | 6,900 | |||
| 2021 | 2,300 | |||
| Total | $ | 23,000 | ||
The debt agreement contains two provisions that if deemed probable would create the recognition of an embedded feature; however, we do not believe either provision is probable.
Note 6 — Stockholders’ Equity
On March 3, 2015, the Company filed a $150,000 shelf registration statement on Form S-3 with the Securities and Exchange Commission (the “SEC”). This shelf registration statement became effective upon filing and allows the Company to sell securities, including common stock, preferred stock, depository shares, stock purchase contracts, warrants and units, from time to time at prices and on terms to be determined at the time of sale. On February 26, 2016, the Company filed a post-effective amendment to this registration statement, which allowed for its use by the Company when declared effective by the SEC’s staff on April 18, 2016.
In March 2017, the Company completed a public offering of 6,061 shares of its common stock at a price of $8.50 per share, which included the underwriters’ overallotment option to purchase additional shares. Net proceeds were approximately $47,750 after deducting underwriting discounts and offering expenses.
In September 2017, the Company completed a public offering of 17,864 shares of its common stock at a price of $5.15 per share, which included the underwriters’ overallotment option to purchase additional shares. Net proceeds were approximately $85,750 after deducting underwriting discounts and offering expenses.
March 31, 2022) usage. The following table summarizes our R&D expenses for the periods indicated (amounts are in thousands). deferred financing associated with the borrowings under the Athyrium Credit Agreement. Interest expense $0.2 million. Pharmakon Loan Agreement. We plan to finance our needs principally from the following: See “Risk Factors—Risks Relating to Our Business—Financial and Liquidity Risks” and “Risk Factors—Risks Relating to Our Business—Risks Relating to Drug Development and Commercialization—If we fail to obtain additional financing or acceptable partnership arrangements as and when needed, we may be unable to complete the development and commercialization of our products and product candidates or continue operations” in Part II, Item 1A of this report for further discussion of the risks related to obtaining additional capital. Athyrium Credit Agreement. Estimates During the quarter ended March 31, 2023, we evaluated our inventory levels and associated expiration dating relative to the latest sales forecasts for ORLADEYO and RAPIVAB and estimated those inventories at risk of obsolescence. Accordingly, we recorded an increase to the inventory valuation reserve of $0.2 million for a total reserve of $1.4 million as of March 31, 2023. include (i) fees paid to clinical research organizations (“CROs”) in connection with preclinical and toxicology studies and clinical trials; (ii) fees paid to investigative sites in connection with clinical trials; (iii) fees paid to contract manufacturers in connection with the production of our raw materials, drug substance, drug products, and product candidates; and (iv) professional fees. Research and Development Expenses Stock-Based Compensation reverse. 11.88% on the $200.0 million borrowings under the Athyrium Credit Agreement. The Pharmakon Loan Agreement uses the 3-month Secured Overnight Financing Rate (“SOFR”) as the initial benchmark rate. We do not use interest rate derivative instruments to manage exposure to interest rate changes. We ensure the safety and preservation of invested principal funds by limiting default risk, market risk and reinvestment risk. We reduce default risk by investing in investment grade securities. To become profitable, we, or our collaborative partners, must successfully manufacture and develop products and product candidates, receive regulatory Even if we are able to successfully commercialize our existing products, or to develop or otherwise acquire new commercially viable products, certain obligations we have to third parties, including, without limitation, our obligation to pay RPI and OMERS, as applicable, royalties on certain revenues from ORLADEYO and BCX10013 under the Royalty Purchase Agreements, may reduce the profitability of such products. process, and to receive regulatory approvals for the commercial sale of our product candidates. vendors, which could adversely impact the development and commercialization timeframes for our products and product candidates. sales activities of competitors; We are subject to various In addition, we are subject to the federal physician sunshine act and certain similar physician payment and drug pricing transparency legislation in various states. We are also subject to various federal and state laws pertaining to In addition, the research, manufacturing, distribution, sale and promotion of products are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services (“CMS”), other divisions of HHS, the diminish, and if we fail to secure the rights to patents of others, it could adversely affect our business. unsuccessful. generate revenues and achieve and sustain profitability. Our existing principal stockholders hold a substantial amount of our common stock and may be able to influence significant corporate decisions, which may conflict with the interest of other stockholders. President and Chief Executive OfficerThis Quarterly Report on Form 10-Q contains statements of a forward-looking nature relatingfuture events orhelp the future financial performance of BioCryst. Such statements are only predictions and the actual events or results may differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this report, as well as those discussed in other filings made by the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. See “Information Regarding Forward-Looking Statements.”Cautionary StatementThe discussion herein contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created in Section 21E. Forward looking statements regarding our financial condition andreader understand our results of operations that are based uponand financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and the accompanying notes to the financial statements and other disclosures included in this report (including the have been preparedsignificant unmet medical needs exist and an enzyme plays the key role in accordance with accounting principles generally accepted withinthe biological pathway of the disease. We integrate the disciplines of biology, crystallography, medicinal chemistry, and computer modeling to discover and develop small molecule pharmaceuticals through the process known as structure-guided drug design. In addition to these discovery and development efforts, our business strategy includes the efficient commercialization of these drugs in the United States (“U.S. GAAP”), as well as projectionsand certain other regions upon regulatory approval. By focusing on rare disease markets, we believe that we can more effectively control the costs of, and our strategic allocation of financial resources toward, post-approval commercialization.future. The preparationprevention of these financial statements requireshereditary angioedema (“HAE”) attacks. ORLADEYO is approved in the United States and multiple global markets for the prevention of HAE attacks in adults and pediatric patients 12 years and older.managementU.S. commercial infrastructure to make estimatessupport the launch and judgments that affectcontinued commercialization of ORLADEYO in the reported amountsUnited States and are continuing to build our commercial infrastructure to support launches in other markets. Based on proprietary analyses of assets, liabilities, revenuesHAE prevalence and expenses,market research studies with HAE patients, physicians, and related disclosurepayors in the United States and Europe, and two full years of contingent assetscommercialization experience with ORLADEYO in 2021 and liabilities.2022, we anticipate the global commercial market for ORLADEYO has the potential to reach a global peak of $1 billion in annual net ORLADEYO revenues. We evaluate our estimates on an ongoing basis. Our estimates are based on historical experience and on various other assumptions that are believedexpect at least 70 to be reasonable under the circumstances. The results80 percent of our estimates formrevenue at peak to come from the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.We operate in a highly competitive environment that involves a number of risks, some of which are beyond our control. WeUnited States. These expectations are subject to numerous risks common to biotechnology and biopharmaceutical companies, including risks inherent in our drug discovery, drug development and commercialization efforts, clinical trials, uncertainty of regulatory actions and marketing approvals, reliance on collaborative partners, enforcement of patent and proprietary rights, the need for future capital, competition associated with products, potential competition associated with our product candidates and retention of key employees. In order for any of our product candidates to be commercialized, it will be necessary for us, or our collaborative partners, to conduct clinical trials, demonstrate efficacy and safety of the product candidate to the satisfaction of regulatory authorities, obtain marketing approval, enter into manufacturing, distribution and marketing arrangements, and obtain market acceptance and adequate reimbursement from government and private insurers. We cannot provide assuranceuncertainties that we will generate significant revenues or achieve and sustain profitability in the future. In addition, we can provide no assurance that we will have sufficient funding to meet our future capital requirements. Statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report which are not historical facts are, or may constitute, forward-looking statements. Forward-looking statements involve known and unknown risks that could cause our actual results, performance, or achievements to differbe materially different. There can be no assurance that our commercialization methods and strategies will succeed, or that the market for ORLADEYO will develop in line with our current expectations. See “Risk Factors—Risks Relating to Our Business—Risks Relating to Drug Development and Commercialization—There can be no assurance that our or our partners’ commercialization efforts, methods, and strategies for our products or technologies will succeed, and our future revenue generation is uncertain” in Part II, Item 1A of this report for further discussion of these risks.expected results. The most significant known risks aresales of ORLADEYO for the three months ended March 31, 2023 is discussed under “Results of Operations” in this MD&A. Revenue from sales of ORLADEYO in future periods is subject to uncertainties and will depend on several factors, including the success of our and our partners’ commercialization efforts in the section entitled “Risk Factors.” AlthoughUnited States and elsewhere, the number of new patients switching to ORLADEYO, patient retention and demand, the number of physicians prescribing ORLADEYO, the rate of monthly prescriptions, reimbursement from third-party and government payors, the conversion of patients from our clinical trials and early access programs to commercial customers, our pricing strategy, and market trends. We are continuing to monitor and analyze this data as we believe the expectations reflectedcontinue to commercialize ORLADEYO. In addition, primarily because of typical first quarter requirements from payors for prescription reauthorization of specialty products, like ORLADEYO, that can temporarily move patients from paid drug to free product, copayment assistance and Medicare D cost sharing dynamics, ORLADEYO net revenue in the forward-looking statementsfirst quarter of 2023 was slightly less than the fourth quarter of 2022.reasonable, we cannot guarantee future results, levelspursuing oral medicines directed at other targets across the classical, lectin, and terminal pathways of activity, performance or achievements.the complement system, including C2, a critical upstream serine protease enzyme for activation of the classical and lectin pathways. We caution you not to place undue reliance on any forward-looking statements.
have developed potent, selective molecules targeting C2, which are currently in lead optimization.19numerousseveral factors, including those discussed in the prevalence and severity“Risk Factors” section in Part II, Item 1A of influenzathis report. For example, our revenues depend, in regions for which peramivir has receivedpart, on regulatory approval seasonalitydecisions for our products and product candidates, the effectiveness of influenza, effortour and our collaborative partners’ commercialization efforts, market acceptance of our products, particularly ORLADEYO, and the resources dedicated to peramivir’s commercialization, ongoing discussions with government agencies regarding future peramivir and/or galidesivir developmentour products and stockpiling procurement,product candidates by us and our collaborative partners, as well as entering into or modifying licensing agreements for our product candidates. Furthermore, revenues related to our collaborative development activities are dependent upon the progress toward, and the achievement of, developmental milestones by us or our collaborative partners.(and whether these expenses are reimbursable under government contracts), drug manufacturing, and clinical research activities, the ongoing requirements of our development programs, andthe costs of commercialization, the availability of capital and direction from regulatory agencies, which are difficult to predict.predict, and the factors discussed in the “Risk Factors” section in Part II, Item 1A of this report. Management may be able to control the timing and level of research and development and selling, general and administrative expenses, but many of these expenditures will occur irrespective of our actions due to contractually committed activities and/or payments.period to periodperiod-to-period comparisons are not necessarily meaningful, and you should not rely on them as an indication of future performance. Due to all of the foregoing factors, it is possible that our operating results will be below the expectations of market analysts and investors. In such event, the prevailing market price of our common stock could be materially adversely affected.OverviewWe are a biotechnology company that designs, optimizes and develops novel small molecule drugs that block key enzymes involved in the pathogenesis of diseases. We focus on oral treatments for rare diseases in which significant unmet medical needs exist and that align with our capabilities and expertise. We integrate the disciplines of biology, crystallography, medicinal chemistry and computer modeling to discover and develop small molecule pharmaceuticals through the process known as structure-guided drug design.GAAP.GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, judgments and the policies underlying these estimates on a periodic basis, as situations change, and regularly discuss financial events, policies, and issues with members of our audit committee and our independent registered public accounting firm. WeIn particular, we routinely evaluate our estimates and policies regarding revenue recognition, administration, inventory and manufacturing, taxes, stock-based compensation, research and development, consulting and other expenses and any associated liabilities.Recent Corporate HighlightsRAPIVAB/RAPIACTA/PERAMIFLU (peramivir injection)Peramivir (i.e., product sold or marketed Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the RAPIVAB, RAPIACTA,circumstances. The results of our estimates form the basis for making judgments about the carrying values of assets and PERAMIFLU trade names) is approvedliabilities that are not readily apparent from other sources. See “Critical Accounting Estimates” at the end of this MD&A for commercial salea description of accounting policies that we believe are the most critical to aid you in fully understanding and evaluating our reported financial results and that affect the more significant judgments and estimates that we use in the United States, Canada, Japan, Taiwan and Korea and has a pending Marketing Authorization Application (MAA) under review for treatmentpreparation of symptoms typical of influenza in adults 18 years and older in all 28 states of the European Union, Norway and Iceland. In September 2017, the FDA approved a sNDA for RAPIVAB extending its availability for the treatment of acute uncomplicated influenza to pediatric patients two years and older.In 2016, our Japanese partner, Shionogi, fulfilled a relatively large stockpiling order to the Japanese Government in advance of the 2016/2017 influenza season for which we recorded $5.7 million of net royalties. In the first quarter of 2017, we received $4.1 million of net royalties from the continued stockpiling of RAPIACTA by the Japanese Government. Unlike the royalties for commercial sales by Shionogi, the proceeds from these stockpiling sales to the Japanese Government are available to us for general corporate use and are not dedicated to satisfying non-recourse obligations under the PhaRMA Notes.
