Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
BOTA > SEC Filings for BOTA > Form 10-Q on 12-May-2014All Recent SEC Filings

Show all filings for BIOTA PHARMACEUTICALS, INC.

Form 10-Q for BIOTA PHARMACEUTICALS, INC.


12-May-2014

Quarterly Report


ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about our business. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In most cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expect," "plan," "intend," "anticipate," "believe," "estimate," "project," "predict," "forecast," "potential," "likely" or "possible", as well as the negative of such expressions, and similar expressions intended to identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to:

? our plans surrounding the future clinical development of laninamivir octanoate;

? un-reimbursable expenses we may incur as a result of the Stop-Work Order and termination of the BARDA contract for the development of laninamivir;

? the nature and extent of a final termination settlement with BARDA as result of the termination of the BARDA contract for the development of laninamivir octanoate;

? the time in which we can finalize and report the top-line data from the IGLOO trial;

? our intended use of net proceeds from the recent public offering of our common stock;

? our future cost structure and operating results;

? our anticipation that we will generally incur annual net losses from operations in the future due to our intention to continue to support the preclinical and clinical development of our product candidates;

? our future financing requirements, the factors that may influence the timing and amount of these requirements, and our ability to fund them;

? the number of months that our current cash, cash equivalents and anticipated future proceeds from existing royalty-bearing licenses, our recently terminated contract with BARDA, and other existing license and collaboration agreements will allow us to operate; and

? our plan to continue to finance our operations with our existing cash, cash equivalents and proceeds from existing or potential future royalty-bearing licenses or collaborative research and development arrangements, or through future equity and/or debt financings or other financing vehicles.


These statements reflect our current views with respect to future events and are based on assumptions and are subject to key risks and uncertainties including, without limitation: BARDA fulfilling and honoring its contractual commitments with the company based on the termination of our contract, our ability to successfully negotiate a fair final termination settlement with BARDA as a result of the termination of the contract to develop laninamivir octanoate in the U.S; GSK or Daiichi Sankyo continuing to generate net sales from Relenza® and Inavir®, respectively, and otherwise continuing to fulfill their obligations under our royalty-bearing license agreements with them in the future; we, the FDA or similar foreign regulatory agency, a data safety monitoring board, or an institutional review board, delaying, limiting, suspending or terminating the clinical development of laninamivir octanoate at any time due to a lack of safety, tolerability, anti-viral activity, commercial viability, regulatory or manufacturing issues, or any other reason whatsoever; the results of research activities related to our product candidates being unfavorable, delayed or terminated; the safety or efficacy data from ongoing or future preclinical studies of any of our product candidates not supporting further development of that product candidate; our capacity to successfully manage worldwide clinical trials on a timely basis; our ability to comply with extensive government regulations in various countries and regions where we expect to conduct clinical trials that are applicable to our business; our ability to maintain and or recruit sufficient human resources, including executive management and key employees; our ability to secure, manage and retain qualified third-party clinical research, preclinical research, data management and contract manufacturing organizations who we rely on to assist us in the design, development and implementation of the clinical and preclinical development of our product candidates, including laninamivir octanoate; third-party contract research, data management and manufacturing organizations continuing to fulfill their contractual obligations or otherwise performing satisfactorily in the future; our ability to manufacture and maintain sufficient quantities of preclinical and clinical trial material on hand to complete our preclinical studies or clinical trials on a timely basis; our ability, or that of our clinical research organizations or clinical investigators to recruit and enroll a sufficient number of patients in our clinical trials on a timely basis; our failure to obtain regulatory approval to advance the clinical development of or to market our product candidates; our ability to protect and maintain our proprietary intellectual property rights from unauthorized use by others or not infringe on the intellectual property rights of others; the U.S. government defaulting on its funding obligations to BARDA; a prolonged shutdown of the U.S. government that delays or suspends approved cash payments to us; the condition of the financial equity and debt markets and our ability to raise sufficient funding in such markets; our ability to successfully manage our expenses, operating results and financial position in line with our plans and expectations; changes in general economic business or competitive conditions related to industry or product candidates; and other statements contained elsewhere in this Quarterly Report on Form 10-Q (including the "Risk Factors" in

Part II, Item 1A of this Quarterly Report).

There may be events in the future that we are unable to predict accurately, or over which we have no control. You should completely read this Form 10-Q and the documents that we reference herein and that have been filed or incorporated by reference as exhibits and with the understanding that our actual future results may be materially different from what we expect. Our business, financial condition, results of operations, and prospects may change. We may not update these forward-looking statements, even though our situation may change in the future, unless we have an obligation under the federal securities laws to update and disclose material developments related to previously disclosed information. We qualify all of the information presented in this Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.

