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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____
Commission File Number 000-23186
BIOCRYST PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 62-1413174
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
2190 Parkway Lake Drive; Birmingham, Alabama 35244
(Address and zip code of principal executive offices)
(205) 444-4600
(Registrant's telephone number, including area code)
NONE
(Former name,former address and former fiscal year,if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 13,942,189 shares of the
Company's Common Stock, $.01 par value, were outstanding as of April 29, 1998.
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BIOCRYST PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C> <C>
Item 1. Financial Statements:
Condensed Balance Sheets - March 31, 1998 and December 31, 1997 2
Condensed Statements of Operations - Three Months Ended March 31, 1998 and 1997 3
Condensed Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5
Part II. Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 17
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BIOCRYST PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
1998 1997
ASSETS (UNAUDITED) (NOTE 1)
<S> <C> <C>
Cash and cash equivalents $ 3,501,811 $ 3,757,098
Securities held-to-maturity 16,560,070 15,723,631
Prepaid expenses and other current assets 446,820 214,777
------- -------
Total current assets 20,508,701 19,695,506
Securities held-to-maturity 2,297,287 5,162,757
Furniture and equipment, net 1,627,941 1,557,537
Patents 66,613 68,928
------ ------
Total assets $ 24,500,542 $ 26,484,728
------------------ ------------------
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 680,751 $ 245,180
Accrued expenses 406,117 306,433
Accrued taxes, other than income 118,054 166,177
Accrued vacation 120,210 89,777
Current maturities of capital lease obligations 44,610 57,896
------ ------
Total current liabilities 1,369,742 865,463
Obligations under capital lease obligations 31,518 34,469
Deferred license fee 300,000 300,000
------- -------
Total liabilities 1,701,260 1,199,932
--------- ---------
Stockholders' equity:
Convertible preferred stock, $.01 par value, shares authorized - 5,000,000;
shares issued and outstanding - none
Common stock, $.01 par value, shares authorized - 45,000,000; shares issued
and outstanding -
13,940,210 in 1998 and 13,817,667 in 1997 139,402 138,177
Additional paid-in capital 74,050,108 73,531,104
Accumulated deficit (51,390,228) (48,384,485)
----------- -----------
Total stockholders' equity 22,799,282 25,284,796
---------- ----------
Total liabilities and stockholders' equity $ 24,500,542 $ 26,484,728
------------------ ------------------
------------------ ------------------
</TABLE>
See accompanying notes to condensed financial statements.
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BIOCRYST PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Collaborative and other research and development $ $
Interest and other 381,987 451,609
----------- -----------
Revenues 381,987 451,609
----------- -----------
Research and development 2,741,473 2,910,485
General and administrative 641,230 672,591
Interest 5,027 17,635
----------- -----------
Expenses 3,387,730 3,600,711
----------- -----------
Net loss $ (3,005,743) $ (3,149,102)
----------- -----------
----------- -----------
Net loss per share (Note 2) $(.22) $(.23)
Weighted average shares outstanding (Note 2) 13,876,907 13,748,998
</TABLE>
See accompanying notes to condensed financial statements.
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BIOCRYST PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (3,005,743) $ (3,149,102)
Depreciation and amortization 149,406 142,882
Non-monetary compensation 12,267 5,022
Changes in operating assets and liabilities, net 287,837 (192,167)
----------- -----------
Net cash used by operating activities (2,556,233) (3,193,365)
----------- -----------
INVESTING ACTIVITIES
Purchases of furniture and equipment (219,810) (276,055)
Purchase of marketable securities (1,851,183) (1,526,833)
Maturities of marketable securities 3,880,214 4,611,650
----------- -----------
Net cash provided by investing activities 1,809,221 2,808,762
----------- -----------
FINANCING ACTIVITIES
Principal payments on debt and capital lease obligations (16,237) (76,058)
Proceeds from sale of common stock, net of issuance cost 507,962 261,916
----------- -----------
Net cash provided by financing activities 491,725 185,858
----------- -----------
(Decrease) in cash and cash equivalents (255,287) (198,745)
Cash and cash equivalents at beginning of period 3,757,098 3,635,780
----------- -----------
Cash and cash equivalents at end of period $ 3,501,811 $ 3,437,035
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed financial statements.