financial statements.20BCX7353In August 2016,had dosedannounced the enrollment of the first subjectpatient in the APeX-1 clinicalpivotal APeX-P trial evaluating ORLADEYO in pediatric HAE patients who are 2 to <12 years of BCX7353age.with HAE. APeX-1 was a 3-part dose ranging trial designed to evaluate the efficacy, safety, tolerability, pharmacokinetics (“PK”)12 years of age and pharmacodynamicsolder.September 5, 2017,February 24, 2023, we reported final results from our APeX-1 clinical trial in HAE patients. This final interim analysis evaluatedannounced that new data from all patients in Parts 1, 2the APeX-S and 3 andAPeX-2 clinical trials, which evaluated doses of BCX7353 62.5 mg (n=7), 125 mg (n=14), 250 mg (n=14) and 350 mg (n=18) QD versus placebo (n=22)ORLADEYO for 28 days. The pre-specified per-protocol interim analysis included data on a total of 67 subjects with confirmed Type 1 or Type 2 HAE completing 28 days of treatment. The percentage reductions by treatment group in the mean rate of independently-adjudicated angioedema attacks for the pre-defined effective dosing period (weeks 2 through 4) in BCX7353 treated subjects were: 62.5mg QD, 7% (p=.715); 125 mg QD, 73% (p<0.001); 250 mg QD, 46% (p=0.006) and 350 mg QD, 58% (p<0.001) compared to placebo. In the intent-to-treat (ITT) population, corresponding reductions by treatment group were: 62.5mg QD, 9% (p=0.687); 125 mg QD, 73% (p<0.001); 250 mg QD, 44% (p=0.014) and 350 mg QD, 45% (p=0.007) compared to placebo.Oral BCX7353 once-daily for 28 days was generally safe and well tolerated in subjects with HAE. No new clinically significant safety findings were seen in Part 3 of the trial. Overall, there was one serious adverse event (“AE”) of moderate gastrointestinal infection that was determined by the investigator not to be drug-related. As previously reported, study drug was discontinued before day 28 in three subjects in the BCX7353 350 mg treatment arm (due to an unrelated pre-existing liver disorder; drug-related gastroenteritis with liver disorder; and drug-related vomiting/abdominal cramps). The most common treatment-emergent AEs in descending order of frequency were the common cold, headache, diarrhea, nausea and abdominal pain. Gastrointestinal AEs were infrequent at the 125 mg and 62.5 mg dose levels, and there were no clinically significant laboratory abnormalities at these dose levels. The observed efficacy, dose response, PK, safety and tolerability profile of BCX7353 strongly support its advancement into Phase 3 development. Going forward, we have changed our nomenclature to a standardized “base” content reference rather than the total “salt” weight of the compound. This change in referencing nomenclature results in the previously described dose of 125 mg (“salt” reference) to be referred to as a 110 mg dose (“base” reference) in the future. This change reflects only the referencing terminology rather than a change in the dose of the compound.In the fourth quarter of 2017, we completed regulatory interactions with the FDA and EMA and reached agreement on the Phase 3 program requirements to support NDA and MAA submissions for prophylactic treatment of HAE, demonstrated sustained reductions in attack rates and improvement in quality of life among patients living with BCX7353. Based upon this agreement,HAE, highlighting its profile as a well-tolerated, effective and convenient prophylactic HAE therapeutic option. We also announced additional analyses from new real-world data that further demonstrate a meaningful reduction in attack rates experienced by patients on ORLADEYO, in addition to findings from a survey that underscore a significant disease and treatment burden among pediatric HAE patients, as reported by their caregivers.expectannounced that new data from the APeX-S clinical trial, which evaluated ORLADEYO for the prophylactic treatment of HAE, showed sustained reduction in disease burden for patients across multiple subgroups through 96 weeks of treatment.begindate. On February 21, 2023, we announced that recent dose-related observations in an ongoing BCX10013 nonclinical study will delay the clinical program.significant aspectsnet proceeds of approximately $26 million for other general corporate purposes. The Pharmakon Loan Agreement also provides for three additional term loan tranches in principal amounts of $50 million each, which we may request, at our option, on or prior to September 30, 2024. The maturity date of the programPharmakon Loan Agreement is April 17, 2028, the fifth anniversary of the Tranche A Closing Date. See “Note 12—Subsequent Events” in the first quarterNotes to Consolidated Financial Statements in Part I, Item 1 of 2018. Accordingly, we will initiate a 24-week randomized, double-blind, placebo-controlled Phase 3 clinical trial studying two doses of BCX7353 (“APeX-2”). Patients will roll-over into a 24 week safety extension. Separately, we will initiate a long-term safety trial (“APeX-S”), which will enroll at least 160 patients who will be randomized tothis report for additional information about our obligations under the two doses of BCX7353 included in APeX-2. Subjects will remain on study-drug for 48 weeks. In the fourth quarter of 2017, we received orphan drug status for BCX7353.On August 2, 2017, we announced the dosing of the first subject into ZENITH-1, a clinical trial studying up to three dosage strengths of a liquid formulation of BCX7353 given as a single oral dose for the acute treatment of angioedema attacks in patients with HAE. ZENITH-1 is a randomized, double-blind, placebo-controlled, adaptive dose-ranging trial of the efficacy, safety and tolerability of BCX7353 for treatment of acute angioedema attacks, and will enroll up to 60 subjects with HAE. Blinded study drug will be dosed as an oral liquid after onset of symptoms, for up to 3 attacks in each subject, with each subject receiving both BCX7353 (for 2 attacks) and placebo (for one attack) in a randomized sequence. The trial is structured with up to 3 consecutive cohorts testing single doses of 750 mg (from 12 to 36 subjects), 500 mg (up to 12 subjects) and 250 mg (up to 12 subjects), starting with 750 mg. Efficacy assessments include patient-reported composite visual analogue scale (“VAS”) scores, patient global assessment, change in symptoms, and use of rescue medication. Treatment effect will be assessed on accumulating results, beginning after 12 subjects have completed study in the first cohort (750 mg), by comparing the proportion of BCX7353-treated and placebo-treated attacks which have a stable or improved composite VAS at 4 hours post dose. Once a treatment effect is demonstrated, enrollment at the 500 mg dose level will commence. If treatment effect at the 500 mg dose level is similar to 750 mg dose level, the 250 mg dose cohort will be enrolled.ForodesineIn April 2017, Mundipharma obtained regulatory approval of Mundesine (forodesine hydrochloride) for the treatment of relapsed/refractory PTCL (Peripheral T-Cell Lymphoma) by the Ministry of Health, Labor and Welfare in Japan. Forodesine is a Purine Nucleoside Phosphorylase (“PNP”) inhibitor in development by Mundipharma, licensed from us under a world-wide license agreement, as a treatment for cancer. PNP is a purine salvage pathway enzyme. High doses of PNP inhibitors could be useful in the treatment of hematological malignancies. Mundipharma has received orphan drug status for forodesine.GalidesivirAfter discussions with the FDA, NIAID and BARDA, we have delayed the initiation of the galidesivir i.v. Phase 1 clinical trial. Based upon ongoing conversations, we expect the next step in galidesivir’s development will be to obtain agreement from the FDA on the nonclinical efficacy program before finalizing the Phase 1 clinical trial protocol design. Until these additional non-clinical studies are initiated or until additional funding is authorized, development activity under our existing U.S. Government contracts will continue to be restrained.
Pharmakon Loan Agreement.21September 30, 2017March 31, 2023 compared to the three months ended September 30, 2016)September 30, 2017,March 31, 2023, total revenues were $8.8$68.8 million as compared to $7.8$49.9 million for the three months ended September 30, 2016.March 31, 2022. The increase was primarily due to ORLADEYO net revenue, including royalties, of $68.4 million, an increase of $18.7 million.revenuecost of product sales was due to an increase in the third quarter of 2017,ORLADEYO sales as compared to 2016, resulted primarily from a $5.0 million milestone payment associated with the FDA approvalprior year period as well as the utilization of a sNDA for RAPIVAB extending its availabilityvalidation materials and product in the prior year period, the cost of which was expensed prior to product launch. Additionally, for the treatmentthree months ended March 31, 2023, an inventory valuation reserve of acute uncomplicated influenza$0.2 million was recorded for inventory, primarily ORLADEYO, that was at risk of expiration prior to pediatric patients two years and older and the recognition of $1.5 million of peramivir product sales to Green Cross. These increases were partially offset by a $3.1 million decrease in RAPIACTA royalties primarily due to lower government stockpiling sales by Shionogi.Revenues in the third quarter of 2017 included $1.5 million of peramivir product sales to Green Cross, $0.4 million of royalty revenue from SUL, Shionogi and Green Cross associated with sales of peramivir in the United States, Japan and Korea, $1.5 million of reimbursement of collaborative expenses from NIAID/HHS and BARDA/HHS under U.S. Government development contracts and $5.3 million associated with milestone revenue and collaborative revenue amortization from other corporate partnerships. Revenues in the third quarter of 2016 included $3.5 million of royalty revenue from Shionogi and Green Cross associated with sales of peramivir in the Japan, Korea and Taiwan, $3.8 million of reimbursement of collaborative expenses from NIAID/HHS and BARDA/HHS related to the development of galidesivir, and $0.4 million associated with collaborative revenue amortization from other corporate partnerships.increaseddecreased to $17.5$48.4 million for the third quarter of 2017three months ended March 31, 2023 from $14.1$65.4 million in 2016. The increase in 2017 R&D expenses, as compared to 2016, was due primarily to increased spending on the Company’s HAE portfolio, including the achievement of a performance-based stock option grant related to the successful completion of the APeX-1 clinical trial. These increases were partially offset by a decrease in the Company’s galidesivir expense under U.S. Government development contracts. General and administrative (“G&A”) expenses for the third quarter of 2017 increased to $3.3 million compared to $2.8 million in the third quarter of 2016. The increase wasthree months ended March 31, 2022, primarily due to reduced R&D investment following the achievement of a performance-based stock option grant related to the successful completiondiscontinuation of the APeX-1 clinical trial.Interest expense increased to $2.1 millionBCX9930 and BCX9250 programs announced in the third quarterDecember and November 2022, respectively. Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 R&D expenses by program: Avoralstat $ — $ 1,377 $ 320 $ 13,011 BCX7353 10,173 5,671 29,913 15,168 2nd generation kallikrein inhibitors 121 141 996 1,139 Galidesivir 1,173 3,462 3,466 7,213 Peramivir 1,005 1,017 3,911 4,679 Other research, preclinical and development costs 5,037 2,437 11,432 7,640 Total R&D expenses $ 17,509 $ 14,105 $ 50,038 $ 48,850 G&A Certain prior period amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on total R&D expenses.Three Months Ended March 31, 2023 2022 R&D expenses by program: Factor D program $ 26,185 $ 47,907 Berotralstat 9,501 8,217 FOP 704 2,875 Peramivir 407 408 Galidesivir 161 586 Other research, preclinical and development costs 11,430 5,367 Total R&D expenses $ 48,388 $ 65,360 first ninethree months of 2017 increased to $9.2ended March 31, 2023 were $47.9 million compared to $8.7$34.3 million of in the first ninethree months of 2016.ended March 31, 2022. The increase was primarily due to increased investment to expand and enhance the achievementU.S. commercial team and expanded international operations.a performance-based stock option grant related$75.0 million of the Term B Loan and the Term C Loan under the Athyrium Credit Agreement, which were funded on July 29, 2022.successful completionamortization of interest associated with the royalty financing obligations and $8.0 million of interest expense, including the amortization of the APeX-1 clinical trial.which isfor the three months ended March 31, 2022 included $19.6 million of non-cash interest expense due to the amortization of interest associated with the royalty financing obligations under the 2020 RPI Royalty Purchase Agreement (as defined in Note 6—Royalty Monetizations—ORLADEYO and Factor D Inhibitors” in the Notes to Consolidated Financial Statements in Part I, Item 1 of this report) and $4.2 million of interest expense, net of deferred financing amortization, associated with the Term A Loan under the Athyrium Credit Agreement.the non-recourse notes issued in conjunction with the non-dilutive RAPIACTA royalty monetization transaction in March 2011 and borrowings under the Senior Credit Facility, was $6.3 million in the first nine months of 2017, compared to $4.4 million in the first nine months of 2016.A mark-to-market loss of $1.9 million was recognized in the first nine months of 2017 related to ournet foreign currency hedge, compared to a mark-to-market losslosses of $7.4 million in the same period in the prior year, both resulting from changes in the U.S. dollar/Japanese yen exchange rate in the related time periods. In addition, we realized a currency exchange gain of $1.0 million and $0.8 million, respectively, in the first nine months of 2017 and 2016 related to the exercise of a U.S. dollar/Japanese yen currency option under our foreign currency hedge.Cash expenditures have exceeded revenues since our inception and we expect our 2017 operating expenses to exceed our 2017 revenues. contracts for RAPIVAB and galidesivir; and to a lesser extent, the PhaRMA Notes and the Senior Credit Facility financings. To date, we have been awarded a BARDA/HHS RAPIVAB development contract totaling $234.8 million, which expired on June 30, 2014, a NIAID/HHS galidesivir development contract totaling $39.5 million, which is ongoing, and a BARDA/HHS galidesivir development contract totaling $39.1 million, which is also ongoing. The total amount of NIAID/HHS and BARDA/HHS galidesivir funding obligated under awarded options is $39.5 million and $20.6 million, respectively. We may issue securities through private placement transactions or registered public offerings pursuant to a registration statement filed with the SEC.contracts. In addition to the above, we have previously received funding from other sources, including other collaborative and other research and development agreements;agreements, government grants;grants, equipment lease financing;financing, facility leases;leases, research grants;grants, and interest income on our investments.September 30, 2017,March 31, 2023, we had net working capital of $106.1$405.7 million, an increasea decrease of approximately $93.5$5.3 million from $12.6$411.0 million at December 31, 2016.2022. The increasedecrease in working capital was principallyprimarily due to $133.5 million of proceeds from our March 2017 and September 2017 public offerings of common stock, partially offset by our normal operating expenses associated with the development of our product candidates.candidates and commercialization of ORLADEYO. Our principal sources of liquidity at September 30, 2017March 31, 2023 were approximately $117.8$155.1 million in cash and cash equivalents and approximately $48.4$243.0 million in investments considered available-for-sale,available-for-sale.