Biota is a registered trademark of Biota Pharmaceutical, Inc., Relenza® is a trademark of GlaxoSmithKline plc, Inavir® is a registered trademark of Daiichi Sankyo Company, Ltd, and TwinCaps® is a registered trademark of Hovione FarmaCiencia SA.

The following is a discussion and analysis of the major factors contributing to our results of operations for the three and nine month periods ended March 31, 2014, and our financial condition at that date, and should be read in conjunction with the financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Company Overview

We are a biopharmaceutical company focused on the discovery and development of innovative anti-infective products to prevent and treat serious and potentially life-threatening infectious diseases. We were incorporated in the state of Delaware in 1969, and our corporate headquarters are located in Alpharetta, Georgia.


We are currently focused on developing oral, small molecule compounds to treat a number of respiratory-related infections. Our most advanced clinical-stage program is laninamivir octanoate, a long-acting neuraminidase inhibitor ("NI") we are developing for the treatment of influenza A and B. We recently completed enrolling patients in a multi-national Phase 2 trial for laninamivir octanoate, which we refer to as "IGLOO." We also have a Phase 2 compound named vapendavir, which is in clinical development for the treatment of human rhinovirus ("HRV") infections in patients with asthma. In addition to these clinical stage development programs, we are developing an orally bioavailable compounds for the treatment of respiratory syncytial ("RSV") infections in children, the elderly, and immune-compromised patients.

We previously developed zanamivir, a NI that is marketed worldwide by GlaxoSmithKline ("GSK") as Relenza® for the prevention and treatment of influenza A and B. GSK developed and markets Relenza® pursuant to a royalty-bearing research and license agreement we entered into with GSK in 1990. In 2003, we entered into a collaboration and license agreement with Daiichi Sankyo Company, Limited ("Daiichi Sankyo"), under which each party cross-licensed its intellectual property related to second-generation, long-acting NI's, including FLUNET and laninamivir octanoate. In 2009, we entered into a separate commercialization agreement with Daiichi Sankyo, which provided Daiichi Sankyo an exclusive license to commercialize laninamivir octanoate in Japan and entitled us to a royalty on net sales of laninamivir octanoate in Japan. In September 2010, laninamivir octanoate was approved for sale by the Japanese Ministry of Health and Welfare for the treatment of influenza A and B in adults and children and, in December 2013, it was also approved for the prevention of influenza A and B in Japan. Laninamivir octanoate is marketed in Japan by Daiichi Sankyo as Inavir®. In 2009, we filed an Investigational New Drug application ("IND") with the United States Food and Drug Administration ("FDA") to develop laninamivir octanoate in the United States. In 2011, we were awarded a contract from the U.S. Office of Biomedical Advanced Research and Development Authority ("BARDA") designed to provide up to $231 million in support of the development of and submission for a New Drug Application ("NDA") of laninamivir octanoate for the treatment of influenza A and B infections in the United States.

On May 7, 2014 the U.S. Department of Health and Human Services ("HHS") office of the Assistant Secretary for Preparedness and Response ("ASPR") and BARDA notified the Company of its decision to terminate the contract for the development of laninamivir octanoate for the convenience of the U.S. government. The decision to terminate for convenience was the result of a recently concluded In-Process Review ("IPR").

Although several of our influenza product candidates have been successfully developed and commercialized by other larger pharmaceutical companies under collaboration, license or commercialization agreements with us to-date, we have not independently developed or received regulatory approval for any product candidate, and we do not currently have any sales, marketing or commercial capabilities. Therefore, it is possible that we may not successfully derive any significant product revenues from any of our existing or future development-stage influenza or other product candidates that we are developing now, or may develop in the future. We expect to incur losses for the foreseeable future as we intend to support the clinical and preclinical development of our product candidates. Also, due to the recent termination of our contract with BARDA, we anticipate that our revenue from service and cost of revenue will decline substantially in the future as compared to current levels.

Recent Corporate Developments

Laninamivir Octanoate/BARDA - On April 29, 2014, we announced that we had been notified by the U.S. Department of Health and Human Services ("HHS") office of the Assistant Secretary for Preparedness and Response (ASPR) and BARDA that pending a decision regarding the outcome of a recently completed In Process Review (IPR) of our contract for the development of laninamivir octanoate, ASPR/BARDA had issued a Stop-Work Order notifying us to discontinue work on a number of activities under its contract. In the interim, we have indicated we would comply with the order and focus our efforts on critical path activities not covered by the order, namely completing the conduct of and finalizing the data from our Phase 2 IGLOO trial. We also announced that we anticipated that top-line data from the IGLOO trial would be available in the third quarter of 2014.