4
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BIOCRYST PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Preparation
The condensed balance sheet as of March 31, 1998 and the condensed statements of
operations and cash flows for the three months ended March 31, 1998 and 1997
have been prepared in accordance with generally accepted accounting principles
by BioCryst Pharmaceuticals, Inc. (the "Company" or "BioCryst") and have not
been audited. Such financial statements reflect all adjustments which are, in
management's opinion, necessary to present fairly, in all material respects, the
financial position at March 31, 1998 and the results of operations and cash
flows for the three months ended March 31, 1998 and 1997. These condensed
financial statements should be read in conjunction with the financial statements
for the year ended December 31, 1997 and the notes thereto included in the
Company's 1997 Annual Report. Interim operating results are not necessarily
indicative of operating results for the full year. The balance sheet as of
December 31, 1997 has been prepared from the audited financial statements
included in the previously mentioned Annual Report.
Note 2. Net Loss Per Share
Net loss per share is computed using the weighted average number of shares of
common stock outstanding. Common equivalent shares from unexercised stock
options and warrants are excluded from the computation as their effect is
anti-dilutive. Due to this anti-dilutive effect, implementation of Statement of
Financial Accounting Standards No. 128, Earnings per Share, issued February
1997, does not change the calculation of the Company's net loss per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q cONTAINS CERTAIN STATEMENTS OF
A FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL
PERFORMANCE OF THE COMPANY. SUCH STATEMENTS ARE ONLY PREDICTIONS AND THE ACTUAL
EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AS WELL AS THOSE DISCUSSED IN OTHER
FILINGS MADE BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THE COMPANY'S ANNUAL REPORT ON FORM 10-K.
OVERVIEW
Since its inception in 1986, the Company has been engaged in research and
development activities (including drug discovery, manufacturing compounds,
conducting preclinical studies and clinical trials) and organizational efforts
(including recruiting its scientific and management personnel), establishing
laboratory facilities, engaging its Scientific Advisory Board and raising
capital. The Company has not received any revenue from the sale of
pharmaceutical products and does not expect to receive such revenues to a
significant extent for at least several years, if at all. The Company has
incurred operating losses since its inception. The Company expects to incur
significant additional operating losses over the next several years and expects
such losses to increase as the Company's research and development and clinical
trial efforts continue.
RESULTS OF OPERATIONS (FIRST THREE MONTHS OF 1998 COMPARED TO THE FIRST THREE
MONTHS OF 1997)
Revenues decreased 15.4% to $381,987 in the first three months of 1998 from
$451,609 in the first three months of 1997. The decrease was primarily due to
having less money to invest, thus reducing interest income.
Research and development expenses decreased 5.8% to $2,741,473 in the first
three months of 1998 from $2,910,485 in the first three months of 1997. The
decrease is primarily attributable to a decrease in costs associated with
conducting trials (the Company was conducting two Phase III trials during this
period in 1997, which are larger and more expensive than Phase I and Phase II
trials). These costs tend to fluctuate from period to period depending
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upon the status of the Company's research projects.
General and administrative expenses decreased 4.7% to $641,230 in the first
three months of 1998 from $672,591 in the first three months of 1997. The
decrease is primarily the result of decreased consulting fees and a one-time
lease fee expense in 1997. The fluctuations in the other accounts were generally
offsetting.
Interest expense decreased 71.5% to $5,027 in the first three months of 1998
from $17,635 in the first three months of 1997. The decrease is due to a decline
in capitalized lease obligations, along with long-term debt, resulting in lesser
interest expense. The Company obtained most of its leases in connection with the
move to its new facilities in April 1992.