$2.0$26 million for other general corporate purposes. The Pharmakon Loan Agreement also provides for three additional term loan tranches in U.S. Government receivables. We anticipateprincipal amounts of $50 million each, which we may request, at our cash and investments will fundoption, on or prior to September 30, 2024. The maturity date of the Pharmakon Loan Agreement is April 17, 2028. See “Note 12—Subsequent Events” in the Notes to Consolidated Financial Statements in Part I, Item 1 of this report for additional information about our operations at least throughobligations under the third quarter of 2019.third partythird-party costs and headcount, leasing scientific equipment and facilities, contracting with other parties to conduct certain research and development projects, and using consultants. We expect to incur additional expenses, potentially resulting in significant losses, as we continue to pursue our research and development activities, commercialize ORLADEYO, and begin to build a commercial infrastructure.hire additional personnel. We may incur additional expenses related to the filing, prosecution, maintenance, defense, and enforcement of patent and other intellectual property claims and additional regulatory costs as our clinical programs advance through later stages of development. The objective of our investment policy is to ensure the safety and preservation of invested funds, as well as maintainingto maintain liquidity sufficient to meet cash flow requirements. We place our excess cash with high credit quality financial institutions, commercial companies, and government agencies in order to limit the amount of our credit exposure. We have not realized any significant losses on our investments.23financing and future financing;existing and executing new contracts with the U.S. Government; andpayments undercurrent or future collaborative and licensing agreements with corporate partners.and timing of funding we receive from existing U.S. Government contracts for galidesivir, the amount of funding or assistance, if any, we receive from new U.S. Government contracts or other new partnerships with third parties for the development and and/or commercialization of our products and product candidates, the progress and results of our current and proposed clinical trials for our most advanced product candidates, the progress made in the manufacturing of our lead product candidates, the success of our commercialization efforts for, and market acceptance of, our products, and the overall progression of our other programs.With The impact of the funds available at September 30, 2017,ongoing COVID-19 pandemic on one or more of the foregoing factors could negatively affect our revenues, expenses, and cash utilization rate.theseour financial resources will be sufficient to fund our operations for at least through the third quarter of 2019. Wenext 12 months. However, we have sustained operating losses for the majority of our corporate history and expect that our 20172023 expenses will exceed our 20172023 revenues. We expect to continue to incur operating losses and negative cash flows until revenues reach a level sufficient to support ongoing operations. Our liquidity needs will largely be largely determined by the success of operations in regardsregard to the successful commercialization of our products and the future progression of our product candidates in the future.candidates. We also may considerregularly evaluate other plansopportunities to fund future operations, beyond the third quarter of 2019 including: (1) securing or increasing U.S. Government funding of our programs, including obtaining procurement contracts; (2) out-licensing rights to certain of our products or product candidates, pursuant to which the we would receive cash milestones; (3)milestone payments; (2) raising additional capital through equity or debt financings or from other sources; (4)sources, including royalty or other monetization transactions; (3) obtaining additional product candidate regulatory approvals, which would generate revenue, milestonesmilestone payments and cash flow; (5)(4) reducing spending on one or more research and development programs, including by discontinuing development; and/or (6)(5) restructuring operations to change our overhead structure.structure; and/orstock purchase contracts, warrants, debt securities, and units, through private placement transactions or registered public offerings. Our future liquidity needs, and our ability to address those needs, will largely be determined by the success of our products and product candidatescandidates; the timing, scope, and magnitude of our research and development and commercial expenses; and key developmentdevelopments and regulatory events and our decisions in the future.•our ability to perform under our government contracts and receive reimbursement, and receive stockpiling procurement contracts;•the magnitude of work under our government contracts;•the progress and magnitude of our research, drug discovery and development programs;•changes in existing or securing additional collaborative relationships or government contracts;•our ability to establish additional collaborative relationships with academic institutions, biotechnology or pharmaceutical companies and governmental agencies or other third parties;•the extent to which our partners, including governmental agencies, will share in the costs associated with the development of our programs or run the development programs themselves;•our ability to negotiate favorable development and marketing strategic alliances for certain product candidates or a decision to build or expand internal development and commercial capabilities;•successful commercialization of marketed products by either us or a partner;•the scope and results of preclinical studies and clinical trials to identify and develop product candidates;•our ability to engage sites and enroll subjects in our clinical trials;•the scope of manufacturing of our product candidates to support our preclinical research and clinical trials;•increases in personnel and related costs to support the development and commercialization of our product candidates;• NDA filings;24•competitive and technological advances;•the time and costs involved in obtaining regulatory approvals; •post-approval commitments for RAPIVAB and other products that receive regulatory approval; and•the costs involved in all aspects of intellectual property strategy and protection including the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims.We expect that we will be required to raise additional capital to complete the development and commercialization of our currentproducts and product candidates, and we may seek to raise capital in the future.future, including to take advantage of favorable opportunities in the capital markets. Additional funding whether through additional sales of equity or debt securities, collaborative or other arrangements with corporate partners or from other sources, including governmental agencies in general and existing government contracts specifically, may not be available when needed or in the form or on terms acceptable to us. The issuance of preferred or common stock or convertible securities, with terms and prices significantly more favorable than those of the currently outstanding common stock, could have the effect of diluting or adversely affecting the holdings or rights of our existing stockholders. In addition, collaborative arrangements may require us to transfer certain material rights to such corporate partners. Insufficient funds may require us to delay, scale back or eliminate certain of our research and development programs. Our future working capital requirements, including the need for additional working capital, will largely be largely determined by the advancement of our portfolio of product candidates as well as rateand the commercialization of reimbursement by U.S. Government agencies of our galidesivir expenses and any future decisions regarding the future of the RAPIVAB and galidesivir programs, including those relating to stockpiling procurement.ORLADEYO. More specifically, our working capital requirements will be dependent on the number, magnitude, scope and timing of our development programs; regulatory approval of our product candidates; obtaining funding from collaborative partners; the cost, timing and outcome of regulatory reviews, regulatory investigations, and changes in regulatory requirements; the costs of obtaining patent protection for our product candidates; the timing and terms of business development activities; the rate of technological advances relevant to our operations; the efficiency of manufacturing processes developed on our behalf by third parties; the timing, scope and magnitude of commercial spending; and the level of required administrative support for our daily operations. Senior Credit FacilityPharmakon Loan Agreement could cause us to be unable to pursue business opportunities that we or our stockholders may consider beneficial without the lender’slenders’ permission or without repaying all Senior Credit Facility obligations.obligations outstanding under the Pharmakon Loan Agreement. These covenants limit our ability to, among other things, convey, sell, lease, license, transfer or otherwise dispose of certain parts of our business or property; change the nature of our business; liquidate or dissolve; enter into certain changeassets; engage in control or acquisitionmergers, acquisitions, and similar transactions; incur or assume certain debt;additional indebtedness; grant certain types of liens on our assets; modify, liquidate or transfer assets in certain collateral accounts;liens; make investments; pay dividends or make distributions or certain distributions to our stockholders; make certain investments;other restricted payments in respect of equity;transactions with affiliates; and modify existing debt or collaboration arrangements.contracts. A breach of any of these covenants could result in an event of default under the Senior Credit Facility.Financial Outlook for 2017Based upon our development plans, expected operations and our awarded government contracts,Pharmakon Loan Agreement. As of March 31, 2023, we expect 2017 operating cash usagewere in compliance with the covenants to be in the upper half of our previously disclosed range of $30 to $50 million, and expect our total 2017 operating expenses to be in the upper half of our previously disclosed range of $53 to $73 million. Our operating expense range excludes equity-based compensation expense due to the difficulty in accurately projecting this expense as it is significantly impacted by the volatility and price of the Company’s stock, as well as vesting of the Company’s outstanding performance-based stock options. Our operating cash forecast excludes any impact of our royalty monetization, hedge collateral posted or returned, and any other non-routine cash outflows or inflows. Our ability to remain within our operating expense and operating cash target ranges iswhich we were then subject to multiple factors, including unanticipated or additional general development and administrative costs and other factors described under the Risk Factors located elsewhere in this report.Off-Balance Sheet ArrangementsAs of September 30, 2017, we do not have any unconsolidated entities or off–balance sheet arrangements.PoliciesNote“Note 1—Significant Accounting Policies and Concentrations of Risk” in the Notes to Consolidated Financial Statements in Part I, Item 1 to our consolidated financial statements included in our 2016 Annual Report on Form 10-K for the year ended December 31, 2016,of this report, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our financial statements.25consist of peramivir work in process, which is valuedprimarily relate to ORLADEYO. Additionally, our inventory includes RAPIVAB and peramivir.andor estimated net realizable value usingvalue. We determine the first-in, first-out (i.e., FIFO) method. Costcost of our inventories, which includes amounts related to materials, labor, manufacturing overhead and shipping and handling costs. costs on a first-in, first-out (FIFO) basis. Raw materials and work-in-process include all inventory costs prior to packaging and labeling, including raw material, active product ingredient, and the drug product. Finished goods include packaged and labeled products.incurred.incurred, regardless of the timing of the invoice. This accrual process involves reviewing open contracts and purchase orders, communicating with our applicable Company personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on the facts and circumstances, known to us.which can include assumptions such as expected patient enrollment, site activation and estimated project duration. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued expenses include:•fees paid to Contract Research Organizations (“CROs”) in connection with preclinical and toxicology studies and clinical trials;•fees paid to investigative sites in connection with clinical trials;•fees paid to contract manufacturers in connection with the production of our raw materials, drug substance and product candidates; and•professional fees.Revenue RecognitionWe recognize revenues from collaborative As of March 31, 2023 and other research and development arrangements and product sales. Revenue is realized or realizable and earned when allDecember 31, 2022, the carrying value of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the seller’s price to the buyer is fixed or determinable; and (iv) collectability is reasonably assured.Collaborative and Other Research and Development Arrangements and RoyaltiesRevenue from license fees, royalty payments, event payments, and research and development fees are recognized as revenue when the earnings process is complete and we have no further continuing performance obligations or we have completed the performance obligations under the terms of the agreement. Fees received under licensing agreements that are related to future performance are deferred and recognized over an estimated period determined by management based on the terms of the agreement and the products licensed. In the event a license agreement contains multiple deliverables, we evaluate whether the deliverables are separate or combined units of accounting. Revisions to revenue or profit estimates as a result of changes in the estimated revenue period are recognized prospectively. Under certain of our license agreements, we receive royalty payments based upon our licensees’ net sales of covered products. We recognize royalty revenues when we can reliably estimate such amounts and collectability is reasonably assured. Royalty revenue paid by Shionogi onaccrued expenses approximates their product sales is subject to returns.For arrangements that involve the delivery of more than one element, each product, service and/or right to use assets is evaluated to determine whether it qualifies as a separate unit of accounting. This determination is based on whether the deliverable has “stand-alone value” to the customer. The consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price of each deliverable. The estimated selling price of each deliverable is determined using the following hierarchy of values: (i) vendor-specific objective evidence of fair value (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of selling price (“BESP”). The BESP reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis. In most cases we expectdue to use TPE or BESP for allocating consideration to each deliverable. The consideration allocated to each unit of accounting is recognized as the related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation.
their short-term settlement.26In June 2015, we entered into a License Agreement (the "SUL Agreement") granting SUL and its affiliates worldwide rights, excluding Israel, Japan, Korea and Taiwan, to develop, manufacture and commercialize RAPIVAB. The SUL Agreement provides for various types of payments, including a non-refundable upfront fee, milestone payments, and future royalties. Analysis of the SUL Agreement identified three deliverables: (i) license rights, (ii) inventory and (iii) regulatory support to obtain Canadian and EU marketing approvals. We received an upfront payment of $33.7 million from SUL of which $7.0 million was determined to be contingent upon EU marketing approval and will be deferred until that time. Approximately $21.8 million of the upfront payment was allocated to the license rights and recognized as revenue in the second quarter. Approximately $3.7 million of the upfront payment was allocated to the sale of inventory and was recognized in the third quarter when the inventory transfer was completed. Approximately $1.2 million of the revenue from the SUL Agreement will be recognized ratably over the expected period of involvement in these regulatory support activities. Milestone payments are recognized as licensing revenue upon the achievement of specified milestones if (i) the milestone is substantive in nature and the achievement of the milestone was not reasonably assured at the inception of the SUL Agreement; and (ii) the fees are non-refundable. Any milestone payments received prior to satisfying these revenue recognition criteria are recorded as deferred revenue. During the first nine months of 2017, we received a $2.0 million milestone payment related to the approval of RAPIVAB by Health Canada and a $5.0 million milestone payment associated with the FDA approval of a sNDA for RAPIVAB extending its availability for the treatment of acute uncomplicated influenza to pediatric patients two years and older. We evaluated each event based payment under the provisions of ASU 2010-17, Milestone Method of Revenue Recognition, and determined that each event based payment met the criteria to be considered substantive and represents a milestone under the milestone method of accounting. Under the terms of the SUL Agreement, we may receive an additional $5.0 million payment related to the successful marketing approval by the EMA for an adult indication in the EU. No event-based payments were achieved during the first nine months of 2016. Reimbursements received for direct out-of-pocket expenses related to research and development costs are recorded as revenue in the income statement rather than as a reduction in expenses. Under our contracts with BARDA/HHS and NIAID/HHS, revenue is recognized as reimbursable direct and indirect costs are incurred.costs.costs, as well as termination fees and other commitments associated with discontinued programs. Most of our manufacturing and clinical and preclinical studies are performed by third-party CROs. Costs for studies performed by CROs are accrued by us over the service periods specified in the contracts, and estimates are adjusted, if required, based upon our on-goingongoing review of the level of services actually performed. such as AECOM, IRL, and UAB, which require fees related to sublicense agreements or maintenance fees. We expense sublicense payments as incurred unless they are related to revenues that have been deferred, in which case the expenses are deferred and recognized over the related