BIOVIE INC. 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Unregistered Sales of Securities All sales of unregistered securities during the year ended June 30, 2023 were previously disclosed in a Quarterly Report on Form 10-Q or Current Report on Form 8-K. Issuer Purchases of Common Stock During the year ended June 30, 2023, there were no issuer repurchases of shares of Common Stock. ITEM 6. [Reserved] ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. Overview 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. The Company acquired the biopharmaceutical assets of NeurMedix, Inc. (“NeurMedix”), a privately held clinical-stage pharmaceutical company, in June 2021 (See Note 6 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 AD (NCT04669028). The Company is targeting primary completion of this study in the fourth quarter of calendar year 2023. The Phase 2 study of NE3107 in Parkinson’s disease (“PD”) (NCT05083260), completed in December 2022 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. This trial was launched with two design objectives: 1) the primary objective was 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 were met. The Company continues to process its findings from its completed study as it prepares for the next round of clinical studies in PD. Neuroinflammation, insulin resistance, and oxidative stress are common features in the major neurodegenerative diseases, including AD, PD, frontotemporal lobar dementia, and Amyotrophic lateral sclerosis (ALS). NE3107 is an oral small molecule, blood-brain permeable, compound with potential anti-inflammatory, insulin sensitizing, and ERK-binding properties that may allow it to selectively inhibit ERK-, NFκB- and TNF-stimulated inflammation. NE3107’s potential to inhibit neuroinflammation and insulin resistance forms the basis for the Company’s work testing the molecule in AD and PD patients. NE3107 is patented in the United States, Australia, Canada, Europe and South Korea. 31 The Company’s Orphan drug candidate BIV201 (continuous infusion terlipressin), with FDA Fast Track status, is being evaluated in a U.S. Phase 2b study (NCT04112199) for the treatment of refractory ascites due to liver cirrhosis. In March 2023, the Company announced enrollment was paused and that data from the first 15 patients treated with BIV201 plus SOC appeared to result in a 34% reduction in ascites fluid during the 28 days after treatment initiation compared to the 28 days prior to treatment (p=0.0046). This improvement was significantly different from those treated with SOC only who experienced a mean increase in ascites fluid of 3.1% (BIV201 vs. SOC p=0.05). Patients who completed the treatment with BIV201 experienced a 53% reduction in ascites fluid (p=0.001), which was significantly different from those treated with SOC (p=0.007). This improvement was sustained in this group during the three months after treatment initiation as compared to the three-month pre-treatment period (43% reduction, p=0.06). There were no unexpected serious adverse events and overall safety was consistent with the patient population. Terlipressin was administered with a continuous low dose infusion via a portable pump in two 28-day treatment cycles. The primary endpoints are the incidence of complications of at least Grade 2 severity, and the change in cumulative ascites in the 12-week period following randomization compared to a 12-week pre-treatment period. The BIV201 trial planned to enroll 30 patients to be treated in the home care setting. The Company requested and has been granted a meeting with the FDA to discuss the design and endpoints for definitive clinical testing of BIV201 for the treatment of ascites due to chronic liver cirrhosis. The active agent is approved in the U.S. and in about 40 countries for related complications of advanced liver cirrhosis. Results of Operations Comparison of the Year Ended June 30, 2023 to the Year Ended June 30, 2022 Net loss The net loss for the year ended June 30, 2023 was approximately $50.3 million as compared to net loss of $26.1 million for the year ended June 30, 2022. The increase in net loss of approximately $24.2 million was primarily due to increased clinical activities of approximately $16.0 million, administrative expenses of approximately $1.8 million, an increase in other expense of approximately $6.3 million primarily attributed to the change in fair value of derivative liabilities of approximately $4.7 million. Total operating expenses for the year ended June 30, 2023, were approximately $45.1 million as compared to $27.3 million for the year ended June 30, 2022. The net increase of approximately $17.8 million was due to an increase in research and development expenses of approximately $16.0 million due to our increased clinical activities, and an increase in selling general and administrative expenses of approximately $1.8 million. Research and Development Expenses Research and development expenses were approximately $33.3 million and $17.3 million for the year ended June 30, 2023, and 2022, respectively. The net increase of approximately $16.0 million, was attributed to increased activities in our clinical studies of approximately $14,3 million; increased expenses in Chemistry, Manufacturing and Control of approximately $344,000, and increased publications and conferences expenses of approximately $273,000, as we published our posters for various congresses that we participated; and an increase compensation expense of approximately $1.3 million. During the year we added for employees including a SVP Discovery, SVP Chief Regulatory Officer, VP of Clinical & Medical Affairs and a VP Safety & Pharmacovigilance. $14.1 million of the increase in research and development expenses of $16.0 million was primarily due to the Neuroscience NE3107 studies, which were significantly more active during the year ended June 30, 2023 compared to the year ended June 30, 2022. The Parkinson’s Phase 2 study initiated in January 2022, completed and reported its top-line data results in December 2022, and the Alzheimer Phase 3 study