BIOVIE INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, and Section 27A of the Securities Act of 1933. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. These factors among others, include our; research and development activities and, distributor channel; compliance with regulatory impositions requirements; and our capital needs Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the Securities and Exchange Commission (the “SEC”) that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business. The following discussion of the Company’s financial condition and the results of operations should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this report. Management’s Discussion BioVie Inc. is a clinical-stage company developing innovative drug therapies to overcome unmet medical needs in chronic debilitating conditions. In neurodegenerative disease, BioVie acquired the biopharmaceutical assets of NeurMedix, Inc., a related party privately held clinical-stage pharmaceutical company and related party affiliate, in June 2021. The acquired assets include NE3107, a potentially selective inhibitor of inflammatory ERK signaling that, based on animal studies, is believed to reduce neuroinflammation. NE3107 is a novel orally administered small molecule that is thought to inhibit inflammation-driven insulin resistance and major pathological inflammatory cascades with a novel mechanism of action. There is emerging scientific consensus that both inflammation and insulin resistance may play fundamental roles in the development of Alzheimer’s and Parkinson’s Disease, and NE3107 could, if approved, represent an entirely new medical approach to treating these devastating conditions affecting an estimated 6 million Americans suffering from Alzheimer’s and 1 million from Parkinson’s. The FDA has authorized a potentially pivotal Phase 3 randomized, double-blind, placebo-controlled, parallel group, multicenter study to evaluate NE3107 in subjects who have mild to moderate Alzheimer’s disease (NCT04669028). We initiated this trial on August 5, 2021 and are targeting primary completion in mid-calendar year 2023. On January 20, 2022, the Company initiated a study by treating the first patient, in its Phase 2 study assessing NE3107’s safety and tolerability and potential pro-motoric impact in Parkinson’s disease patients. The NM201 study (NCT05083260) is a double-blind, placebo-controlled, safety, tolerability, and pharmacokinetics study in Parkinson’s Disease (PD). Participants will be treated with carbidopa/levodopa and NE3107 or placebo. Forty patients with a defined PD medication “off state” will be randomized 1:1 placebo to active NE3107 20 mg twice daily for 28 days. Safety assessments will look at standard measures of patient health and potential for drug-drug interactions affecting L-dopa pharmacokinetics and activity. Exploratory efficacy assessments will use the Motor Disease Society Unified Parkinson’s Disease Rating (MDS-UPDRS) parts 1-3, ON/OFF Diary, and Non-Motor Symptom Scale. Topline results are expected for the NM201 study in December 2022. In liver disease , our Orphan Drug candidate BIV201 (continuous infusion terlipressin) is being developed as a future treatment option for patients suffering from ascites and other life-threatening complications of advanced liver cirrhosis caused by NASH, hepatitis, and alcoholism. The initial target for BIV201 therapy is refractory ascites. These patients suffer from frequent life-threatening complications, generate more than $5 billion in annual treatment costs, and have an estimated 50% mortality rate within 6 to 12 months. The US Food and Drug Administration (FDA) has not approved any drug to treat refractory ascites. A Phase 2a clinical trial of BIV201 was completed in 2019, and a multi-center, randomized 30-patient Phase 2b trial is currently underway. Top-line results from this trial are expected in mid-calendar year 2023. - 17 - Table of Contents Comparison of the three months ended September 30, 2022 to the three months ended September 30, 2021 Net income (loss) The net loss for the three months ended September 30, 2022 was approximately $10.4 million as compared $5.5 million for the three months ended September 30, 2021. The increase in net loss of approximately $4.9 million was primarily due to increased losses from operations of $3.3 million from increased activities in our clinical studies, increase in interest expense of $1.1 million from the notes payable financing obtained in November 2021 and a change in fair value of derivative liabilities of approximately $567,000. Total operating expenses for the three months ended September 30, 2022 were approximately $8.8 million as compared to $5.5 million for the three months ended September 30, 2021. The net increase of approximately $3.3 million during the three months ended September 30, 2022 was primarily due to an increase in research and development expenses of approximately $3.7 million from the increased activities of our clinical studies; offset by decline selling general and administrative expenses of approximately $388,000. Research and Development Expenses Research and development expenses were approximately $6.8 million and $3.1 million for the three months ended September 30, 2022 and 2021, respectively. The net increase of approximately $3.7 million, consisted of an increase of approximately $4.1 million primarily attributed to the increased activities in our