revenue recognition period. We expense maintenance payments as incurred.sub-licensesublicense payments paid to our academic partners upon receipt of consideration from various commercial partners, and other consideration paid to our academic partners for modification to existing license agreements. These deferred expenses would not have been incurred without receipt of such payments or modifications from our commercial partners and are being expensed in proportion to the related revenue being recognized. We believe that this accounting treatment appropriately matches expenses with the associated revenue.27hasis deemed to have occurred. Significant management judgment is also required in determining estimates of future stock priceCurrency Hedge AgreementIn connection with our issuancePhaRMA Notes, we entered into a foreign Currency Hedge Agreementrelated liabilities will be paid. This requires us to hedge certain risks associated with changes inestimate the total amount of future royalty payments to be generated from product sales over the life of the agreement. We impute interest on the carrying value of each of the Japanese yen relativeroyalty financing obligations and record interest expense using an imputed effective interest rate. We reassess the expected royalty payments each reporting period and account for any changes through an adjustment to the U.S. dollar. Undereffective interest rate on a prospective basis. The assumptions used in determining the Currency Hedge Agreement,expected repayment term of the debt and amortization period of the issuance costs requires that we havemake estimates that could impact the right to purchase dollars and sell yen at a ratecarrying value of 100 yen per dollar foreach of the liabilities, as well as the periods over which we may be required to pay a premium in each year from 2018 through 2020, provided the Currency Hedge Agreement remains in effect. A payment of $2.0 millionassociated issuance costs will be required if, on May 18amortized. A significant increase or decrease in forecasted net sales could materially impact each of the relevant year,liability balances, interest expense and the U.S. dollartime periods for repayment.worth 100 yen or less as determined in accordance with the Currency Hedge Agreement. In conjunction with establishing the Currency Hedge Agreement, we will be required to post collateral to the counterparty, which may cause us to experience additional quarterly volatilityused in our financial results. We will not be required at any time to post collateral exceeding the maximum premium payments remaining payable under the Currency Hedge Agreement. As of September 30, 2017, the maximum amount of hedge collateral we may be required to post is $5.9 million.The Currency Hedge Agreement does not qualifyaccounting for hedge accounting treatmentincome taxes. Under this method, deferred tax assets and therefore mark to market adjustments will be recognized in our Consolidated Statements of Comprehensive Loss. Mark to market adjustmentsliabilities are determined by quoted prices in marketsbased on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are not actively traded and for which significant inputsexpected to be in effect when the differences are observable directly or indirectly, representing the Level 2 in the fair value hierarchy as defined by generally accepted accounting principles (“U.S. GAAP”). We are also requiredexpected to post collateral in connection with the mark to market adjustments based on defined thresholds. As of September 30, 2017, no collateral was posted under the agreement.TaxInformation Regarding Forward-Looking StatementsThis filing contains forward-looking statements within the meaning21E174 of the Securities Exchange ActInternal Revenue Code of 1934,1986, as amended which(“IRC”), no longer permit an immediate deduction for research and development expenditures in the tax year that such costs are subject toincurred. Instead, these IRC Section 174 development costs must now be capitalized and amortized over either a five- or 15-year period, depending on the “safe harbor” created in Section 21E. All statements other than statementslocation of historical facts contained in this filing are forward-looking statements. These forward-looking statements can generally be identified by the use of words such as “may,” “will,” “intends,” “plans,” “believes,” “anticipates,” “expects,” “estimates,” “predicts,” “potential,” the negative of these words or similar expressions. Statements that describe our future plans, strategies, intentions, expectations, objectives, goals or prospects are also forward-looking statements. Discussions containing these forward-looking statements are principally contained in “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as any amendments we make to those sections in filingsactivities performed. The new amortization period begins with the SEC. These forward-looking statements include,midpoint of any taxable year that IRC Section 174 costs are first incurred, regardless of whether the expenditures were made prior to or after July 1, and runs until the midpoint of year five for activities conducted in the United States or year 15 in the case of development conducted on foreign soil.are not limited to, statements about:•the preclinical development, clinical development, commercialization, or post-marketing studies of our product candidates and products, including our HAE program, peramivir, galidesivir, and early stage discovery programs;•the potential funding from our contracts with NIAID/HHS and BARDA/HHS for the development of galidesivir;•the potential for government stockpiling orders of peramivir, additional regulatory approvals of peramivir or milestones, royalties or profit from sales of peramivir by us or our partners;•the potential use of peramivir as a treatment for H1N1, H5N1, and H7N9 or other strains of influenza;•the implementation of our business model, strategic plans for our business, products, product candidates and technology;28•our ability to establish and maintain collaborations or out-license rights to our product candidates;•plans, programs, progress and potential success of our collaborations, including SUL for peramivir, Mundipharma for forodesine and Shionogi and Green Cross for peramivir in their territories;•Royalty Sub’s ability to service its payment obligations in respect of the PhaRMA Notes;•the Currency Hedge Agreement entered into by us in connection with the issuance by Royalty Sub of the PhaRMA Notes;•the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;•our ability to operate our business without infringing the intellectual property rights of others;•estimates of our expenses, revenues, capital requirements, annual cash utilization, and our needs for additional financing;•our ability to continue as a going concern;•the timing or likelihood of regulatory filings or regulatory agreements, deferrals, and approvals;•our ability to raise additional capital to fund our operations or repay our recourse debt obligations;•our ability to comply with the covenants as set forth in the agreements governing our debt obligations;•our financial performance; and•competitive companies, technologies and our industry.These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievementsyet required to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors.” Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, industry and future growth. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.arewere subject to interest rate risk on our investment portfolio and borrowings under our fixed-interest rate PhaRMA NotesAthyrium Credit Agreement through its payoff and our variable-interest rate Senior Credit Facility.termination on April 17, 2023 and, subsequent to that date, the Pharmakon Loan Agreement. The interest rate applicable to our borrowingsAthyrium Term Loans under the PhaRMA NotesAthyrium Credit Agreement accrued interest each quarter at a rate equal to the three-month LIBOR rate, which was capped to be no less than 1.75% and no more than 3.50% (“LIBOR”), plus 8.25% or, for each quarterly interest period in which a PIK Interest Payment is fixed at 14% and the Senior Credit Facility bears a floating interest rate based on LIBOR. Increasesmade, LIBOR plus 10.25%. Accordingly, increases in interest rates could therefore increasehave increased the associated interest payments that we arewere required to make on the Senior Credit Facility.Athyrium Term Loans. As of September 30, 2017, our Senior Credit Facility hadMarch 31, 2023, interest was accrued at an interesteffective rate of 9.2%.29The majoritytransactions occurrevenues and expenses are denominated in U.S. dollarsdollars. Our commercial sales in Europe are primarily denominated in Euros and the British Pound. We also had other transactions denominated in foreign currencies during the three months ended March 31, 2023, primarily related to operations in Europe, contract manufacturing and ex-U.S. clinical trial activities, and we expect to continue to do so. Our royalties from Torii are derived from Torii’s sales of ORLADEYO in Japan. Those sales are denominated in Japanese yen and converted into U.S. dollars for purposes of determining the royalty owed to us. Our limited foreign currency exposure relative to our European operations is to fluctuations in the Euro, British Pound, Swiss Franc, Danish Krone, and Swedish Krona. Additionally, we have initiated operations in Canada and have foreign currency exposure to the Canadian Dollar.significant operating subsidiaries or significant investmentsnot engaged in foreign countries. Therefore,currency hedging during the three months ended March 31, 2023; however, we may do so in the future.not subject to significant foreign currency exchange riskpresented in our normal operations.In connection with the issuance by Royalty Sub of the PhaRMA Notes, we entered into a Currency Hedge Agreement to hedge certain risks associated withthis report. Significant adverse changes in the valueinflation could negatively impact our future results of the Japanese yen relative to the U.S. dollar. Under the Currency Hedge Agreement, we are required to post collateral based on our potential obligations under the Currency Hedge Agreement as determined by periodic mark to market adjustments. Provided the Currency Hedge Agreement remains in effect, we may be required to pay an annual premium in the amount of $2.0 million from May 2018 through May 2020. Such payment will be required if, in May of the relevant year, the spot rate of exchange for Japanese yen-U.S. dollars (determined in accordance with the Currency Hedge Agreement) is such that the U.S. dollar is worth 100 yen or less.BioCryst Pharmaceuticals, Inc.the Company required to be disclosed in our periodic filings under the Exchange Act is recorded, processed, summarized and reported in a timely manner under the Exchange Act. We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2017,March 31, 2023, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it underSeptember 30, 2017March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.liquidity, prospects or results of operations, along with all of the other information included in our other filings with the Securities and Exchange Commission,SEC, before deciding to buymaking an investment decision regarding our common stock.approval,approvals, and successfully commercialize our products and/or enter into profitable agreementscommercialization arrangements with other parties. It could be several years, if ever,take longer than expected before we receive, or we may never receive, significant revenue from any current or future license agreements or significant revenues directly from product sales. 30productsproduct candidates through the various stages of development, especially through the clinical trial process. good the clinical trials, unlikely to help advance a product to the point of a meaningful collaboration, or unlikely to have reasonable commercial potential. We may suffer significant setbackspivotal pre-clinicalour preclinical studies and clinical trials (e.g. galidesivir, BCX7353, other kallikrein inhibitors and our other rare disease product candidates), even after earlier clinical trials show promising results. The development of our product candidates, including our clinical trials, may not be adequately designed or executed, which could affect the potential outcome and analysis of study results. Any of our product candidates may produce undesirable side effects in humans. The pre-clinical and clinical data from our product candidates could cause us or regulatory authorities to interrupt, delay, modify or halt preclinical or clinical trials of a product candidate. Undesirable or inconclusive data or side effects in humans could also result in the FDA or foreign regulatory authorities (including, e.g., the EMA, the Ministry of Health, Labor and Welfare (“MHLW”) in Japan or the United Kingdom’s Medicines and Healthcare Regulatory Agency (“MHRA”)) refusing to approve thea product candidate for any targeted indications.indications or imposing restrictions or warnings that could impact development or the ultimate commercial viability of a product candidate. In addition, the FDA or otherforeign regulatory agenciesauthorities may determine that study data from our product candidates necessitates additional studies or study designs which differ from our planned development strategy, and such regulatory agenciesauthorities may also require patient monitoring and testing or may implement restrictions or other conditions on our development activities, any of which could materially impact the cost and timing of our planned development strategy. We, our partners, the FDA, or foreign regulatory authorities have previously, and may again in the future, pause enrollment in, suspend, or terminate clinical trials at any time if we or they believe the trial participants face unacceptable health risks. Clinical trials may fail to demonstrate that our product candidates are safe or effective and have acceptable commercial viability. Regulatory authorities may interrupt, delay or halt clinical trials for a product candidate for any number of reasons.successfully complete the clinical trialsdevelopment process successfully is dependent upon many factors, including, but not limited to:•our ability to find suitable clinical sites and investigators to enroll patients;•the ability to maintain contact with patients to provide complete data after treatment;•our product candidates may not prove to be either safe or effective;•clinical protocols or study procedures may not be adequately designed or followed by the investigators;•formulation improvements may not work as expected, which could negatively impact commercial demand for our product candidates;•manufacturing or quality control problems could affect the supply of product candidates for our trials; and•delays or changes in our planned development strategy, the regulations or guidelines, or other unexpected conditions or requirements of government agencies.orand our partners incur substantial expense for, and devote significant time to, preclinical testing and clinical trials, yet we cannot be certain that the tests and trials will ever result in the commercial sale of a product. For example, clinical trials require adequate supplies of drug and sufficient patient enrollment. Lack of adequate drug supply or delays in patient enrollment, including for APeX-2, APeX-S and ZENITH-1, can result in increased costs and longer development times. Even if we or our partners successfully complete clinical trials for our product candidates, we or our partners might not file the required regulatory submissions in a timely manner andor may not receive regulatory approval for the product candidates.We focus on rare diseases, which may create additional risks and challenges.Because we focus on developing drugs as treatments for rare diseases, we may seek orphan drug, breakthrough therapy or fast track designations for our product candidates in the United States or the equivalent designations elsewhere in the world. Often, regulatory agencies have broad discretion in determining whether or not to grant such designations. We cannot guarantee that we will be able to receive orphan drug status from the FDA or equivalent regulatory designations elsewhere. We also cannot guarantee that we will obtain breakthrough therapy or fast track designation, which may provide certain potential benefits such as more frequent meetings with the FDA to discuss the development plan, intensive guidance on an efficient drug development program, and potential eligibility for rolling review or priority review. Even if we are successful in obtaining any such designation by the FDA or other regulatory agency for our product candidates, such designations may not lead to faster development or regulatory review or approval, and it does not increase the likelihood that our product candidates will receive marketing approval. We may not be able to obtain or maintain such designations for our product candidates, and our competitors may obtain these designations for their product candidates, which couldin either case would adversely impact or preclude our ability to developgenerate any revenues from product sales or licensing arrangements. In addition, any product candidate, if approved, may be subject to restrictions on labeling, marketing, distribution, prescribing, and commercialize our product candidates or compete with such competitors,use, which maycould adversely impact our business, financial condition or resultsthe sales of operations.
