BioCryst: Estimate-Beating Q1 But Risks Are Considerable (NASDAQ:BCRX)

This is my second BioCryst (NASDAQ:BCRX) article, following 04/11/2022’s “BioCryst: After The Fall” (“FALL“). The downdraft referenced in the title to FALL was caused by its decision to pause enrollment in phase 2 trials for BCX9930 in treatment of diverse diseases.

FALL closed with the following statement “… I fear its shares are going to struggle to find traction until it can resolve its BCX9930 trial issues.” In this article now two years on I can report that BCX9930 is long gone; BioCryst jettisoned it in 12/2022.

At the time, it advised:

… based on new competitive data recently presented at the American Society of Hematology (ASH) annual meeting, the company no longer believes that BCX9930 would be commercially competitive, and is discontinuing the development of BCX9930.

Long approved ORLADEYO provides the bulk of BioCryst’s revenues

In its latest 10-K (p. 80), BioCryst notes its:

…principal sources of product sales are sales of ORLADEYO, which the Company began shipping to patients in December 2020, sales of peramivir to the Company’s licensing partners, and in prior years, sales of RAPIVAB to the U.S. Department of Health and Human Services (“HHS”) under the Company’s historical procurement contract, which was completed in 2022. …

Under the 10-K, Revenue heading note 2 (p. 89) to BioCryst’s consolidated financial statements, it provides the following detailed listing:

Slide 4 of the DECK lists ORLADEYO as on track for $1 billion peak revenues. Per its Q1, 2024 release, BioCryst’s financials are looking favorable.

The market has reacted positively to BioCryst’s Q1, 2024 earnings per its 05/06/2024) press release (the “RELEASE“), earnings call (THE “CALL“) and slide deck (the “DECK“). It beat on the top and bottom lines with revenues of $92.8 million, $7.29 million above expectations and GAAP EPS of -$0.17, $0.06 better than expectations.

Slide 11 from the DECK presents an unexpectedly sunny view for this stock for which the Seeking Alpha and Wall Street analyst communities have had strongly divergent views:

The RELEASE sets out the following four points on ORLADEYO’s Q1, 2024 (edited for brevity and clarity):

1. net income was $88.9 million (+30 percent year-over-year);
2. U.S. commercial team accelerated patients going through annual reimbursement reauthorization from free drug to paid drug faster than in previous years, generating higher than expected ORLADEYO revenue;
3. strong new patient growth, with the past two quarters having most new prescriptions in the United States since the first two quarters of its launch;
4. ex-U.S. net revenues contributed 10 percent of global ORLADEYO net, as the number of patients treated with ORLADEYO continued to grow strongly and consistently in new and existing markets.

In terms of cash, cash burn and cash runway as revealed during Q1, 2024 earnings, cash is the lynchpin. Slide 12 from the DECK provides a rundown:

Cash utilization for the quarter of $52.4 million is daunting. CFO Doyle addressed this as follows during the CALL:

Cash utilization will decline in the remaining quarters of the year as it did last year, closer to an average of $10 million to $12 million per quarter, and we expect to end the year with above $300 million in cash.

Based on an expectation of closing the quarter with >$300 million in cash, down from $338 million at the close of Q1, implies a burn of ~$12 million per quarter. Management provided no estimates of cash runway as such. However, taking the estimate of $300 million at close of 2024 with the estimates from slide 11 above implies that BioCryst’s cash runway has no anticipated end point.

BioCryst’s Q1 2024 earnings reports are encouraging, nonetheless there are significant risks

Despite its strong earnings, one dare not lose sight of the risks inherent in investing in BioCryst. The most obvious risk is concentration of revenues in ORLADEYO. In its 10-K (p. 15) it includes the table below listing therapies in development that if approved may compete with ORLADEYO:

The ones that seem most obviously problematic for ORLADEYO if they were approved include the first two and the last two. The first two because they have an oral route of administration, and the last two because they are curative.

While curative gene therapies are daunting competition; they tend to be so incredibly expensive that they are not destructive of markets for merely palliative therapies like ORLADEYO. Further, the gene therapies are still in early development. Any risk they might pose would be years down the road.

Of more immediate concern is KalVista Pharmaceuticals (KALV) sebetralstat which is on track for an NDA filing in H1/2024. Pharvaris’ (PHVS) deucrictibant is at an earlier stage of development.

BioCryst’s pipeline provides limited near-term revenue opportunities

Slide 9 of the DECK sets out BioCryst’s pipeline. With the exception of pediatric ORLADEYO, it is all early phase:

As for pediatric ORLADEYO, it is on schedule for a filing next year. In terms of market, it should contribute marginally. During the CALL, CCO Gayer pegged its market in the US as 500 patients.

The next most advanced pipeline therapy is BCX10013. As to this therapy, during the CALL, CEO Stonehouse noted:

We continue to make progress with BCX10013 and expect we will be able to decide on whether to partner or discontinue the program later this year.

That is certainly not a rousing endorsement. The balance of the pipeline is too early stage to merit consideration here.

Conclusion

I rate BioCryst as a highly speculative “Buy” for those who want to take a chance with their risk capital. My thinking is simple; it carries a market cap of <$1 billion. If one applies a highly conservative 3X multiple to that, one can support a possible trebling of its price.

I should point out that I currently have no skin in the game on this one. I may get in at any moment, or I may continue to hold back. This is a tough call. It has potential, but that billion dollar peak potential, may just be so much blue sky.