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. The Company acquired the biopharmaceutical assets of NeurMedix, Inc. (“NeurMedix”) a privately held clinical-stage pharmaceutical company and a related party in June 2021 . The acquired assets included NE3107. NE3107 is an investigational, 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 AD and PD, and NE3107 could, if approved by FDA, 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. Neurodengenerative Disease Program In neurodegenerative disease, the Company’s drug candidate NE3107 inhibits activation of inflammatory actions extracellular single-regulated kinase (“ERK”) and nuclear factor kappa-light-chain-enhancer of activated B cells (“NFκB”) (including interactions with tumor necrosis factor (“TNF”) signaling and other relevant inflammatory pathways) that lead to neuroinflammation and insulin resistance. NE3107 does not interfere with their homeostatic functions (e.g., insulin signaling and neuron growth and survival). Both inflammation and insulin resistance are drivers of AD and PD. Alzheimer’s Disease (NCT05083260) On November 29, 2023, the Company announced the analysis of its unblinded, topline efficacy data from its Phase 3 clinical trial (NCT04669028) of NE3107 in the treatment of mild to moderate AD. The study has co-primary endpoints looking at cognition using the Alzheimer’s Disease Assessment Scale-Cognitive Scale (ADAS-Cog 12) and function using the Clinical Dementia Rating-Sum of Boxes (CDR-SB). Patients were randomly assigned, 1:1 versus placebo, to receive sequentially 5 mg of NE3107 orally twice a day for 14 days, then 10 mg orally twice a day for 14 days, followed by 26 weeks of 20 mg orally twice daily. Upon trial completion, as the Company began the process of unblinding the trial data, the Company found significant deviation from protocol and current good clinical practices (“cGCPs”) violations at 15 study sites (virtually all of which were from one geographic area). This highly unusual level of suspected improprieties led the Company to exclude all patients from these sites and to refer the sites to the FDA Office of Scientific Investigations (“OSI”) for further action. After the patient exclusions, 81 patients remained in the Modified Intent to Treat population, 57 of whom were in the Per-Protocol population which included those who completed the trial and were verified to take study drug from pharmacokinetic data. 22 Table of Contents The trial was originally designed to be 80% powered with 125 patients in each of the treatment and placebo arms. The unplanned exclusion of so many patients has left the trial underpowered for the primary endpoints. In the Per-Protocol population, which included those patients who completed the trial and who were further verified to have taken the study drug (based on pharmacokinetic data), an observed descriptive change from baseline appeared to suggest a slowing of cognitive loss; these same patients experienced an advantage in age deceleration vs. placebo as measured by DNA epigenetic change. Age deceleration is used by longevity researchers to measure the difference between the patient’s biological age, in this case as measured by the Horvath DNA methylation Skin Blood Clock, relative to the patient’s actual chronological age. This test was a non-primary/secondary endpoint, other-outcome measure, done via blood test collected at week 30 (end of study). Additional DNA methylation data continues to be collected and analyzed. Based on the efficacy signal seen in this trial, the Company is exploring (1) a discussion with the FDA to potentially employ the adaptive trial feature of the protocol to continue enrolling patients to achieve statistical significance; and/or (2) designing a new Phase 3 study of NE3107 that leverages the most recent data and understanding of the potential effect NE3017 may have in helping persons with AD. Parkinson’s Disease (NCT05083260) The Phase 2 study of NE3107 for the treatment of 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 to measure the potential for adverse interactions of NE3107 with carbidopa/ levodopa; and 2) the secondary objective was to determine if preclinical indications of promotoric activity and apparent enhancement of levodopa activity could be seen in humans. Both objectives were met. The initiation of trial design for a Phase 3 study of NE3107 for the treatment of PD is currently on hold, pending additional funding. Neuroinflammation, insulin resistance, and oxidative stress are common features in the major neurodegenerative diseases, including AD, PD, frontotemporal lobar dementia, and Amyotrophic lateral sclerosis. NE3107 is an investigational 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. Liver Disease Program In liver disease, our investigational drug candidate BIV201 (continuous infusion terlipressin), which has been granted both FDA Fast Track designation status and FDA Orphan Drug status, is