such product.31Although we have received Sakigake designation for BCX7353 in Japan, we may not experience a faster development, review or approval process compared to the conventional process.Our clinical trials may not adequately show that our product candidates are safe or effective.Progression•discovery of compounds that cause or enable biological reactions necessary for the progression of the disease or disorder, called enzyme targets;•licensing or designing of enzyme inhibitors for development as product candidates;•execution of certain preclinical studies and late-stage development for our compounds and product candidates;•management of our clinical trials, including medical monitoring and data management;•execution of additional toxicology studies that may be required to obtain approval for our product candidates;•formulation improvement strategies and methods; and•manufacturing the starting materials and drug substance required to formulate our products and the product candidates to be used in our clinical trials, toxicology studies and any potential commercial product.manageother services (including clinical operation services) in connection with our clinical trials, provide medical writing services, or assist with our regulatory function breachedbreach their obligations to us, or perform their services inconsistent with industry standards, and not in accordanceor fail to comply with the required regulations,regulatory requirements, this would delay or prevent both the development of our product candidates and the availability of any potential commercial product.(“cGLP”), current Good Manufacturing Practices (“cGMP”) and current Good Clinical Practices, (“cGCP”), and comparable foreign standards. We do not have control over compliance with these regulations by these providers. Consequently, if these practices and standards are not adhered to by these providers, the development and commercialization of our product candidates could be delayed. If any of the foregoing risks areis realized, our business, financial condition and results of operations could be materially adversely affected.manufacturingcontrol over their decisions;manufacturers tovendors in the manufacture and distribution of our product,products, product candidates and the materials for our products and product candidates. Often, especially early in the development and commercialization process, we have only one source for manufacturing. If we cannot rely on existing third-party manufacturers,vendors, we will be required to incur significant costs and potential delays in finding new third-party manufacturers.have limited manufacturing experience and only a small scale manufacturing facility. We currently rely upon a very limited number ofdepend on third-party vendors, including third-party manufacturers, todistributors, and specialty pharmacies, in the manufacture the materials required forand distribution of our product,products, product candidates, and most of the preclinicalmaterials for our products and clinical quantities of our product candidates. Often, especially in the early development and commercialization process, we have only one or limited sources for a particular product or service, such as manufacturing and/or distribution. We depend on these third-party manufacturersvendors to perform their obligations in a timely manner and in accordance with applicable governmental regulations. Our third-party vendors, particularly our third-party manufacturers and distributors, each of which may be the only manufacturervendor we have engaged for a particular product, product candidate, or service or in a particular region, may encounter difficulties with meeting our requirements, including, but not limited to, problems involving:involving, as applicable:32•product liability claims or recalls of commercial product;•difficulties in scaling production to commercial and validation sizes;•interruption of the delivery of materials required for the manufacturing process;•scheduling of plant time with other vendors or unexpected equipment failure;•potential catastrophes that could strike their facilities or have an effect on infrastructure;• drug substance or products that could affect availability of product for our clinical trials or future commercialization;•poor quality control and assurance or inadequate process controls; and•lack of compliance or cooperation with regulations and specifications or requests set forth by the FDA or other foreign regulatory agencies, particularly associated with peramivir, BCX7353, galidesivir and our early stage compounds.These contract manufacturers may not be able to manufacture the materials required for our products or product candidates at a cost or in quantities necessary to make them commercially viable. We also have no control over whetherOur raw materials, drug substances, products, and product candidates are manufactured by a limited group of suppliers, including some at a single facility. If any of these suppliers were unable to produce these items, this could significantly impact our supply of products and product candidate material for further preclinical testing and clinical trials. Our third-party manufacturers breach their agreements with us or whether theyalso may terminate or decline to renew agreements with us. To date, our third-party manufacturers have metnot meet our manufacturing requirements, but they may not continue to do so.requirements. Furthermore, changes in the manufacturing process or procedure, including a change in the location where the drug is manufactured or a change of a third-party manufacturer, may require prior review and approval in accordance with the FDA’s cGMP and comparable foreign requirements. This review may be costly and time-consuming and could delay or prevent the launch of a product. The FDA or similar foreign regulatory agenciesauthorities may at any time implement new standards, or change their interpretation and enforcement of existing standards, for manufacture, packagingthe Companyus and could result in a delay or shortage of product.manufacturing or other contractthird-party relationships, or enter into new agreements with additional manufacturersthird parties on commercially reasonable terms, or at all, or if there is poor manufacturing or distribution performance or failure to comply with any regulatory agency on the part of any of our third-party manufacturers,vendors, we may not be able to complete development of, seekobtain timely approval of, or market,commercialize our products and product candidates.Our raw materials,substances,development and product candidates are manufacturedcommercialization. In addition, commercialization of our products is subject to further risks and may be negatively impacted by a number of factors, including, but not limited groupto, the following:suppliers, including someour products may not be available timely, at a single facility. If anyall, or in sufficient amounts;these suppliers were unablemarketing and commercialization efforts for our products by us or our partners;produce these items, this could significantly impact other available therapies;supplypricing and reimbursement strategy may not be effective;product candidate material for further preclinical testingimports or alternative products;clinical trials.if any, may be reduced.manufacturingsales organizations. In addition, most of our competitors have greater experience than we do in conducting clinical trials and obtaining FDA and other regulatory approvals. Accordingly, our competitors may succeed in obtaining FDA or other regulatory approvals of product candidates more rapidly than we do.do for products that compete with our products. Companies that complete clinical trials, obtain required regulatory approvals, and commence commercial sale of their drugs before we do may achieve a significant competitive advantage, including patent and FDA exclusivity rights that would delay our ability to market products. We face, and will continue to face, competition in the commercialization of our products, licensing of potential product candidates for desirable disease targets, licensing of desirable product candidates, and development and marketing of our product candidates from academic institutions,•other drug development technologies;•methods of preventing or reducing the incidence of disease, including vaccines; and•new small molecule or other classes of therapeutic agents.33disorders,diseases, including HAE, as well as developing broad spectrum antivirals for use as medical countermeasures.diseases of the complement system. We expect to encounter significant competition for any of theour pharmaceutical products we are developing and plan to develop.product candidates. Companies that complete clinical trials, obtain required funding or government support, obtain required regulatory approvals and commence commercial sales or stockpiling orders of their products before their competitors may achieve a significant competitive advantage. Such isIn addition, various government entities throughout the case withworld may offer incentives, grants and contracts to encourage additional investment into certain preventative and therapeutic agents, which may have the current neuraminidase inhibitors marketed by GSKeffect of further increasing the number of our competitors and/or providing advantages to certain competitors. See “Business—Competition” in Part I, Item 1 of our most recent Annual Report on Form 10-K for further discussion of our competitors, competitive products or programs, and Roche for influenza; CINRYZE® , KALBITOR®the competitive conditions in these and FIRAZYR®, marketed by Shire Pharmaceuticals, Inc. (“Shire”) for HAE; BERINERT® and HAEGARDA® marketed by CSL for HAE; and RUCONEST® marketed by Pharming Healthcare, Inc. (“Pharming”) for HAE.Further, several pharmaceutical and biotechnology firms have announced efforts in HAE and in other therapeutic areas where we have discovery and development efforts ongoing. Notably, prophylactic treatment for HAE is becoming increasingly competitive with the recent approval of CSL’s HAEGARDA, Shire’s positive Phase 3 data for the monoclonal antibody, lanadelumab, and Pharming’s completion of a Phase 2 HAE prophylaxis trial for RUCONEST. Additionally, Kalvista Pharmaceuticals, Inc. (KVD818) and Attune Pharmaceuticals, Inc. (ATN-249) have oral candidates for HAE prophylaxis in Phase 1 development. Therapeutic products with potentially promising data to treat Ebola include Mapp Biopharmaceutical, Inc.’s ZMapp (antibody-based) and Gilead Sciences, Inc.’s product currently under development (small molecule), both of which have been used in Ebola infected patients. Shionogi also recently announced positive Phase 3 data for S033188, an oral treatment for influenza. areas.•capital resources;•research and development resources, including personnel and technology;•regulatory experience;•preclinical study and clinical testing experience;•manufacturing and marketing experience; and•production facilities.technology andour products, product candidates, or technologies noncompetitive or eliminate or reduce demand for our product candidates.We face risks related to our government-funded programs; if BARDA/HHS or NIAID/HHS were to eliminate, reduce or delay funding from our contracts, this would have a significant negative impact on the programs associated with such funding and could have a significant negative impact on our revenues and cash flows.Our projections of revenues and incoming cash flows are substantially dependent upon BARDA/HHS and NIAID/HHS reimbursement for the costs related to our galidesivir program. If BARDA/HHS or NIAID/HHS were to eliminate, reduce or delay the funding for these programs or disallow some of our incurred costs, we would have to obtain additional funding for continued development or regulatory registration for these product candidates or significantly reduce or stop the development effort. In contracting with BARDA/HHS and NIAID/HHS, we are subject to various U.S. Government contract requirements, including general clauses for a cost-reimbursement research and development contract, which may limit our reimbursement or if we are found to be in violation could result in contract termination. If the U.S. Government terminates any of its contracts with us for its convenience, or if we default by failing to perform in accordance with the contract schedule and terms, significant negative impact on our cash flows and operations could result. Our government contracts with BARDA/HHS and NIAID/HHS have special contracting requirements, which create additional risks of reduction or loss of funding.We have completed work under a contract with BARDA/HHS for the development of our neuraminidase inhibitor, RAPIVAB. We also have entered into contracts with BARDA/HHS and NIAID/HHS for the development of galidesivir as a treatment for diseases caused by RNA pathogens, including Marburg virus disease and Ebola virus disease. In contracting with these government agencies, we are subject to various U.S. Government contract requirements, including general clauses for a cost-reimbursement research and development contract, which may limit our reimbursement or, if we are found to be in violation, could result in contract termination.34U.S. Government contracts typically contain a number of extraordinary provisions that would not typically be found in commercial contracts and which may create a disadvantage and additional risks to us as compared to competitors that do not rely on U.S. Government contracts. These risks include the ability of the U.S. Government to unilaterally:•terminate or reduce the scope of our contract with or without cause;•interpret relevant regulations (federal acquisition regulation clauses);•require performance under circumstances which may not be favorable to us;•require an in process review where the U.S. Government will review the project and its options under the contract;•control the timing and amount of funding, which impacts the development progress of our programs; and•audit and object to our contract-related costs and fees, including allocated indirect costs.Our government contracts with BARDA/HHS and NIAID/HHS have termination and audit provisions which create additional risks to us.The U.S. Government may terminate its contracts with us either for its convenience or if we default by failing to perform in accordance with the contract schedule and terms. Termination for convenience provisions generally enable us to recover only our costs incurred or committed, and settlement expenses and profit on the work completed prior to termination. Termination does not permit these recoveries under default provisions. In the event of termination or upon expiration of a contract, the U.S. Government may dispute wind-down and termination costs and may question prior expenses under the contract and deny payment of those expenses. Should we choose to challenge the U.S. Government for denying certain payments under a contract, such a challenge could subject us to substantial additional expenses which we may or may not recover. Further, if the U.S. Government terminates its contracts with us for its convenience, or if we default by failing to perform in accordance with the contract schedule and terms, significant negative impact on our cash flows and operations could result.As a U.S. Government contractor, we are required to comply with applicable laws, regulations and standards relating to our accounting practices and are subject to periodic audits and reviews. As part of any such audit or review, the U.S. Government may review the adequacy of, and our compliance with, our internal control systems and policies, including those relating to our purchasing, property, estimating, compensation and management information systems. Audits conducted by the U.S. Government for the completed BARDA/HHS peramivir contract have been performed and concluded through fiscal 2009; all subsequent fiscal years are still open and auditable. Audits under the active BARDA/HHS and NIAID/HHS galidesivir contracts may occur at the election of the U.S. Government and have been concluded through fiscal 2013. Based on the results of its audits, the U.S. Government may adjust our contract-related costs and fees, including allocated indirect costs. This adjustment could impact the amount of revenues reported on a historic basis and could impact our cash flows under the contracts prospectively. In addition, in the event BARDA/HHS or NIAID/HHS determines that certain costs and fees were unallowable or determines that the allocated indirect cost rate was higher than the actual indirect cost rate, BARDA/HHS or NIAID/HHS would be entitled to recoup any overpayment from us as a result. In addition, if an audit or review uncovers any improper or illegal activity, we may be subject to civil and criminal penalties and administrative sanctions, including termination of our contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. We could also suffer serious harm to our reputation if allegations of impropriety were made against us. In addition, under U.S. Government purchasing regulations, some of our costs may not be reimbursable or allowed under our contracts. Further, as a U.S. Government contractor, we are subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits and other legal actions and liabilities as compared to private sector commercial companies.If we fail to reach milestones or to make annual minimum payments or otherwise breach our obligations under our license agreements, our licensors may terminate our agreements with them and seek additional remedies.If we are unable or fail to meet payment obligations, performance milestones relating to the timing of regulatory filings, product supply obligations, post approval commitments for RAPIVAB, or development and commercial diligence obligations; are unable or fail to make milestone payments or material data use payments in accordance with applicable provisions; or fail to pay the minimum annual payments under our respective licenses, our licensors may terminate the applicable license or seek other available remedies. As a result, our development of the respective product candidate or commercialization of the product would cease. If we fail to obtain additional financing or acceptable partnership arrangements, we may be unable to complete the development and commercialization of our product candidates or continue operations.As our programs advance, our costs are likely to increase. Our current and planned discovery activities, pre-clinical and clinical trials, the related development, manufacturing, regulatory approval process requirements, and the additional personnel resources and testing required for supporting the development of our product candidates will consume significant capital resources. Our expenses, revenues and cash utilization rate could vary significantly depending on many factors, including: our ability to raise additional capital; the development progress of our collaborative agreements for our product candidates; the amount of funding we receive from NIAID/HHS and BARDA/HHS for galidesivir or from other new partnerships with third parties for the development of our product candidates, including BCX7353 and our other rare disease product candidates; the commercial success of peramivir achieved by our partners; the amount or profitability of any orders for peramivir or galidesivir by any government agency or other party; the progress and results of our current and proposed clinical trials for our most advanced product candidates, including BCX7353 and our other rare disease product candidates; the progress made in the manufacture of our lead products and the progression of our other programs.35We expect that we will be required to raise additional capital to complete the development and commercialization of our current product candidates and we may seek to raise capital at any time. Additional funding, whether through additional sales of securities, additional borrowings, or collaborative arrangements with partners, including governmental agencies in general and from any BARDA/HHS or NIAID/HHS contract specifically, may not be available when needed or on terms acceptable to us. The issuance of preferred or common stock or convertible securities, with terms and prices significantly more favorable than those of the currently outstanding common stock, could have the effect of diluting or adversely affecting the holdings or rights of our existing stockholders. Additional borrowings may subject us to more restrictive covenants than are currently applicable to us under our September 23, 2016 Senior Credit Facility with an affiliate of MidCap Financial Services, LLC, as administrative agent (the “Senior Credit Facility”). In addition, collaborative arrangements may require us to transfer certain material rights to such corporate partners. Insufficient funds or lack of an acceptable partnership may require us to delay, scale-back or eliminate certain of our research and development programs.In order to continue future operations and continue our drug development programs, we will be required to raise additional capital. In addition to seeking strategic partnerships, transactions and government funding, we may decide to access the equity or debt markets, incur additional borrowings, or seek other sources to meet liquidity needs. Our ability to raise additional capital may be limited and may greatly depend upon the success of ongoing development related to our current drug development programs, including post approval studies for RAPIVAB, the progress, timeline and ultimate outcome of our kallikrein inhibitors, including the BCX7353 program (including, but not limited to, formulation progress, Phase 3 trials, long-term human safety studies, and the timing of carcinogenicity or other required studies), the progress of our other rare disease product candidates, funding for and continued successful development of galidesivir, and the progress of our early discovery programs. In addition, constriction and volatility in the equity and debt markets may restrict our future flexibility to raise capital when such needs arise. Furthermore, we have exposure to many different industries, financing partners and counterparties, including commercial banks, investment banks and partners (which include investors, licensing partners, and the U.S. Government) which may be unstable or may become unstable in the current economic and political environment. Any such instability may impact these parties’ ability to fulfill contractual obligations to us or they might limit or place burdensome conditions upon future transactions with us. Also, it is possible that suppliers may be negatively impacted. Any such unfavorable outcomes in our current programs or unfavorable economic conditions could place severe downward pressure on the price of our common stock and may decrease opportunities to raise capital in the capital or credit markets, and further could reduce the return available on invested corporate cash, which, if severe and sustained, could have a material and adverse impact on our results of operations and cash flows and limit our ability to continue development of our product candidates.We may not be able to continue as a going concern if we do not obtain additional capital.We have sustained operating losses for the majority of our corporate historyexpect that our 2017 expenses will exceed our 2017 revenues. We expect to continue to incur operating losses and negative cash flows until revenues reach a level sufficient to support ongoing operations.Our liquidity needs will be largely determined by the success of operations in regards to the progression of our product candidates in the future. Our plans to alleviate the doubt regarding our ability to continue as a going concern primarily include our ability to control the timing and spending on our research and development programs and raising additional funds through equity financings. We also may consider other plans to fund operations including: (1) securing or increasing U.S. Government funding of our programs, including obtaining procurement contracts; (2) out-licensing rights to certain of our products or product candidates, pursuant to which the we would receive cash milestones; (3) raising additional capital through equity or debt financings or from other sources; (4) obtaining additional product candidate regulatory approvals, which would generate revenue, milestones and cash flow; (5) reducing spending on one or more research and development programs, including by discontinuing development; and/or (6) restructuring operations to change our overhead structure.There can be no assurance that any of our plans will be successful or that additional capital will be available to us on reasonable terms, or at all, when needed. If we are unable to obtain sufficient additional capital, we may be forced to curtail operations, delay or stop ongoing clinical trials, cease operations altogether or file for bankruptcy.If we fail to successfully commercialize or establish collaborative relationships to commercialize certain of our product candidates, or if any partner terminates or fails to perform its obligations under agreements with us, potential revenues from commercialization of our product candidates could be reduced, delayed or eliminated.Our business strategy is to increase the asset value of our product candidate portfolio. We believe this is best achieved by retaining full product rights or through collaborative arrangements with third parties as appropriate. As needed, potential third-party relationships could include preclinical development, clinical development, regulatory approval, marketing, sales and distribution of our product candidates.