On May 8, 2014, we announced that HHS, ASPR and BARDA had notified us of their decision to terminate the contract for the development of laninamivir octanoate for the convenience of the U.S. government. The decision to terminate for convenience was the result of a recently concluded IPR of our contract for the development of laninamivir octanoate. We also announced that we intend to immediately begin negotiating a final termination settlement with ASPR/BARDA with respect to the termination of the contract. Subsequent to receiving the written notice of termination, we were verbally informed by ASPR/BARDA that the reasons for the U.S. government deciding to terminate our contract for convenience were not performance-related, but included: the challenging clinical development path and related costs to continue the development of laninamivir octanoate; the emergence of resistance to laninamivir octanoate in H7N9 virus strains; and the suitability of using laninamivir to treat critically ill, hospitalized influenza patients.

Public Offering - In January 2014, we reported that we had priced a public offering of 5,813,900 shares of our common stock at a purchase price of $4.30 per share. Later in January, we further reported that the underwriter had exercised its option to purchase 872,085 additional shares at the public offering price to cover over-allotments. The net proceeds to us from the sale of the shares, including the overallotment, after underwriting discounts and commissions and other offering expenses, were approximately $26.8 million. We intend to use the net proceeds from the offering for working capital and general corporate purposes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Results of Operations discusses our financial results, which (except to the extent described in the Notes thereto) have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

We base our estimates and judgments on historical experience, current economic and industry conditions, and various other factors that we believe to be reasonable under the circumstances. This forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies require significant judgment and estimates:

• Use of Estimates
• Revenue Recognition
• Accrued Expenses
• Share-Based Compensation

In March 2013, the FASB issued ASU No. 2013-05. We do not anticipate that its future adoption will have a material impact on our consolidated financial statements.


Results of Operations

Three Months Ended March 31, 2014 and March 31, 2013

Summary. We reported net income of $3.2 million for the three month period ended March 31, 2014, as compared to net income of $0.2 million in the same period of 2013. The $3.0 million increase in net income in 2014 was primarily the result of a $17.0 million increase in revenue related to both higher revenue from services and from royalties, and lower research and development expense, general and administrative expense and foreign currency loss of $0.4 million, $0.9 million, and $0.1 million respectively, offset in part by a $15.2 million increase in the cost of revenue and lower interest income of $0.2 million. Basic and diluted net loss per share were $0.09 for the three month period ended March 31, 2014, as compared to a basic and diluted net income per share of $0.01 in the same period of 2013.

We expect to incur losses for the foreseeable future as we intend to support the clinical and preclinical development of our product candidates. Also, due to the recent termination of our contract with BARDA, we anticipate that our revenue from service and cost of revenue will decline substantially in the future as compared to current levels.

Revenue. Revenue increased to $29.5 million for the three months ended March 31, 2014 from $12.5 million for the same period in 2013. The following table summarizes the key components of our revenue for the three months ended March 31, 2014 and 2013:

                                   Three Months Ended March 31
                                          (in millions)
                                   2014                  2013

Royalty revenues - Relenza®    $         4.2         $         1.7
- Inavir®                                3.9                   3.2
Revenue from services                   21.4                   4.8
Milestones and other revenue               -                   3.0
Total revenue                  $        29.5         $        12.5

Royalty revenues increased due to higher net sales of Relenza® and Inavir® during the quarter. Revenue from services increased primarily due to the ongoing clinical trials and product development and manufacturing activities related to advancing laninamivir octanoate under our BARDA contract. Milestone and other revenue decreased primarily due to a $2.9 million commercial milestone earned in 2013 for Inavir®.

Cost of Revenue. Cost of revenue increased to $19.3 million for the three months ended March 31, 2014 from $4.1 million for the same period in 2013. The following table summarizes the key components of our cost of revenue for the three months ended March 31, 2014 and 2013.

                                                                   Three Months Ended March 31
                                                                          (in millions)
                                                                    2014                  2013

Direct preclinical, clinical and product development expense   $         18.1         $         2.6
Salaries, benefits and share-based compensation expense                   1.1                   1.3
Other expense                                                             0.1                   0.2
Total cost of revenue                                          $         19.3         $         4.1


Direct preclinical, clinical and product development expense increased due to significantly more activities in 2014 related to ongoing clinical trials and product development and manufacturing related to advancing laninamivir octanoate under our BARDA contract. Salaries, benefits and share-based compensation expense decreased due to a higher allocation of personnel to other projects within research and development as compared to the same period last year. Other expense decreased to fewer other expenses related to the laninamivir octanoate program under the BARDA contract.

Research and Development Expense. Research and development expense decreased to $4.1 million for the three months ended March 31, 2014 from $4.5 million in the same period in 2013. The following table summarizes the key components of our research and development expense for the three months ended March 31, 2014 and 2013.