being evaluated and discussed after receiving guidance from the FDA regarding the design of Phase 3 clinical testing of BIV201 for the treatment of ascites due to chronic liver cirrhosis. BIV201 is administered as a patent-pending liquid formulation. In June 2021, the Company initiated a Phase 2 study (NCT04112199) designed to evaluate the efficacy of BIV201 (terlipressin, administered by continuous infusion for two 28-day treatment cycles) combined with standard-of-care (“SOC”), compared to SOC alone, for the treatment of refractory ascites. The primary endpoints of the study are the incidence of ascites-related complications and change in ascites fluid accumulation during treatment compared to a pre-treatment period. In March 2023 the company announced enrollment was paused and that data from the first 15 patients treated with BIV201 plus SOC appeared to show at least a 30% reduction in ascites fluid during the 28 days after treatment initiation compared to the 28 days prior to treatment. The change in ascites volume was significantly different from those patients receiving SOC treatment. Patients who completed the treatment with BIV201 experienced a 53% reduction in ascites fluid, which was sustained (43% reduction) during the three months after treatment initiation as compared to the three-month pre-treatment period. In June 2023, the Company requested and subsequently received guidance from the FDA regarding the design and endpoints for definitive clinical testing of BIV201 for the treatment of ascites due to chronic liver cirrhosis. The Company is currently finalizing protocol designs for the Phase 3 study of BIV201 for the treatment of ascites due to chronic liver cirrhosis. While the active agent, terlipressin, is approved in the U.S. and in about 40 countries for related complications of advanced liver cirrhosis, treatment of ascites is not included in these authorizations. Patients with refractory ascites 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 U.S. FDA has not approved any drug to treat refractory ascites. The BIV201 development program was initiated by LAT Pharma LLC. On April 11, 2016, the Company acquired LAT Pharma LLC and the rights to its BIV201 development program. The Company currently owns all development and marketing rights to this drug candidate. Pursuant to the Agreement and Plan of Merger entered into on April 11, 2016, between our predecessor entities, LAT Pharma LLC and NanoAntibiotics, Inc., BioVie is obligated to pay a low single digit royalty on net sales of BIV201 (continuous infusion terlipressin) to be shared among LAT Pharma Members, PharmaIn Corporation, and The Barrett Edge, Inc. 23 Table of Contents Comparison of the three months ended December 31, 2023 to the three months ended December 31, 2022 Net loss The net loss for the three months ended December 31, 2023, was approximately $8.4 million compared to a net loss of $15.7 million for the three months ended December 31, 2022. The decrease in net loss of approximately $7.3 million was comprised of reduced research and development expenses of approximately $563,000, a decrease in selling, general and administrative expenses of approximately $2.2 million, an increase in interest income of approximately $135,000, a reduction in interest expense of approximately $233,000 and the change in the fair value of derivative liabilities of $4.2 million. Total operating expenses for the three months ended December 31, 2023, were approximately $8.8 million as compared to $11.5 million for the three months ended December 31, 2022. The net decrease of approximately $2.7 million for the three months ended December 31, 2023 represented a net decrease in research and development expenses of approximately $563,000 due to the completion of clinical trials and a decrease in selling general and administrative expenses of approximately $2.2 million from a decline in stock compensation expense of approximately $2.1 million. Research and Development Expenses Research and development expenses were approximately $6.5 million and $7.0 million for the three months ended December 31, 2023, and 2022, respectively. The net decrease for the three months ended December 31, 2023 of approximately $563,000, was comprised of decreases from the completion of the clinical studies: the BIV201 Phase 2b study in the prior fiscal year ended June 30, 2023 of approximately $1.2 million, the AD Phase 3 clinical study completed during the three months ended December 31, 2023 of approximately $131,000, and the PD Phase 2 study that completed in the three months ended December 31, 2022 of approximately $492,000; offset by increased expenses of the clinical team employee and consultant compensation of approximately $272,000 and $635,000, respectively; and other increases in regulatory and other consultancy expense of approximately $148,000; Chemistry, Manufacturing and Control of approximately $110,000 and publications and travel of