LIQUIDITY AND CAPITAL RESOURCES
Cash expenditures have exceeded revenues since the Company's inception.
Operations have principally been funded through public offerings of common
stock, private placements of equity and debt securities, equipment lease
financing, facility leases, collaborative and other research and development
agreements (including a license and options for licenses), research grants and
interest income. In addition, the Company has attempted to contain costs and
reduce cash flow requirements by renting scientific equipment or facilities,
contracting with third parties to conduct certain research and development and
using consultants. The Company expects to incur additional expenses, resulting
in significant losses, as it continues its research and development activities
and undertakes additional preclinical studies and clinical trials of compounds
which have been or may be discovered. The Company also expects to incur
substantial administrative, manufacturing and commercialization expenditures in
the future as it seeks Food and Drug Administration (the "FDA") approval for its
compounds and establishes its manufacturing capability under good manufacturing
practices ("GMP"), and substantial expenses related to the filing, prosecution,
maintenance, defense and enforcement of patent and other intellectual property
claims.
At March 31, 1998, the Company's cash, cash equivalents and securities
held-to-maturity were $22.4 million, a decrease of $2.3 million from December
31,1997 principally due to the net loss for the three months ended March 31,
1998, offset by the sale of common stock under the Company's Stock Option and
Employee Stock Purchase Plans.
The Company has financed its equipment purchases primarily with lease lines of
credit. The Company currently has a $500,000 line of credit with its bank to
finance capital equipment. In January 1992, the Company entered into an
operating lease for its current facilities which, based on an extension signed
in February 1998, expires on March 31, 2001, with an option to lease for an
additional three years at current market rates. The February 1998 extension also
added 9,600 square feet of finished office space. The operating lease requires
the Company to pay monthly rent (ranging from $19,399 and escalating annually to
a minimum of $20,580 per month in the final year), and a pro rata share of
operating expenses and real estate taxes in excess of base year amounts.
At December 31, 1997, the Company had long-term capital lease and operating
lease obligations which provide for aggregate minimum payments of $251,401 in
1998, $201,653 in 1999 and $127,610 in 2000. The Company is required to expend
$6 million , over a period coinciding with funding by the Company to The
University of Alabama at Birmingham ("UAB") on its influenza neuraminidase
project, of which approximately $5.9 million was expended through March 31,
1998. In 1997, the Company upgraded all its personal computers and established a
network using software packages that are generally year 2000 compliant.
Consequently, the Company does not anticipate incurring additional significant
costs to ensure that its operations will not be adversely impacted by the year
2000 software problem.
The Company entered into an exclusive license agreement with Torii
Pharmaceutical Co., Ltd. ("Torii") under which Torii paid the Company $1.5
million in license fees and made a $1.5 million equity investment in the Company
in 1996. The first milestone payment of $1 million was received in 1997. While
the license agreement provides for potential milestone payments of up to an
additional $18 million and royalties on future sales of licensed products in
Japan, there can be no assurance that Torii will continue to develop the product
in Japan or that if it does so that it will result in meeting the milestones or
achieving future sales of licensed products in Japan.
6
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The Company plans to finance its needs principally from its existing capital
resources and interest thereon, from payments under collaborative and licensing
agreements with corporate partners, through research grants, and to the extent
available, through lease or loan financing and future public or private
financings. The Company believes that its available funds will be sufficient to
fund the Company's operations at least through 1998. However, this is a
forward-looking statement, and no assurance can be given that there will be no
change that would consume available resources significantly before such time.