Regulatory Risks36Currently, we have established collaborative relationships with Mundipharma for the development and commercialization of forodesine and with each of Shionogi and Green Cross for the development and commercialization of peramivir in Japan, Taiwan and South Korea. Most recently we have established a collaborative relationship with Seqirus UK Limited for RAPIVAB on a worldwide basis other than Israel, Japan, Korea and Taiwan. The process of establishing and implementing collaborative relationships is difficult, time-consuming and involves significant uncertainty, including:•our partners may seek to renegotiate or terminate their relationships with us due to unsatisfactory commercial, regulatory or clinical results, including post approval clinical commitments, a change in business strategy, a change of control or other reasons;•our contracts for collaborative arrangements may expire;•our partners may choose to pursue alternative technologies, including those of our competitors;•we may have disputes with a partner that could lead to litigation or arbitration;•we do not have day to day control over the activities of our partners and have limited control over their decisions;•our ability to generate future event payments and royalties from our partners depends upon their abilities to establish the safety and efficacy of our product candidates, obtain regulatory approvals and achieve market acceptance of products developed from our product candidates;•we or our partners may fail to properly initiate, maintain or defend our intellectual property rights, where applicable, or a party may utilize our proprietary information in such a way as to invite litigation that could jeopardize or potentially invalidate our proprietary information or expose us to potential liability;•we or our partners may not devote sufficient capital or resources towards our product candidates; and•we or our partners may not comply with applicable government regulatory requirements.If we or our partners fail to fulfill our responsibilities in a timely manner, or at all, our commercialization efforts related to that collaboration could be reduced, delayed or terminated, or it may be necessary for us to assume responsibility for activities that would otherwise have been the responsibility of our partner. If we are unable to establish and maintain collaborative relationships on acceptable terms, we may have to delay or discontinue further development of one or more of our product candidates, undertake commercialization activities at our own expense or find alternative sources of funding. Any delay in the development or commercialization of our product candidates would severely affect our business, because if our product candidates do not progress through the development process or reach the market in a timely manner, or at all, we may not receive additional future event payments and may never receive milestone, product sales or royalty payments. We do not have a great deal of experience in commercializing our products or technologies, and our future revenue generation is uncertain.We do not have a great deal of experience in commercializing our product candidates or technologies. We currently have limited marketing and commercial capability, no direct or third-party sales force and limited distribution capabilities. We may be unable to establish or sufficiently increase these capabilities for products we currently, or plan to, commercialize. In addition, our revenue from collaborative agreements may be dependent upon the status of our preclinical and clinical programs. Our ability to receive revenue from products we commercialize presents several risks, including:•we or our collaborators may fail to successfully complete clinical trials, or satisfy post-marketing commitments, sufficient to obtain and keep FDA marketing approval;•many competitors are more experienced and have significantly more resources, and their products could reach the market faster, be more cost effective or have a better efficacy or tolerability profile than our product candidates;•we may fail to employ a comprehensive and effective intellectual property strategy, which could result in decreased commercial value of our Company and our products;•we may fail to employ a comprehensive and effective regulatory strategy, which could result in a delay or failure in commercialization of our products;•our ability to successfully commercialize our products is affected by the competitive landscape, which cannot be fully known at this time;•reimbursement is constantly changing, which could greatly affect usage of our products; and•future revenue from product sales would depend on our ability to successfully complete clinical studies, obtain regulatory approvals, and manufacture, market and commercialize our approved drugs.37Commercialization of peramivir by our partners is subject to the potential commercialization risks described herein and numerous additional risks. Any potential revenue benefits to us in the form of milestone payments, royalties or other consideration are highly speculative.Commercialization success of peramivir is uncertain and is subject to all the risks and uncertainties disclosed in our other risk factors relating to drug development and commercialization. In addition, commercialization of peramivir products is subject to further risks and may be negatively impacted by a number of factors, including, but not limited to, the following:•peramivir may not prove to be adequately safe and effective for market approval in markets other than the United States, Canada, Japan, Korea and Taiwan;•necessary funding for post-marketing commitments and further development of peramivir may not be available timely, at all, or in sufficient amounts;•flu prevention or pandemic treatment concerns may not materialize at all, or in the near future;•advances in flu vaccines or other antivirals, including competitive i.v. antivirals, could substantially replace potential demand for peramivir;•a limited number of governmental entities are expected to be the primary potential stockpiling customers for peramivir and if we are not successful at marketing peramivir to these entities for any reason, we will not receive substantial revenues from stockpiling orders;•government and third party payors may not provide sufficient coverage or reimbursement which would negatively impact the demand for peramivir;•we may not be able to supply commercial material to our partners and our partners may not be able to maintain or establish sufficient and acceptable commercial manufacturing, either directly or through third-party manufacturers;•the commercial demand and acceptance for peramivir by healthcare providers and by patients may not be sufficient to result in substantial revenues of peramivir to our partners and may result in little to no milestones or royalties to us;•effectiveness of marketing and commercialization efforts for peramivir by our partners;•market satisfaction with existing alternative therapies;•perceived efficacy relative to other available therapies;•disease prevalence;•cost of treatment;•pricing and availability of alternative products;•marketing and sales activities of competitors;•shifts in the medical community to new treatment paradigms or standards of care; and•relative convenience and ease of administration.federallaws and state lawsregulations related to RAPIVABour products and other products under developmentproduct candidates, and if we or our partners do not comply with these laws and regulations, we could face substantial penalties.orand our partners’ activities related to RAPIVAB,approved products or, following their regulatory approval (if applicable), any of our other productsproduct candidates under development, and following their regulatory approval,such as BCX10013, are subject to regulatory and law enforcement authorities in addition tothe United States (including the FDA, including the Federal Trade Commission, the Department of Justice (“DOJ”), and state and local governments. Ingovernments) and their foreign equivalents (including the case of our collaboration with SUL, although SUL is responsible for RAPIVAB marketingEMA, MHLW, MHRA, and commercialization efforts, we continue to carry certain risks associated with RAPIVAB because we hold the RAPIVAB NDA. For example, weothers).we have responsibility for certain post-approval studies, weand may have responsibilities and costs related to a recall or withdrawal of RAPIVABour products from sale wein the jurisdictions in which they are approved. We may also incur liability associated with RAPIVABproduct manufacturing contracted by us or in support of any of our partners, wepartners. We are required to maintain records and provide data and reports to regulatory agencies related to RAPIVABour products (e.g. risk evaluation and mitigation strategies, track and trace requirements, and adverse events), and we may incur certain promotional regulatory and government pricing risks, all of which could have a material adverse impact on our operations and financial condition.
Similar responsibilities would apply upon regulatory approval of any of our other product candidates currently under development.38health carehealthcare “fraud and abuse,” including both federal and state anti-kickback and false claims laws. TheseOutside of the United States, we may be subject to analogous foreign laws regulateand regulations in the various jurisdictions in which we operate. Theseorand our partners’ operations, sales and marketing practices, price reporting, and relationships with physicians and other customers and third-party payors. Anti-kickback laws generally prohibit a manufacturer from soliciting, offering, receiving, or paying any remuneration to generate business, including the purchase or prescription of a particular drug. Although the specific provisions of these laws vary, their scope is generally broad and there may be no regulations, guidance or court decisions that clarify how the laws apply to particular industry practices. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payors (including Medicare and Medicaid) claims for reimbursement or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. The sunshine provisions apply to manufacturers with products reimbursed under certain government programs and require those manufacturers to disclose annually to the federal government certain payments made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as, ownership and investment interests held by physicians (as defined above) and their immediate family members. State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. Although we seek to comply with these statutes, it is possible that our practices, or those of our partners, might be challenged under health carehealthcare fraud and abuse, anti-kickback, false claims or similar laws. Violations of the physician sunshine act and similar state legislation or the fraud and abuse laws may be punishable by civil or criminal sanctions, including fines and civil monetary penalties, and future exclusion from participation in government healthcare programs.We havenumberfinancial relationship between us and a principal investigator creates a conflict of outstanding post-marketing commitmentsinterest or otherwise affects interpretation of the study. In the event of a conflict of interest with respect to a study, the integrity of the data generated at the applicable clinical trial site may be questioned or the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.that we retain, despite our partnership with SUL,and foreign regulatory authorities may also impose post-approval commitments on us for approved products, which we may not complete successfully or on time for any number of reasons, including, but not limited to, lack of funds to complete the studies and insufficient interest by appropriate sites, investigators or study subjects. For example, as a condition of the approval of RAPIVAB, weWe are required to complete a pediatric patient study of RAPIVAB and to submit the final results of this clinical trial to the FDA. Depending on the FDA’s evaluation of the data from this clinical trial, we may be unable to expand the indication for RAPIVAB or we may be required to include specific warnings or limitations on dosing this product, which could negatively impact sales of RAPIVAB and negatively impact our relationship with our partner. We may becurrently subject to penalties ifcertain post-approval commitments. If we fail to comply with post-approval legal and regulatory requirements, we could be subject to penalties, and our products could be subject to continual recordkeeping and reporting requirements, review and periodic inspections by the FDA and other regulatory bodies. Regulatory approval of a product may be subject to limitations on the indicated uses for which the product may be marketed or to the other restrictive conditions of approval that limit our ability to promote, sell or distribute a product. Furthermore, the approval of RAPIVABour products and any other future product candidates may be subject to requirements for costly post-marketingpost-approval testing and surveillance to monitor itstheir safety or efficacy.thean NDA holder, of the NDA we may be held responsible for any advertising and promotion conducted by our partner that is not in compliance with the rules and regulations. Applicable regulatory authorities, competitors, and other third parties may take the position that we are not in compliance with such regulations. In particular, the claims in all promotional materials and activities must be consistentaddition to medical education efforts, we may offer patient support services to assist patients receiving treatment with the FDA approvals forour commercially approved products and must be appropriately substantiated and fairly balanced with information onwhich have increasingly become the safety risks and limitationsfocus of the products. government investigation.thean NDA holder, of RAPIVAB we are required to make expedited and periodic adverse event reports to the FDA and other regulatory authorities. U.S. Department of Health and Human Services, the U.S. Department of JusticeDOJ and individual U.S. Attorney offices within the Department of Justice, andDOJ, state and local governments. Until we can successfully transfer the pricing responsibilities to our partner, we remain responsible for pricinggovernments, and rebate programs. Pricing and rebate programs must comply with the Medicaid rebate requirementsforeign equivalents of the Omnibus Budget Reconciliation Act of 1990, as amended, and the Veterans Health Care Act of 1992, as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply.foregoing. All of these activities are also potentially subject to federal and state healthcare false claims and fraud and abuse laws, as well as consumer protection and unfair competition laws.RAPIVAB or our other products that are subject to healthcare laws and regulations are found to be in violation of any of the healthcare fraud and abuse laws described above or in “Business—Government Regulation” in Part I, Item 1 of our most recent Annual Report on Form 10-K or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management'smanagement’s attention from the operation of our business. Moreover, achieving and sustaining compliance with all applicable federal and state fraud and abuse laws may be costly.39partners’ partners’ ability to market our products, including RAPIVAB,develop our product candidates, obtain collaborators and raise capital.Theor PPACA,(“PPACA”), which made extensive changes to the delivery of health carehealthcare in the U.S. The PPACA included numerous provisions that affect pharmaceutical companies, someUnited States, as discussed in “Business—Government Regulation” in Part I, Item 1 of which became effective immediately and others of which have taken effect over the past several years. For example, the PPACA expanded health care coverage to the uninsured through private health insurance reforms and an expansion of Medicaid. The PPACA also imposed substantial costsour most recent Annual Report on pharmaceutical manufacturers, such as an increase in liability for rebates paid to Medicaid, new drug discounts that must be offered to certain enrollees in the Medicare prescription drug benefit, an annual fee imposed on all manufacturers of brand prescription drugs in the U.S., and an expansion of an existing program requiring pharmaceutical discounts to certain types of hospitals and federally subsidized clinics. The PPACA also contains cost containment measures that could reduce reimbursement levels for health care items and services generally, including pharmaceuticals. It also required reporting and public disclosure of payments and other transfers of value provided by pharmaceutical companies to physicians and teaching hospitals.We expect that the current presidential administration and U.S. Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the PPACA. There is still significant uncertainty with respect to the impact that the current presidential administration and the U.S. Congress may have on the PPACA, if any, and any changes will likely take time to unfold. As such, we cannot predict what effect the PPACA or other healthcare reform initiatives that may be adopted in the future will have on our business.We cannot predict what effect the PPACA or other healthcare reform initiatives that may be adopted in the future will have on our business.Form 10-K. The continuing efforts of the government, insurance companies, managed care organizations and other payors of health carehealthcare services to contain or reduce costs of health carehealthcare could result in decreased net revenues from our pharmaceutical products and decrease potential returns from our development efforts. In addition, pharmaceutical and device manufacturers are also required to report and disclose certain payments and transfers of value to, and investment interests held by, physicians and their immediate family members during the preceding calendar year. Failure to submit required information may result in civil monetary penalties for payments, transfers of value, or ownership or investment interests not reported in an annual submission. Compliance with the PPACA and state laws with similar provisions is difficult and time consuming, and companies that do not comply with these state laws face civil penalties. Because of the breadth of these laws and the narrowness of the applicable safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Such a challenge could have a material adverse effect on our business, financial condition, results of operations and growth prospects.In particular,For example, legislation has been enacted in certain states and at a federal level that requires development of an electronic pedigree to track and trace each prescription drug at the saleable unit level through the distribution system. Compliance with these electronic pedigree requirements may increase our operational expenses and impose significant administrative burdens. In addition, our compliance may be deemed insufficient and we could face a material adverse effect on our business, financial condition, results of operations and growth prospects. As a result of these and other new proposals, we may determine to change our current manner of operation, provide additional benefits or change our contract arrangements, any of which could have a material adverse effect on our business, financial condition and results of operations.U.S.United States and other markets is critical to the commercial success of RAPIVAB or any other product that we might bring to market.our approved products. Recently in the U.S.United States, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. For example, the Inflation Reduction Act of 2022 (“IRA”) implements a number of drug pricing measures intended to lower the cost of prescription drugs and related healthcare reforms, including limits on price increases and subjecting an escalating number of drugs to annual price negotiations with CMS. We cannot be sure whether additional legislation or rulemaking related to the IRA will be issued or enacted, or what impact, if any, such changes will have on the profitability of our products or any of our product candidates, if approved for commercial use, in the future. The effect of the IRA on our business and the healthcare industry in general is not yet known. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which has resultedsuppliers will be included in several Congressional inquiriestheir prescription drug and proposed bills designed to, among other things, reform government program reimbursement methodologies.healthcare programs. Third-party payors are increasingly challenging the prices charged for medical products and servicesoura product and makes a decision with respect to coverage. For example, third-party payors may require cost-benefit analysis data from us in order to demonstrate the cost-effectiveness of RAPIVABour products or any other product we might bring to market. For any individual third-party payor, we may not be able to provide data sufficient to gain reimbursement on a similar or preferred basis to competitive products, or at all, which may have a material adverse effect on our business, financial condition and results of operations.Thererisks relatedsubject to the potential government use or sale of peramivir (RAPIVAB).United States Government use or sale of RAPIVAB in emergency situations, or otherwise, may result in the use of RAPIVAB outside of its approved use. To the extent that RAPIVAB is used as a treatment for influenza by the U.S. Government or peramivir by any other government entity, there can be no assurance that it will prove to be generally safe, well-tolerateddata security and effective. Such government use of RAPIVAB/peramivir may create certain liabilities for us or our partners in the case of government use outside of the U.S. There is no assurance that we or our manufacturers will be able to fully meet the demand for peramivir in the event of additional orders. Further, we may not achieve a favorable price for additional orders of RAPIVAB in the U.S. or peramivir in any other country. Our competitors may develop products that could compete with or replace peramivir. We may face competition in markets where we have no existing intellectual property protection or are unable to successfully enforce our intellectual property rights.40There is no assurance that the non-U.S. partnerships that we have entered into for peramivir will result in any order for peramivir in those countries. There is no assurance that peramivir will be approved for any use or will achieve market approval in additional countries. In the event that any emergency use or market approval is granted, there is no assurance that any government order or commercialization of peramivir in any countries will be substantial or will be profitable to us. In addition, the sale of peramivir, emergency use or other use of peramivir in any country may create certain liabilities for usprivacy risks, and our partners.If weactual or our partners do not obtain and maintain governmental approvals for our product candidates under development, we or our partners will not be able to sell these potential products, which would significantly harm our business because we will receive no revenue.We or our partners must obtain regulatory approval before marketing or selling our future product candidates. If we or our partners are unable to receive regulatory approval and do not market or sell our future product candidates, we will never receive any revenue from such product sales. In the United States, we or our partners must obtain FDA approval for product candidates that we intend to commercialize. The process of preparing for and obtaining FDA approval may be lengthy and expensive, and approval is never certain. Products distributed abroad are also subject to foreign government regulation and export laws of the United States. Because of the risks and uncertainties in biopharmaceutical development, our product candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain approval. If the FDA delays regulatory approval of our product candidates, our management’s credibility, our value and our operating results may suffer. Even if the FDA or foreign regulatory agencies approve a product candidate, the approval may limit the indicated uses for a product candidate and/or may require post-approval studies. The FDA regulates, among other things, the record keeping and storage of data pertaining to potential pharmaceutical products. We currently store most of our preclinical research data, our clinical data and our manufacturing data at our facility. While we do store duplicate copies of most of our clinical data offsite and a significant portion of our data is included in regular backups of our systems, we could lose important data if our facility incurs damage, or if our vendor data systems fail, suffer damage or are destroyed. If we receive approval to market our potential products, whether in the United States or internationally, we will continue to be subject to extensive regulatory requirements. These requirements are wide ranging and govern, among other things:•adverse drug experience reporting regulations;•product promotion;•product manufacturing, including good manufacturing practice requirements; and•product changes or modifications.Ourperceived failure to comply with existingregulations and other legal obligations related to privacy and data protection could harm our business.future regulatory requirements, orin some cases, impact our lossability to operate in certain jurisdictions. For example, we may be subject to the California Consumer Privacy Act, which gives California residents expanded rights to access and require deletion of or changestheir personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. We also may be subject to previously obtained approvals, could have a material adverse effect on our business because we will not receive product or royalty revenues if we or our partners do not receive approvalthe General Data Protection Regulation (“GDPR”) in the European Economic Area (“EEA”) and similar legislation in the United Kingdom and Switzerland. See “Business—Government Regulation—Data Privacy and Security Laws” in Part I, Item 1 of our productsmost recent Annual Report on Form 10-K and “Risks Relating to Our Business—Risks Relating to International Operations—Our actual or perceived failure to comply with European governmental laws and regulations and other legal obligations related to privacy, data protection and information security could harm our business” in this section for marketing. Royaltiesadditional discussion of privacy laws and milestone payments from Shionogi underregulations. Failure to comply with these laws and regulations could result in government enforcement actions, private litigation, or harm to our license agreement with Shionogi (the “Shionogi Agreement”) will be required to be used by Royalty Sub to service its obligations under its PhaRMA Notes,reputation and generally will not be available to us for other purposes until Royalty Sub has repaid in full its obligations under the PhaRMA Notes.In March 2011, our wholly-owned subsidiary Royalty Sub issued $30.0 million in aggregate principal amount of PhaRMA Notes. The PhaRMA Notes are secured principally by (i) certain royalty and milestone payments under the Shionogi Agreement, pursuant to which Shionogi licensed from us the rights to market peramivir in Japan and Taiwan, (ii) rights to certain payments under a Japanese yen/U.S. dollar Currency Hedge Agreement put into place by us in connection with the issuance of the PhaRMA Notes and (iii) the pledge by usbusiness.equity interest in Royalty Sub. Payments from Shionogiuse of hazardous materials, we violate any environmental controls or regulations that apply to us on non-governmental sales under the Shionogi Agreement will generally not be available to us for other purposes until Royalty Sub has repaid in full its obligations under the PhaRMA Notes. Accordingly, these funds will be required to be dedicated to Royalty Sub’s debt service and not available to us for product development or other purposes. As of September 1, 2014, the payments from Shionogi were insufficient for Royalty Sub to service its obligations under the PhaRMA Notes, resulting in an event of default with respect to the PhaRMA Notes. As a result of this event of default, the holders of the PhaRMA Notes may be able to pursue acceleration of the PhaRMA Notes and foreclose on the collateral securing the PhaRMA Notes and our equity interest in Royalty Sub and may exercise other remedies available to them under the indenture or other documents related to the PhaRMA Notes. In such event, we may not realize the benefit of future royalty payments that might otherwise accrue to us following repayment of the PhaRMA Notes,materials, we may incur legalsubstantial costs and we might otherwise be adversely affected.Because anexpenses in our remediation efforts.default has occurred under the PhaRMA Notes, the holders of the PhaRMA Notes may be able to pursue acceleration of the PhaRMA Notes and foreclose on the collateral securing the PhaRMA Notes and our equity interest in Royalty Sub, in which case we may not realize the benefit of future royalty payments that might otherwise accrue to us following repayment of the PhaRMA Notes andan accident, we could otherwise be adversely affected.Royalty Sub’s ability to service its payment obligations in respectliable for any damages that result, and any liabilities could exceed our resources. Compliance with environmental laws and regulations or a violation of the PhaRMA Notes,such environmental laws and our ability to benefit from our equity interest in Royalty Sub, is subject to numerous risks. Royalty Sub’s ability to service the PhaRMA Notes may be adversely affected by, among other things, changes in or any termination of our relationship with Shionogi, reimbursement, regulatory, manufacturing and/or intellectual property issues, product returns, product recalls, product liability claims and allegations of safety issues, as well as other factors. As Royalty Sub has been unable to service its obligations under the PhaRMA Notes and an event of default has occurred under the PhaRMA Notes, the holders of the PhaRMA Notes may be able to pursue acceleration of the PhaRMA Notes and foreclose on the collateral securing the PhaRMA Notes and our equity interest in Royalty Sub and may exercise other remedies available to them under the indenture or other documents related to the PhaRMA Notes. In such event, we may not realize the benefit of future royalty payments that might otherwise accrue to us following repayment of the PhaRMA Notes, we may incur legal costs and we might otherwise be adversely affected.41We may be required to pay significant premiums under the Currency Hedge Agreement entered into by us in connection with the issuance of the PhaRMA Notes. In addition, because our potential obligations under the foreign currency hedge are marked to market, we may experience additional quarterly volatility in our operating results and cash flows attributable to the Currency Hedge Agreement. In connection with the issuance by Royalty Sub of the PhaRMA Notes, we entered into a Currency Hedge Agreement to hedge certain risks associated with changes in the value of the Japanese yen relative to the U.S. dollar. Under the foreign currency hedge agreement, we may be required to pay an annual premium in the amount of $2.0 million in each May continuing through May 2020. Such payment will be required if, in May of the relevant year, the spot rate of exchange for Japanese yen-U.S. dollars (determined in accordance with the Currency Hedge Agreement) is such that the U.S. dollar is worth 100 yen or less. We will be required to mark to market our potential obligations under the currency hedge and post cash collateral, which may causeregulations could require us to experience additional quarterly volatility inincur substantial unexpected costs, which would materially and adversely affect our operating results and cash flows as a result. Additionally, we may be required to pay significant premiums or a termination fee under the foreign currency hedge agreement entered into by us in connection with the issuance of the PhaRMA Notes. We are required to maintain a foreign currency hedge at 100 yen per dollar under the agreements governing the PhaRMA Notes.Our Senior Credit Facility contains restrictions that limit our flexibility in operating our business. We may be required to make a prepayment or repay the outstanding indebtedness earlier than we expect if a prepayment event or an event of default occurs, including a material adverse change with respect to us, which could have a material adverse effect on our business.The Senior Credit Facility contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:•convey, sell, lease, license, transfer or otherwise dispose of certain parts of our business or property;•change the nature of our business;•liquidate or dissolve;•enter into certain change in control or acquisition transactions;•incur or assume certain debt;•grant certain types of liens on our assets;•modify, liquidate or transfer assets in certain collateral accounts;•pay dividends or make certain distributions to our stockholders;•make certain investments;•enter into material transactions with affiliates; and•modify existing debt or collaboration arrangements.The restrictive covenants contained in the Senior Credit Facility could cause us to be unable to pursue business opportunities that we or our stockholders may consider beneficial without the lender’s permission or without repaying all Senior Credit Facility obligations.A breach of any of these covenants could result in an event of default under the Senior Credit Facility. An event of default will also occur if, among other things, a material adverse change in our business, operations or condition occurs, which could potentially include negative results in clinical trials, or a material impairment of the prospect of our repayment of any portion of the amounts we owe under the Senior Credit Facility occurs. In the case of a continuing event of default under the agreement, the lender could elect to declare all amounts outstanding to be immediately due and payable, proceed against the collateral in which we granted to the lender a security interest under the Senior Credit Facility, or otherwise exercise the rights of a secured creditor. Amounts outstanding under the Senior Credit Facility are secured by substantially all of our assets and those of our subsidiaries, excluding certain specified assets but including proceeds from those assets.
