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, as amended, and Section 27A of the Securities Act of 1933, as amended. 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 include, among others: our research and development activities and distributor channel; compliance with regulatory requirements; and our ability to satisfy 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. You are cautioned not to place undue reliance on the forward-looking statements in this report, which speak only as of the date of this report. 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, except as required by law. 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. (the “Company” or “we” or “our”) is a clinical-stage company developing innovative drug therapies to treat chronic debilitating conditions including neurological and neuro-degenerative disorders and liver disease. In neurodegenerative disease, the Company acquired the biopharmaceutical assets of NeurMedix, Inc. (“NeurMedix”), a privately held clinical-stage pharmaceutical company, in June 2021 (See Note 5 Related Party Transactions ). The acquired assets included NE3107, a potentially selective inhibitor of inflammatory extracellular single-regulated kinase (“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 Disease (AD) and Parkinson’s Disease (PD), and NE3107 could, if approved, represent an entirely new medical approach to treating these devastating conditions affecting an estimated 6 million Americans suffering from AD and 1 million Americans suffering from PD. In August 2021, the Company initiated the FDA authorized 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). The Company is targeting primary completion of this study in the third quarter of calendar year 2023. In December 2022, the Company released topline results from its Phase 2 study assessing NE3107’s safety and tolerability and potential pro-motoric impact in PD patients. The NM201 study (NCT05083260) was a double-blind, placebo-controlled, safety, tolerability, and pharmacokinetics study in PD participants treated with carbidopa/levodopa and NE3107. Forty-five patients with a defined L-dopa “off state” were randomized 1:1 to placebo:NE3107 20 mg twice daily for 28 days. The trial was launched with two design objectives: 1) the primary objectives are safety and a drug-drug interaction study (as requested by the FDA) to demonstrate the absence of adverse interactions of NE3107 with levodopa; and 2) the secondary objective is to determine if preclinical indications of promotoric activity and apparent enhancement of levodopa activity can be seen in humans. Both objectives of the study were met. The Company continues to process its findings from its completed NM201 study as it prepares for the next round of clinical studies in PD. In liver disease, the Company’s Orphan drug candidate BIV201 (continuous infusion terlipressin), with FDA Fast Track status, is being evaluated in a US Phase 2b study for the treatment of refractory ascites due to liver cirrhosis with top-line results anticipated in mid-2023. BIV201 is administered as a patent-pending liquid formulation. The active agent is approved in the U.S. and in about 40 countries for related complications of advanced liver cirrhosis. - 18 - Table of Contents Comparison of the three months ended December 31, 2022 to the three months ended December 31, 2021 Net loss The net loss for the three months ended December 31, 2022 was approximately $15.7 million as compared $5.4 million for the three months ended December 31, 2021. The increase in net loss of approximately $10.3 million was primarily due to increased losses from operations of $4.8 million due to increased clinical activities, an increase in interest expense of approximately $737,000 million from the notes payable financing obtained in November 2021 and a change in fair value of derivative liabilities of approximately $4.8 million. Total operating expenses for the three months ended December 31, 2022 were approximately $11.5 million as compared to $6.7 million for the three months ended December 31, 2021. The net increase of approximately $4.8 million for the three months ended December 31, 2022 was due to an increase in research and development expenses of approximately $2.3 million due to increased clinical activities and an increase in selling general and administrative expenses of approximately $2.5 million. Research and Development Expenses Research and development expenses were approximately $7.0 million and $4.7 million for the three months ended December 31, 2022 and 2021, respectively. The net increase of approximately $2.3 million, was comprised of a net increase in clinical study activities of approximately $1.4 million, offset by a decline in other development activities of approximately $526,000 ; and increase in Chemistry, Manufacturing and Control of approximately $542,000, and an increase in compensation expense of approximately $973,000 related to the Company’s expansion of the clinical team and consultants supporting its increased clinical activities over the three months ended December 31, 2021. The increase in research and development expenses of $1.3 million was primarily due to the Neuroscience NE3107 studies, which were significantly more active during the three months ended December 31, 2022 compared to the three months ended December 31, 2021. The Parkinson’s Phase 2 study initiated in January 2022, became fully enrolled with the top-line data read reported in December 2022 and the Alzheimer Phase 3 study is approaching full enrollment. Our Orphan drug candidate BIV201’s Phase 2b study, which was initiated in June 2021, accounted for approximately $100,000 of the net increase in