The Company's future capital requirements will depend on many factors, including
continued scientific progress in its research, drug discovery and development
programs, the magnitude of these programs, progress with preclinical studies and
clinical trials, prosecuting and enforcing patent claims, competing
technological and market developments, changes in existing collaborative
research or development relationships, the ability of the Company to establish
additional collaborative relationships, and the cost of manufacturing scale-up
and effective marketing activities and arrangements. Additional funds, if any,
may possibly be raised through financing arrangements or collaborative
relationships and/or the issuance of preferred or common stock or convertible
securities, on terms and prices significantly more favorable than those of the
currently outstanding Common Stock, which could have the effect of diluting or
adversely affecting the holdings or rights of existing stockholders of the
Company. In addition, collaborative arrangements may require the Company to
transfer certain material rights to such corporate partners. If adequate funds
are not available, the Company will be required to delay, scale back or
eliminate one or more of its research, drug discovery or development programs or
attempt to obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish some or all of its rights to
certain of its intellectual property, product candidates or products.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS, FINANCIAL CONDITION AND THE
MARKET PRICE OF SECURITIES
EARLY STAGE OF DEVELOPMENT; UNCERTAINTY OF PRODUCT DEVELOPMENT; TECHNOLOGICAL
UNCERTAINTY
BioCryst is at an early stage of development. All of the Company's compounds are
in research and development, and no revenues have been generated from sales of
its compounds. It will be a number of years, if ever, before the Company will
recognize significant revenues from product sales or royalties. To date, most of
the Company's resources have been dedicated to the research and development of
pharmaceutical compounds based upon its purine nucleoside phosphorylase ("PNP")
program for the treatment of T-cell proliferative diseases and disorders and for
the development of inhibitors of influenza neuraminidase and enzymes and
proteins involved in the complement cascade. The Company is conducting
preclinical and clinical studies with its lead drugs, BCX-34 and BCX-1470, and
results from these studies may not support future human clinical testing or
further development of the compounds. Recently completed Phase III trials with a
cream formulation of BCX-34 for treatment of cutaneous T-cell lymphoma ("CTCL")
and psoriasis did not show statistical efficacy. Accordingly, the Company has
discontinued further development of the cream formulation of BCX-34, but is
continuing its oral trials for BCX-34 and a Phase I trial for a topical ointment
treatment for psoriasis. T-cell proliferative diseases, as well as the other
disease indications the Company is studying, are highly complex and their causes
are not fully known. The Company's compounds under development will require
significant additional, time-consuming and costly research and development,
preclinical testing and extensive clinical testing prior to submission of any
regulatory application for commercial use. Product development of new
pharmaceuticals is highly uncertain, and unanticipated developments, clinical or
regulatory delays, unexpected adverse side effects or inadequate therapeutic
efficacy could slow or prevent product development efforts and have a material
adverse effect on the Company. One of BioCryst's lead drugs, BCX-34, reversibly
inhibits T-cell activity, an essential component of the human immune system. In
addition to any direct toxicities or side effects the drug may cause, BCX-34,
while inhibiting T-cells, may compromise the immune system's ability to fight
infection. Although the Company will monitor immunosuppression during drug
dosing, there can be no assurance that the drug will not cause irreversible
immunosuppression. There can be no assurance that the Company's research or
product development efforts as to any particular compound will be successfully
completed, that the compounds currently under development will be safe or
efficacious, that required regulatory approvals can be obtained, that products
can be manufactured at acceptable cost and with appropriate quality or that any
approved products can be successfully marketed or will be accepted by patients,
health care providers and third-party payors. Few drugs discovered by use of
structure-based drug design have been successfully developed, approved by the
FDA or marketed. Within the pharmaceutical industry, treatment of the disease
indications being pursued by the Company, especially T-cell proliferative
diseases such as CTCL and psoriasis, have proven difficult. There can be no
assurance that drugs resulting from the
7
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approach of structure-based drug design employed by the Company will overcome
the difficulties of drug discovery and development or result in commercially
successful products.
UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING
Before obtaining regulatory approvals for the commercial sale of any of its
products, BioCryst must undertake extensive preclinical and clinical testing to
demonstrate their safety and efficacy in humans. The Company has limited
experience in conducting clinical trials. To date, the Company has conducted
initial preclinical testing of certain of its compounds and is testing oral and
topical ointment formulations of BCX-34 in various clinical trials. The results
of initial preclinical and clinical testing of compounds under development by
the Company are neither necessarily predictive of results that will be obtained
from subsequent or more extensive preclinical and clinical testing nor
necessarily acceptable to the FDA to support applications for marketing permits.
However, the Company recently completed two Phase III trials of a topical cream
formulation of BCX-34 which did not show statistical efficacy. Even if the
results of subsequent clinical tests are positive, products, if any, resulting
from the Company's research and development programs are not likely to be
commercially available for several years. Additionally, the Company has made and
may in the future make changes to the formulation of its drugs and/or to the
processes for manufacturing its drugs. Any such future changes in formulation or
manufacturing processes could result in delays in conducting further preclinical
and clinical testing, in unexpected adverse events in further preclinical and
clinical testing, and/or in additional development expenses. Furthermore, there
can be no assurance that clinical studies of products under development will be
acceptable to the FDA or demonstrate the safety and efficacy of such products at
all or to the extent necessary to obtain regulatory approvals of such products.
Companies in the industry have suffered significant setbacks in advanced
clinical trials, even after promising results in earlier trials. The failure to
comply with data integrity good clinical practices requirements or to adequately
demonstrate the safety and efficacy of a therapeutic product under development
could delay or prevent regulatory approval of the product, and would have a
material adverse effect on the Company.
The rate of completion of clinical trials is dependent upon, among other
factors, the rate of enrollment of patients. Patient accrual is a function of
many factors, including the size of the patient population, the proximity of
patients to clinical sites, the eligibility criteria for the study and the
existence of competitive clinical trials. Delays in planned patient enrollment
in the Company's current trials or future clinical trials may result in
increased costs and/or program delays which could have a material adverse effect
on the Company.
GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL
The research, testing, manufacture, labeling, distribution, advertising,
marketing and sale of drug products are subject to extensive regulation by
governmental authorities in the United States and other countries. Prior to
marketing, compounds developed by the Company must undergo an extensive
regulatory approval process required by the FDA and by comparable agencies in
other countries. This process, which includes preclinical studies and clinical
trials of each compound to establish its safety and effectiveness and
confirmation by the FDA that good laboratory, clinical and manufacturing
practices were maintained during testing and manufacturing, can take many years,
requires the expenditure of substantial resources and gives larger companies
with greater financial resources a competitive advantage over the Company. To
date, no compound or drug candidate being evaluated by the Company has been
submitted for approval to the FDA or any other regulatory authority for
marketing, and there can be no assurance that any such compound or drug
candidate will ever be approved for marketing or that the Company will be able
to obtain the labeling claims desired for its compounds or drug candidates. The
Company is and will continue to be dependent upon the laboratories and medical
institutions conducting its preclinical studies and clinical trials to maintain
both good laboratory and good clinical practices and, except for the formulating
and packaging of small quantities of its drug formulations which the Company is
currently undertaking, upon the manufacturers of its compounds to maintain
compliance with current GMP requirements. Data obtained from preclinical studies
and clinical trials are subject to varying interpretations which could delay,
limit or prevent FDA regulatory approval. Delays or rejections may be
encountered based upon changes in FDA policy for drug approval during the period
of development and FDA regulatory review. Similar delays also may be encountered
in foreign countries. Moreover, even if approval is granted, such approval may
entail commercially unacceptable limitations on the labeling claims for which a
compound may be marketed. Even if such regulatory approval is obtained, a
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marketed drug or compound and its manufacturer are subject to continual review
and inspection, and later discovery of previously unknown problems with the
product or manufacturer may result in restrictions or sanctions on such product
or manufacturer, including withdrawal of the product from the market, and other
enforcement actions.