approximately $84,000. Selling, General and Administrative Expenses Selling, general and administrative expenses were approximately $2.3 million and $4.4 million for the three months ended December 31, 2023, and 2022, respectively. The net decrease of approximately $2.1 million was primarily attributed to a decline in directors and the executive team’s stock compensation expense of approximately $2.1 million. Other Income and Expense Other income, net was approximately $380,000 compared to other expense, net of $4.2 million, for the three months ended December 31, 2023 and 2022, respectively. The net increase in other income of approximately $4.6 million represented change in fair value of the related derivative liabilities of approximately $4.2 million. Comparison of the six months ended December 31, 2023 to the six months ended December 31, 2022 Net loss The net loss for the six months ended December 31, 2023, was approximately $19.1 million compared to a net loss of $26.1 million for the six months ended December 31, 2022. The decrease in net loss of approximately $7.0 million was comprised of a net decrease in research and development expenses of approximately $1.5 million and selling, general and administrative expenses of approximately $2.2 million, an increase in interest income of approximately $555,000, a reduction in interest expense of approximately $285,000 and the change in the fair value of derivative liabilities of $5.5 million. Total operating expenses for the six months ended December 31, 2023, were approximately $19.7 million as compared to $20.3 million for the six months ended December 31, 2022. The net decrease of approximately $671,000 for the six months ended December 31, 2023 was comprised of an increase in research and development expenses of approximately $1.5 million offset by a decrease in selling general and administrative expenses of approximately $2.2 million. Research and Development Expenses Research and development expenses were approximately $15.3 million and $13.8 million for the six months ended December 31, 2023, and 2022, respectively. The net increase for the six months ended December 31, 2023 of approximately $1.5 million was comprised of increases from the expansion of the clinical team employees and consultants of $1.1 million and $874,000, respectively; planning and development of new clinical studies of approximately $1.4 million, and other increases in regulatory and other consultants of approximately $394,000 and publications and travel of approximately $215,000; offset by a reduction in costs from the completion in the prior fiscal year ended June 30, 2023 of PD Phase 2 study of approximately $1.3 million and the BIV201 Phase 2b study of approximately $1.4 million. Selling, General and Administrative Expenses Selling, general and administrative expenses were approximately $4.2 million and $6.4 million for the six months ended December 31, 2023, and 2022, respectively. The net decrease of approximately $2.2 million was primarily attributed to decreases in the administrative team and directors stock compensation of approximately $2.4 million, other professional and advisory fees of $152,000 offset by increased legal fees of $92,000, and insurance expenses of approximately $111,000. Other Income and Expense Other income, net was approximately $545,000 compared to other expense, net of $5.8 million, for the six months ended December 31, 2023 and 2022, respectively. The net increase in other income of approximately $6.3 million was primarily driven by the change in fair value of the derivative liabilities of approximately $5.5 million, as well as an increase in interest income of approximately $555,000 which was primarily from the investments in U.S. Treasury Bills and a reduction in interest expense of approximately $285,000 due to amortization and accretion of the financing costs, unearned discount, and premium relating to the note payable. 24 Table of Contents Capital Resources and Liquidity As of December 31, 2023 the Company had working capital of approximately $6.6 million, cash and cash equivalents totaling approximately $20.2 million, stockholders’ equity of approximately $7.5 million, and an accumulated deficit of approximately $320.3 million. During the six months ended December 31, 2023, the Company sold approximately 3.3 million shares of its Common Stock under its Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co for total net proceeds of approximately $9.3 million after 3% commissions and offering costs totaling approximately $377,000. 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. Critical Accounting Policies and Estimates For the six-month period ended December 31, 2023, 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, 2023. 25 Table of Contents 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 and comprehensive loss. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable to smaller reporting companies.