research and development expenses for three months ended December 31, 2022. Selling, General and Administrative Expenses Selling, general and administrative expenses were approximately $4.4 million and $1.9 million for the three months ended December 31, 2022 and 2021, respectively. The net increase of approximately $2.5 million was primarily attributed to increased stock compensation expense of approximately $1.7 million related to the board of directors’ annual compensation, a net increase in management compensation expenses of approximately $342,000, due to an increase in staff from 2 to 4 persons, and equity awards granted in the three months ended December 31, 2022, and increased legal, investor advisory and other professional fees totaling approximately $478,000. Other Income and Expense Other expense, net was $4.2 million for the three months ended December 31, 2022 compared to other income of $1.3 million for the three months ended December 31, 2021. The net increase in other expense of $5.5 million was due to an increase in interest expense of approximately $737,000, which 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 December 31, 2022 was approximately $4.8 million. Comparison of the six months ended December 31, 2022 to the six months ended December 31, 2021 Net loss The net loss for the six months ended December 31, 2022 was approximately $26.1 million as compared to $11.0 million for the six months ended December 31, 2021. The increase in net loss of approximately $15.1 million was primarily due to increased losses from operations of $8.1 million due to increased clinical activities, an increase in interest expense of approximately $1.8 million from the notes payable financing obtained in November 2021, and a change in fair value of derivative liabilities of approximately $5.3 million. Total operating expenses for the six months ended December 31, 2022 were approximately $20.3 million as compared to $12.2 million for the six months ended December 31, 2021. The net increase of approximately $8.1 million during the six months ended December 31, 2022 was due to an increase in research and development expenses of approximately $6.0 million due to our increased clinical activities, and an increase in selling general and administrative expenses of approximately $2.0 million. Research and Development Expenses Research and development expenses were approximately $13.8 million and $7.8 million for the six months ended December 31, 2022 and 2021, respectively. The net increase of approximately $6.0 million, was comprised of a net increase of $5.4 million from increased clinical activities, offset by a decline in other development activities of approximately $543,000, an increase in Chemistry, Manufacturing and Control expense of approximately $542,000, and an increase in compensation expense of approximately $537,000 due to the Company’s expansion of the clinical team and consultants supporting our increased clinical activities over the six months ended December 31, 2021. The increase in research and development expenses of $5.3 million was primarily due to the Neuroscience NE3107 studies, which were significantly more active during the six months ended December 31, 2022 compared to the six months ended December 31, 2021. The Parkinson’s Phase 2 study initiated in January 2022, became fully enrolled, with the top-line data read reported in December 2022, and the Alzheimer Phase 3 study is approaching full enrollment. Our Orphan drug candidate BIV201’s Phase 2b study, which was initiated in June 2021, accounted for approximately $100,000 of the net increase in research and development expenses for six months ended December 31, 2022. Selling, General and Administrative Expenses Selling, general and administrative expenses were approximately $6.4 million and $4.3 million for the six months ended December 31, 2022 and 2021, respectively. The net increase of approximately $2.1 million was primarily attributed to increased stock compensation expense of approximately $1.8 million related to the board of directors’ annual compensation; a net increase in legal, investor relations and other professional fees totaling approximately $462,000, an increase in management compensation expense of approximately $477,000 due to an increase in staff from two to four persons, offset by stock compensation expense of approximately $758,000. Other Income and Expense Other expense, net was $5.8 million for the six months ended December 31, 2022 compared to other income of $1.3 million. The net increase in other expense of $7.1 million represented an increase in interest expense of approximately $1.8 million 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 six months ended December 31, 2022 of approximately $5.3 million. - 19 - Table of Contents Capital Resources and Liquidity As of December 31, 2022, the Company had cash of approximately $45.7 million, working capital of approximately $38.2 million, stockholders’ equity of approximately $26.1 million, and an accumulated deficit of approximately $277.1 million. In the three months ended December 31, 2022, the Company sold 4.3 million shares of its common stock under its Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co and B. Riley Securities, Inc. for total net proceeds of $32.5 million after 3% commissions and cost totaling approximately $1.2 million. 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. 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 continue to be 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. - 20 - Table of Contents Critical Accounting Policies and Estimates For the six-month period ended December 31, 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.