In June 1995 the Company notified the FDA that it had submitted incorrect
efficacy data to the FDA pertaining to its Phase II dose-ranging studies of
BCX-34 for CTCL and psoriasis. The FDA inspected the Company in November 1995 in
relation to a study involving the topical application of BCX-34 concluded in
early 1995, and in June 1996 the FDA inspected the Company and one of its
clinical sites in relation to a Phase II dose-ranging study of BCX-34 for CTCL
and a Phase II dose ranging study for psoriasis, both of which were concluded in
early 1995. After each inspection, the FDA issued to the Company a List of
Inspectional Observations ("Form FDA 483") setting forth certain deficient Good
Clinical Practices procedures followed by the Company, some of which resulted in
submission to the FDA of efficacy data which reported false statistical
significance. The FDA also issued a Form FDA 483 to the principal investigator
at one of the Company's clinical sites citing numerous significant deficiencies
in the conduct of the Phase II dose-ranging studies of BCX-34 for CTCL and
psoriasis. These deficiencies included improper delegations of authority by the
principal investigator, failures to follow the protocols, institutional review
board deviations, and discrepancies or deficiencies in documentation and
reporting. As a consequence of the FDA inspections and such resulting Form FDA
483s, the Company's ongoing clinical studies are likely to receive increased
scrutiny since the same clinical site which received the Form FDA 483 is
involved in the Company's oral trials; this may delay the regulatory review
process or require the Company to increase the number of patients at other sites
to obtain approval (which can not be assured on a timely basis or at all). The
Company has adjusted certain of its procedures, but there can be no assurance
that the FDA will find such adjustments to be in compliance with FDA
requirements or that, even if it does find such adjustments to be in compliance,
it will not seek to impose administrative, civil or other sanctions in
connection with the earlier studies. Administrative sanctions could include
refusing to accept earlier studies and requiring the Company to repeat one or
more clinical studies, which would be the only studies the FDA would accept for
purposes of substantive scientific review of any New Drug Application by the
agency.
Such sanctions or other government regulation may delay or prevent the marketing
of products being developed by the Company, impose costly procedures upon the
Company's activities and confer a competitive advantage to larger companies or
companies that are more experienced in regulatory affairs and that compete with
the Company. There can be no assurance that FDA or other regulatory approval for
any products developed by the Company will be granted on a timely basis, or at
all. Delay in obtaining or failure to obtain such regulatory approvals will
materially adversely affect the marketing of any products which may be developed
by the Company, as well as the Company's results of operations.
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY
BioCryst, to date, has generated no revenue from product sales and has incurred
losses since its inception. As of March 31, 1998, the Company's accumulated
deficit was approximately $51.4 million. Losses have resulted principally from
costs incurred in research activities aimed at discovering, designing and
developing the Company's pharmaceutical product candidates and from general and
administrative costs. These costs have exceeded the Company's revenues, which to
date have been generated primarily from collaborative arrangements, licenses,
research grants and from interest income. The Company expects to incur
significant additional operating losses over the next several years and expects
such losses to increase as the Company's research and development and clinical
trial efforts continue. The Company's ability to achieve profitability depends
upon its ability to develop drugs and to obtain regulatory approval for its
products that may be developed, to enter into agreements for product
development, manufacturing and commercialization, and to develop the capacity to
manufacture, market and sell its products. There can be no assurance that the
Company will ever achieve significant revenues or profitable operations.