operations.42or secure rights to patents of others, the value of those rights would diminish.lawsuitslegal proceedings to protect or enforce our patents, the patents of our partners or our other intellectual property rights, which could be expensive, time consuming and unsuccessful ..and time-consuming, and unsuccessful. An adverse result in any litigation or defenselegal proceeding could put one or more of our patents at risk. Our success depends in part on avoiding the infringement of other parties’ patents and other intellectual property rights as well as avoiding the breach of any licenses relating to our technologies and products. In the United States, patent applications filed in recent years are confidential for 18 months, while older applications are not published until the patent issues. As a result, avoiding patent infringement may be difficult and we may inadvertently infringe third-party patents or proprietary rights. These third parties could bring claims against us, our partners or our licensors that even if resolved in our favor, could cause us to incur substantial expenses and, if resolved against us, could additionally cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, our partners or our licensors, we or they could be forced to stop or delay research, development, manufacturing or sales of any infringing product in the country or countries covered by the patent we infringe, unless we can obtain a license from the patent holder. Such a license may not be available on acceptable terms, or at all, particularly if the third party is developing or marketing a product competitive with the infringing product. Even if we, our partners or our licensors were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property.theour products and product candidates to produce revenue would diminish. Additionally, if our products, methods, processes, and other technologies or our commercial use of such products, processes, and other technologies, including, but not limited to, any trade name, trademark or commercial strategy infringe the proprietary rights of other parties, we could incur substantial costs. The USPTO and the patent offices of other jurisdictions have issued to us a number of patents for our various inventions, and we have in-licensed several patents from various institutions. We have filed additional patent applications and provisional patent applications with the USPTO. We have filed a number of corresponding foreign patent applications and intend to file additional foreign and U.S. patent applications, as appropriate. We have also filed certain trademark and trade name applications worldwide. We cannot assure you as to:•the degree and range of protection any patents will afford against competitors with similar products;•if and when patents will issue;•if patents do issue we cannot be sure that we will be able to adequately defend such patents and whether or not we will be able to adequately enforce such patents; or•whether or not others will obtain patents claiming aspects similar to those covered by our patent applications.43•obtain licenses or redesign our products or processes to avoid infringement;•stop using the subject matter claimed in those patents; or•pay damages.suchlitigation or administrative proceeding may be substantial whether or not we are successful.companyCompany and require disclosure and assignment to us of their ideas, developments, discoveries and inventions. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information, and if any of our proprietary information is disclosed, our business will suffer because our revenues depend upon our ability to license or commercialize our products and product candidates and any such events would significantly impair the value of such products and product candidates.Our failure to comply with data protection laws and regulations could lead to government enforcement actions and significant penalties against us and adversely impact our operating results.European Union (“EU”) Member States, Switzerland and other countries have adopted data protection laws and regulation, which impose significant compliance obligations. For example, the EU Data Protection Directive, as implemented into national laws by the EU Member States, imposes strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting. Data protection authorities from the different EU Member States may interpret the EU Data Protection Directive and national laws differently, which adds to the complexity of processing personal data in the European Union, and guidance on implementation and compliance practices is often updated or otherwise revised. Our failure to comply with these laws and regulations could lead to government enforcement actions and significant penalties against us and adversely impact our operating results. We are subject to litigation, which could result in losses or unexpected expenditure of time and resources. From time to time, we may be called upon to defend ourselves against lawsuits relating to our business. Due to the inherent uncertainties in litigation, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome in any such proceedings could have an adverse impact on our business, financial condition and results of operations. If our stock price is volatile, we may become involved in securities class action lawsuits in the future. Any litigation in the future, regardless of its merits, could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully run our business.peramivir, forodesine or any other regulatory body-approved products we sell, or a partner may sell in the futuresells, harms people, we may be subject to costly and damaging product liability claims brought against us by consumers, healthcare providers, pharmaceutical companies, third-party payors or others. The use of our product candidates in clinical trials, including post marketingpost-marketing clinical studies, could also expose us to product liability claims. We cannot predict all of the possible harms or side effects that may result from the use of our products or the testing of product candidates, and therefore, the amount of insurance coverage we currently have may not be adequate to cover all liabilities or defense costs we might incur. A product liability claim or series of claims brought against us could give rise to a substantial liability that could exceed our resources. Even if claims are not successful, the costs of defending such claims and potential adverse publicity could be harmful to our business.will face even greater risks upon any commercialization by us of our products or product candidates. We have product liability insurance covering our clinical trials. Clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance or increase our existing coverage at a reasonable cost to protect us against losses that could have a material adverse effect on our business. An individual may bring a product liability claim against us if one of our products or product candidates causes, or is claimed to have caused, an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without merit, could result in:44••an increase of our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, or at all;•withdrawal of clinical trial volunteers or patients;•damage to our reputation and the reputation of our products, resulting in lower sales;•regulatory investigations that could require costly recalls or product modifications;•litigation costs; and•the diversion of management’s attention from managing our business.Insurance coverage is increasingly morein the future on acceptable terms, or at all;difficultare subject to obtainvarious U.S. Government contract requirements, which may create a disadvantage and additional risks to us.maintain.Whilereduce the scope of our contract with or without cause;currentlychoose to challenge the U.S. Government for denying certain payments under a contract, such a challenge could subject us to substantial additional expenses which we may or may not recover.insurancebeen concluded through fiscal 2019; all subsequent fiscal years are still open and auditable. Based on the results of its audits, the U.S. Government may adjust our contract-related costs and fees, including allocated indirect costs. This adjustment could impact the amount of revenues reported on a historic basis. In addition, in the event BARDA/HHS or NIAID/HHS determines that certain costs and fees were unallowable or determines that the allocated indirect cost rate was higher than the actual indirect cost rate, BARDA/HHS or NIAID/HHS would be entitled to recoup any overpayment from us as a result. In addition, if an audit or review uncovers any improper or illegal activity, we may be subject to civil and criminal penalties and administrative sanctions, including forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. We could also suffer serious harm to our reputation if allegations of impropriety were made against us. In addition, under U.S. Government purchasing regulations, some of our costs may not be reimbursable or allowed under our contracts. Further, as a U.S. Government contractor, we are subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits and other legal actions and liabilities as compared to private sector commercial companies.business,antivirals with respect to any future arrangements. Further, we may not receive a favorable purchase price for future orders, if any, of our antivirals by governmental entities. Our competitors may develop products that could compete with or replace any antivirals selected for government sale or use. We may face competition in markets where we have no existing intellectual property directorsprotection or are unable to successfully enforce our intellectual property rights.officers,commercial diligence obligations; are unable or fail to make milestone payments or material data use payments in accordance with applicable provisions; or fail to pay the minimum annual payments under any of our in-licenses relating to our products or product candidates, our licensors may terminate the applicable license and/or seek other available remedies. As a result, our development of the respective product candidate or commercialization of the product would cease.products, insurance is increasingly more costlyequity interest in Royalty Sub. As a result, we may not realize the benefit of future royalty payments, if any, that might otherwise accrue to us following repayment of the PhaRMA Notes and narrowerwe could otherwise be adversely affected.scope,aggregate principal amount of PhaRMA Senior Secured 14.0% Notes due on December 1, 2020 (the “PhaRMA Notes”). The PhaRMA Notes are secured principally by (i) certain royalty and milestone payments under our agreement with Shionogi (the “Shionogi Agreement”), pursuant to which Shionogi licensed from us the rights to market peramivir in Japan and Taiwan and (ii) the pledge by us of our equity interest in Royalty Sub. Payments, if any, from Shionogi to us on non-governmental sales under the Shionogi Agreement will generally not be available to us for other purposes unless and until Royalty Sub has repaid in full its obligations under the PhaRMA Notes. Accordingly, these funds have been and will continue to be required to be dedicated to Royalty Sub’s debt service and not available to us for product development or other purposes. Since September 1, 2014, payments from Shionogi have been insufficient for Royalty Sub to service its obligations under the PhaRMA Notes, resulting in a continuing event of default with respect to the PhaRMA Notes since that time. In addition, the PhaRMA Notes had a final legal maturity date of December 1, 2020, at which time the outstanding principal amount of the PhaRMA Notes of $30.0 million, together with accrued and unpaid interest of $20.6 million, was due in full. The failure by Royalty Sub to repay these amounts at the maturity date constituted an additional event of default under the PhaRMA Notes. As Royalty Sub has been unable to service its obligations under the PhaRMA Notes and continuing events of default exist under the PhaRMA Notes, the holders of the PhaRMA Notes may be able to foreclose on the collateral securing the PhaRMA Notes and our equity interest in Royalty Sub and may exercise other remedies available to them under the indenture or other documents related to the PhaRMA Notes. In such event, we may not realize the benefit of future royalty payments, if any, that might otherwise accrue to us following repayment of the PhaRMA Notes, we may incur legal costs, and we might otherwise be adversely affected.assume more riskmake a prepayment or repay our outstanding indebtedness earlier than we expect if a prepayment event or an event of default occurs, including a material adverse change with respect to us, which could have a material adverse effect on our business.future. If we are subject to claims or suffer a loss or damage in excessprincipal amount of our insurance coverage,$300 million. Under the new Pharmakon Loan Agreement, we will be required to bearpay to Pharmakon, for the account of the lenders, a prepayment premium or a make-whole premium, as applicable, plus certain fees or expenses set forth in the Pharmakon Loan Agreement in the event that we prepay or repay, or are required to prepay or repay, voluntarily or pursuant to a mandatory prepayment obligation under the Pharmakon Loan Agreement (e.g., upon a change of control of the Company and specified other events, subject to certain exceptions), all of the then-outstanding term loans under the Pharmakon Loan Agreement, in each case, subject to certain exceptions set forth in the Pharmakon Loan Agreement.lossof these covenants could result in an event of default under the Pharmakon Loan Agreement. An event of default will also occur if, among other things, we fail to pay amounts due under the Pharmakon Loan Agreement, we fail to repay certain other indebtedness having an aggregate principal amount in excess of a threshold amount, a material adverse change in our insurance limits. Ifbusiness, assets, properties, liabilities, or condition occurs, or a material impairment of our ability to perform our obligations under the Pharmakon Loan Agreement occurs, certain negative regulatory events occur, including without limitation certain withdrawal events with respect to ORLADEYO, or we fail to make required payments under our Royalty Purchase Agreements. In the case of a continuing event of default under the Pharmakon Loan Agreement, the lenders under the Pharmakon Loan Agreement could elect to declare all amounts outstanding to be immediately due and payable, proceed against the collateral in which we granted to the lenders a security interest, or otherwise exercise the rights of a secured creditor. Amounts outstanding under the Pharmakon Loan Agreement are secured by a security interest in, subject to claims or suffer a loss or damage that is outsidecertain exceptions, substantially all of our insurance coverage, weassets. Because substantially all of our assets are pledged to secure the Pharmakon Loan Agreement obligations, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may incur significant uninsured costs associated with loss or damage thatbe impaired, which could have an adverse effect on our financial flexibility.financial position. Furthermore,activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, including its books and records provisions or anti-bribery provisions, or the U.K. Bribery Act and similar foreign laws and regulations; andclaims madeentity that is subject to sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury.insurance policiesresults of operations, financial position, and cash flows.obtain or maintain insurance coverage at reasonable costs or at all. facility incursfacilities, or the facilities of our third-party vendors, incur damage or power is lost for a significant length of time, our business will suffer.facilityfacilities that could be damaged if our facility incursthe facilities incur physical damage or in the event of an extended power failure. We have backup power systems in addition to backup generators to maintain power to all critical functions, but any loss of these products or samples could result in significant delays in our commercialization or drug development process.cyber-securitycybersecurity breach could adversely affect our business.If we failretain our existing key personnel or fail to attract and retain additional key personnel, the development of our product candidates and commercialization of our products and the related expansion of our business will be delayed or stopped.We are highly dependent upon our senior management and scientific team, the unexpected loss of whose services might impede the achievement of our development and commercial objectives. Competition for key personnel with the experience that we require is intense and is expected to continue to increase.Investing in Our inability to attract and retain the required number of skilled and experienced management, commercial, operational and scientific personnel will harm our business because we rely upon these personnel for many critical functions of our business. If because of our use of hazardous materials, we violate any environmental controls or regulations that apply to such materials, we may incur substantial costs and expenses in our remediation efforts.Our research and development involves the controlled use of hazardous materials, chemicals and various radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and some waste products. Accidental contamination or injury from these materials could occur. In the event of an accident, we could be liable for any damages that result and any liabilities could exceed our resources. Compliance with environmental laws and regulations or a violation of such environmental laws and regulations could require us to incur substantial unexpected costs, which would materially and adversely affect our results of operations.
Common Stock45Risks relating to investing in our common stockSeveralmore thanapproximately 50% of BioCrystour common stock and can individually, and as a group, influence our operations based upon their concentrated ownership. These stockholders, if they act together,ownership and may also be able to influence the outcome of matters requiring approval of the stockholders, including the election of our directors and other corporate actions.September 30, 2017,March 31, 2023, the 52-week range of the market price of our stock was from $2.82$7.61 to $9.25$18.00 per share. The following factors, in addition to other risk factors described in this section, may have, and in some cases have had, a significant impact on the market price of our common stock:•announcements of technological innovations or new products by us or our competitors;•developments or disputes concerning patents or proprietary rights;•additional dilution through sales of our common stock or other derivative securities;•status of new or existing licensing or collaborative agreements and government contracts;•announcements relating to the status of our programs;•developments and announcements regarding new and virulent strains of influenza;•we or our partners achieving or failing to achieve development milestones;•publicity regarding actual or potential medical results relating to products under development by us or our competitors;•publicity regarding certain public health concerns for which we are or may be developing treatments;•regulatory developments in both the United States and foreign countries;•public concern as to the safety of pharmaceutical products;•actual or anticipated fluctuations in our operating results;•changes in financial estimates or recommendations by securities analysts;•changes in the structure of healthcare payment systems, including developments in price control legislation;•announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;•additions or departures of key personnel or members of our board of directors;•purchases or sales of substantial amounts of our stock by existing stockholders, including officers or directors;•economic and other external factors or other disasters or crises; and•period-to-period fluctuations in our financial results.46October 31, 2017,April 28, 2023, there were 98,404,761188,934,787 shares of our common stock outstanding. We may from time to time issue securities in relation to a license arrangement, collaboration, merger or acquisition. We may also sell, for our own account, shares of common stock or other equity securities, from time to time at prices and on terms to be determined at the time of sale.October 31, 2017,April 28, 2023, there were 13,530,57234,185,014 stock options and restricted stock units outstanding 1,606,959and 11,740,717 shares available for issuance under our Amended and Restated Stock Incentive Plan (inclusive of the 7,000,000 shares that are subject to stockholder approval at our annual meeting of stockholders to be held on June 13, 2023), 6,185,479 stock options and 330,270restricted stock units outstanding and 480,621 shares available for issuance under our Amended and Restated Inducement Equity Incentive Plan, and 5,616,817 shares available for issuance under our Amended and Restated Employee Stock Purchase Plan. In addition, we could also make equity compensation grants outside of our Amended and Restated Stock Incentive Plan or Amended and Restated Inducement Equity Incentive Plan. The shares underlying existing stock options, restricted stock units and possible future stock options, stock appreciation rights and stock awards have been or will be, as applicable, registered pursuant to registration statements on Form S-8.Act.Act of 1933, as amended (the “Securities Act”). Our registration obligations pursuant to the Registration Rights Agreement cover all shares then held or thereafter acquired by the Baker Entities, for up to ten years, and include our obligation to facilitate certain underwritten public offerings of our common stock by the Baker Entities in the future. On May 10, 2017, we filed a registration statement on Form S-3 with respect to 11,710,951 shares of common stock held by the Baker Entities. Subsequently, on November 21, 2019, certain of the Baker Entities acquired pre-funded warrants to purchase 11,764,706 shares of our common stock at a price of $1.69 per warrant, of which warrants to purchase 11,511,472 shares of our common stock remain outstanding. In addition, on June 1, 2020, we issued to certain of the Baker Entities pre-funded warrants to purchase 3,511,111 shares of our common stock at a price of $4.49 per warrant. Each warrant has an exercise price of $0.01 per share. If the Baker Entities, by exercising their underwritingregistration rights or otherwise, sell a large number of our shares, or the market perceives that the Baker Entities intend to sell a large number of our shares, this could adversely affect the market price of our common stock.4,800,0005,000,000 shares of undesignated preferred stock and to determine the rights, preferences, privileges and restrictions of those shares without further vote or action by our stockholders. The rights of the holders of any preferred stock that may be issued in the future may adversely affect thecertificateCertificate of incorporationIncorporation provides for staggered terms for the members of the board of directors and supermajority approval of the removal of any member of the board of directors and prevents our stockholders from acting by written consent or from calling special meetingsconsent. Our Certificate of stockholders. Our certificateIncorporation also requires supermajority approval of any amendment of these provisions. These provisions and other provisions of our by-lawsAmended and Restated Bylaws and of Delaware law applicable to us could delay or make more difficult a merger, tender offer or proxy contest involving us.47INDEX TO EXHIBITSNumber Description 3.1 3.13.2 3.3 Certificate of Increase of Authorized Number of Shares of Series B Junior Participating Preferred Stock. Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed November 4, 2008.3.43.53.43.5 3.6 (10.1)3.7(31.1) (31.2) (32.1) (32.2) (101) Financial statements from the Quarterly Report on Form 10-Q of BioCryst Pharmaceuticals, Inc. for the three months ended September 30, 2017,March 31, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Loss, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.Statements, tagged as blocks of text and including detailed tags._______________________(104) Cover Page Interactive Data File – The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 is formatted in Inline XBRL (contained in Exhibit 101). ( ) Filed or furnished herewith. 48November, 2017.May, 2023.BIOCRYST PHARMACEUTICALS, INC. /s/ Jon P. Stonehouse Jon P. Stonehouse (Principal Executive Officer) /s/ Thomas R. Staab, IIAnthony Doyle Thomas R. Staab, IIAnthony Doyle Senior Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer) /s/ Michael L. Jones Michael L. Jones Executive Director, Finance and Principal Accounting Officer (Principal Accounting Officer) 49