clinical studies offset by $446,000 from a net decrease in the clinical team’s compensation expense. The Neuroscience NE3107 studies accounted for approximately $3.9 million of the net increase in research and development expenses as both studies were significantly more active during the three months ended September 30, 2022 over the three months ended September 30, 2021, as the Parkinson’s Phase 2 study initiated in January 2022, became fully enrolled and with the top-line data read expected in December 2022 and the Alzheimer Phase 3 study nears full enrollment. Our Orphan Drug candidates BIV201’s Phase 2b study initiated in June 2021 accounted for approximately $159,000 of the net increase for three months ended September 30, 2022. The total increase in the clinical studies expenses of $4.1 million was offset by a net decline in clinical team’s total compensation expense of approximately $446,000. The net decline in the clinical team’s compensation consisted of an increase of approximately $1.1 million in the clinical team’s compensation from expansion of the clinical team, offset by $1.6 million representing declines in stock compensation expense of approximately $578,000 from stock options awarded and the retention compensation of $1.0 million accrued in the three months ended September 30, 2021. Selling, General and Administrative Expenses Selling, general and administrative expenses were approximately $2.0 million and $2.4 million for the three months ended September 30, 2021 and 2020, respectively. The net decrease of approximately $388,000 was primarily attributed to decline in compensation expense of approximately $641,000, representing a decline stock-based compensation expense of approximately $828,000 representing restricted stock units and stock options awarded to the executive management team in the three months ended September 30, 2021 and increase of approximately $187,000 related to increase in staff from two to four and annual salary increases. The remaining net increase of approximately $239,000 was attributed to increased expenses related to being listed on a national exchange including listing fees and investor relations and advisory $197,000, increase in directors stock compensation of approximately $162,000 stock options awarded and other net increases totaling approximately $54,000 representing insurance and office and website development expenses offset by a decline in other legal and professional fees of approximately $174,000. Other Income and Expense Other expense, net was $1.6 million for the three months ended September 30, 2022 compared nearly nil for the three months ended September 30, 2021. Interest expense of $1.1 million recognized during the three months ended September 30, 2022 was attributed to the $15 million debt financing obtained in November 2021 and the change in fair value of the related derivative liabilities recognized for the three months ended September 30, 2022 was approximately $567,000. - 18 - Table of Contents Capital Resources and Liquidity As of September 30, 2022, the Company had working capital of approximately $17.5 million, cash of approximately $21.2 million, stockholders’ equity of approximately $6.0 million, and an accumulated deficit of approximately $261.4 million. In addition, the Company has not generated any revenues and no revenues are expected in the foreseeable future. The Company’s future operations are dependent on the success of the Company’s ongoing development and commercialization efforts, as well as its ability to secure additional financing as needed. The future viability of the Company is largely dependent upon its ability to raise additional capital to finance its operations. Management expects that future sources of funding may include sales of equity, obtaining loans, or other strategic transactions. The duration and spread of the COVID-19 pandemic and the long-term impact of COVID-19 and its variants on the financial markets and the overall economy are highly uncertain and cannot be predicted at this time. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s ability to raise funds may be materially adversely affected. In addition, the COVID-19 pandemic has created a widespread labor shortage, including a shortage of medical professionals, and has impacted and may continue to impact the potential patient participation in our studies, which may adversely impact our ability to continue or complete our clinical trials in the planned timeline. Although management continues to pursue the Company’s strategic plans, there is no assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company, if at all, to fund continuing operations. These circumstances raise substantial doubt on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. - 19 - Table of Contents Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. Critical Accounting Policies and Estimates For the three-month period ended September 30, 2022, there were no significant changes to the Company’s critical accounting policies as identified in the Annual Report Form 10-K for the fiscal year ended June 30, 2022. New Accounting Pronouncements The Company considered the applicability and impact of recent accounting pronouncements and determined those to be either not applicable or expected to have minimal impact on our balance sheets or statement of operations. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable to smaller reporting companies.