reached full enrollment in November 2022. Our Orphan drug candidate BIV201’s Phase 2b study, which was initiated in June 2021, accounted for approximately $143,000 of the net increase in research and development expenses for the year ended June 30, 2023. Selling, General and Administrative Expenses Selling, general and administrative expenses were approximately $11.6 million and $9.8 million for the year ended June 30, 2023, and 2022, respectively. The net increase of approximately $1.8 million was primarily attributed to increased stock compensation expense of approximately $1.1 million related to the board of directors’ annual compensation; a net increase in legal, investor relations and other professional fees totaling approximately $405,000, an increase in management compensation expense of approximately $115,000, an increase in business development and fund raising activities of approximately $107,000 and increase in insurance expense of approximately $77,000. 32 Other expense/income, net Other expense, net was $5.2 million compared to other income, net of $1.2 million, for the year ended June 30, 2023 and 2022, respectively. The net increase in other expenses of $6.4 million represented an increase in interest expense of approximately $2.1 million and the change in fair value of the related derivative liabilities of approximately $4.7 million, offset by increase in interest income of approximately $518,000 from investments in U.S. Treasury Bills. Capital Resources and Liquidity As of June 30, 2023 the Company had working capital of approximately $19.5 million, cash and cash equivalents and U.S. treasury bills totaling of approximately $33.9 million, stockholders’ equity of approximately $15.3 million, and an accumulated deficit of approximately $301 million. In addition, the Company has not generated any revenues to date 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. During the year ended June 30, 2023, the Company sold approximately 7.5 million shares of its Common Stock under its Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co for total net proceeds of approximately $49.5 million after 3% commissions and cost totaling approximately $2 million. The Company has not generated any revenue 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. 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. Recently Issued Accounting Pronouncement In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” This amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. In November 2019, the FASB issued No. 2019-10, Financial Instruments --Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date of ASU 2016-13 for Smaller Reporting Companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not expect a material impact from the adoption of ASU 2016-13 on the financial statements. Off-Balance Sheet Arrangements 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. 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. 33 Critical Accounting Policies and Estimates Cash and cash equivalents Cash and cash equivalents consisted of cash deposits and money market funds held at a bank and funds held in a brokerage account which included a U.S. treasury money market fund and U.S. Treasury Bills with original maturities of three months or less. Concentration of Credit Risk in the Financial Service Industry As of June 30, 2023, the Company had cash deposited in certain financial institutions in excess of federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents. However, in March and April 2023, certain U.S. government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in financial markets. While these events have not had a material direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations. Investments in U.S. Treasury Bills Investments in U.S. Treasury Bills with maturities greater than three months, are accounted for as available for sale and are recorded at fair value. Unrealized gains were included in other comprehensive income in the accompanying the statements of operations and comprehensive loss. Accounting for Stock-based Compensation The Company follows the provision of ASC 718- Stock Compensation, which requires the measurement of compensation expense for all shared – based payment awards made to employees and non-employee director, including employee stock options. Share-based compensation expense is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is generally recognized as an expense over the requisite service period, net of forfeitures. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets and would be charged to earnings. Purchase Accounting for Transactions with Related Party Purchase accounting for transactions with related party, entities under common control, are recorded at the historical carrying cost with no step up in basis to the fair market value of the asset or liability are recognized. Leases The Company determines whether an arrangement contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and net of current portion of operating lease liabilities on our balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments. The Company does not include options to extend or terminate the lease term unless it is reasonably certain that the Company will exercise any such options. Rent expense is recognized under the operating leases on a straight-line basis. The Company does not recognize right of-use assets or lease liabilities for short-term leases, which have a lease term of 12 months or less, and instead will recognize lease payments as expense on a straight-line basis over the lease term. 34 Fair value measurement of assets and liabilities We determine the fair values of our financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value: Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 - Inputs are unobservable inputs based on our assumptions. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS Our financial information required to be filed hereunder are indexed under Item 15 of this report and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not applicable.