                                                                   Three Months Ended March 31
                                                                          (in millions)
                                                                   2014                  2013

Direct preclinical, clinical and product development expense   $         1.2         $         1.0
Salaries, benefits and share-based compensation expense                  1.5                   1.8
Other expense                                                            0.7                   0.8
Depreciation and facility related expense                                0.7                   0.8
Total research and development expense                         $         4.1         $         4.5

Direct preclinical, clinical and product development expense increased due to more clinical and manufacturing activities undertaken with respect to our vapendavir program, as well as recurring preclinical development activities for our RSV program. Salaries, benefits and share-based compensation decreased due to fewer personnel as a result of staff reductions that occurred in April and November 2013. Other expenses decreased due to a reduced number of research programs. Depreciation and facility related expenses decreased due to lower depreciation and operating expenses for our research facility.

General and Administrative Expense. General and administrative expense decreased to $2.5 million for the three months ended March 31, 2014 from $3.4 million for the same period in 2013. The following table summarizes the key components of our general and administrative expense for the three months ended March 31, 2014 and 2013.

                                                               Three Months Ended March 31
                                                                      (in millions)
                                                               2014                  2013

Salaries, benefits and share-based compensation expenses   $         1.4         $         1.8
Professional and legal fees expenses                                 0.4                   0.3
Other expenses                                                       0.7                   1.3
Total general and administrative expense                   $         2.5         $         3.4

Salaries, benefits and share-based compensation expense decreased due to fewer personnel as a result of staff reductions that occurred in April and November 2013. Professional and legal fees increased primarily due to higher legal expenses related to corporate matters. Other expenses decreased due to lower administrative expenses.


Foreign Exchange Loss, net. Foreign exchange loss decreased by $0.1 million in 2014 due to lower volatility in foreign currencies as compared to last year and the related recording of the translation of foreign currency balances in our subsidiaries that have a different functional currency than our reporting currency.

Interest Income. Interest income decreased in 2014 due to lower available interest rates on a higher balance of U.S. dollar cash holdings in 2014 as compared to last year.

Nine Months Ended March 31, 2014 and March 31, 2013

Summary. We reported a net loss of $0.8 million for the nine month period ended March 31, 2014, as compared to a net loss of $2.4 million in the same period of 2013. The $1.6 million decrease in net loss in 2014 was primarily the result of a $36.0 million increase in revenue related to both higher revenues from services and from royalties, and lower research and development expense and general and administrative expense of $2.3 million and $5.7 million, respectively, offset in part by a $28.7 million increase in the cost of revenue, a decrease in non-recurring other income of $12.0 million recorded in 2013 related to a gain on merger and a research and development tax credit, lower interest income of $1.0 million, and an increase in foreign exchange loss of $0.7 million. Basic and diluted net loss per share were $(0.03) for the nine month period ended March 31, 2014, as compared to a basic and diluted net income per share of $(0.09) in the same period of 2013.

Revenue. Revenue increased to $60.3 million for the nine months ended March 31, 2014 from $24.3 million for the same period in 2013. The following table summarizes the key components of our revenue for the nine months ended March 31, 2014 and 2013:

                                   Nine Months Ended March 31
                                          (in millions)
                                   2014                  2013

Royalty revenue - Relenza®     $         9.7         $         2.7
- Inavir®                                4.4                   4.1
Revenue from services                   46.1                  14.5
Milestones and other revenue             0.1                   3.0
Total revenue                  $        60.3         $        24.3

Royalty revenue increased due to higher net sales of Relenza® and Inavir® during 2014 as compared to last year. Revenue from services increased primarily due to the ongoing clinical trials of and product development and manufacturing activities related to advancing laninamivir octanoate under our BARDA contract. Milestone and other revenue decreased primarily due to a $2.9 million commercial milestone earned in 2013 for Inavir®.

Cost of Revenue. Cost of revenue increased to $41.4 million for the nine months ended March 31, 2014 from $12.7 million for the same period in 2013. The following table summarizes the key components of our cost of revenue for the nine months ended March 31, 2014 and 2013.

                                                              Nine Months Ended March 31
                                                                     (in millions)
                                                              2014                   2013

Direct preclinical, clinical and product development
expense                                                  $         37.5         $          8.5
Salaries, benefits and share-based compensation
expense                                                             3.5                    3.5
Other expense                                                       0.4                    0.7
Total cost of revenue expense                            $         41.4         $         12.7


Direct preclinical, clinical and product development expense increased due to significantly more activities in 2014 related to ongoing clinical trials and product development and manufacturing related to advancing laninamivir octanoate under our BARDA contract. Other expense decreased due to lower legal expenses related to the contracts for the laninamivir octanoate program under the BARDA contract.

Research and Development Expense. Research and development expense decreased to $11.3 million for the nine months ended March 31, 2014 from $13.6 million for the same period in 2013. The following table summarizes the key components of our research and development expense for the nine months ended March 31, 2014 and 2013.

. . .

  Add BOTA to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for BOTA - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.