ADDITIONAL FINANCING REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company has incurred negative cash flows from operations in each year since
its inception. The Company expects that the funding requirements for its
operating activities will increase substantially in the future due to
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continued research and development activities (including preclinical studies and
clinical trials), the development of manufacturing capabilities and the
development of marketing and distribution capabilities. The Company anticipates
that its capital resources are adequate to satisfy its capital requirements at
least through 1998. However, this is a forward-looking statement, and no
assurance can be given that there will be no change that would consume available
resources significantly before such time. The Company's future capital
requirements will depend on many factors, including continued scientific
progress in its research, drug discovery and development programs, the magnitude
of these programs, progress with preclinical studies and clinical trials,
prosecuting and enforcing patent claims, competing technological and market
developments, changes in existing collaborative research or development
relationships, the ability of the Company to establish additional collaborative
relationships, and the cost of manufacturing scale-up and effective marketing
activities and arrangements. The Company anticipates, based on its current
business plan, that it will be necessary to raise additional funds in 1999 or
earlier. Additional funds, if any, may possibly be raised through financing
arrangements or collaborative relationships and/or the issuance of preferred or
common stock or convertible securities, on terms and prices significantly more
favorable than those of the currently outstanding Common Stock, which could have
the effect of diluting or adversely affecting the holdings or rights of existing
stockholders of the Company. In addition, collaborative arrangements may require
the Company to transfer certain material rights to such corporate partners. If
adequate funds are not available, the Company will be required to delay, scale
back or eliminate one or more of its research, drug discovery or development
programs or attempt to obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish some or all of its
rights to certain of its intellectual property, product candidates or products.
No assurance can be given that additional financing will be available to the
Company on acceptable terms, if at all.
COMPETITION
The Company is engaged in the pharmaceutical industry, which is characterized by
extensive research efforts, rapid technological progress and intense
competition. There are many public and private companies, including well-known
pharmaceutical companies, chemical companies, specialized biotechnology
companies and academic institutions, engaged in developing synthetic
pharmaceuticals and biotechnological products for human therapeutic applications
that represent significant competition to the Company. Existing products and
therapies and improvements thereto will compete directly with products the
Company is seeking to develop and market, and the Company is aware that other
companies or institutions are pursuing development of new drugs and technologies
directly targeted at applications for which the Company is developing its drug
compounds. Many of the Company's competitors have substantially greater
financial and technical resources and production and marketing capabilities and
experience than does the Company. The Company has granted Novartis
Pharmaceuticals Corporation, formerly Ciba-Geigy Corporation, ("Novartis"), a
worldwide exclusive license to several compounds in the Company's sixth group of
PNP inhibitors. Such arrangement with Novartis does not include BCX-34 or most
of the Company's other compounds. No assurance can be given that Novartis will
or will not develop compounds under such arrangements, will be able to obtain
FDA approval for any licensed compounds, that any such licensed compounds if so
approved will be able to be commercialized successfully, or that the Company
will realize any revenues pursuant to such arrangements. If commercialized,
these compounds could compete directly against other compounds, including
BCX-34, being developed by the Company.
Many of the Company's competitors have significantly greater experience in
conducting preclinical studies and clinical trials of new pharmaceutical
compounds and in obtaining FDA and other regulatory approvals for health care
products. Accordingly, BioCryst's competitors may succeed in obtaining approvals
for their drug candidates more rapidly than the Company and in developing
products that are safer or more effective or less costly than any that may be
developed by the Company and may also be more successful than the Company in the
production and marketing of such products. Many of the Company's competitors
also have current GMP facilities and significantly greater experience in
implementing GMP or in obtaining and maintaining the requisite regulatory
standards for manufacturing. Moreover, other technologies are, or may in the
future become, the basis for competitive products. Competition may increase
further as a result of the potential advances from structure-based drug design
and greater availability of capital for investment in this field. There can be
no assurance that the Company's competitors will not succeed in developing
technologies and products that are more effective than any being developed by
the Company or that would render the Company's technology and product candidates
obsolete or noncompetitive.
10
<PAGE>
DEPENDENCE ON COLLABORATIVE PARTNERS; RELATIONSHIP WITH THE UNIVERSITY OF
ALABAMA AT BIRMINGHAM
The Company's strategy for research, development and commercialization of
certain of its products is to rely in part upon various arrangements with
corporate partners, licensees and others. As a result, the Company's products
are dependent in large part upon the subsequent success of such third parties in
performing preclinical studies and clinical trials, obtaining regulatory
approvals, manufacturing and marketing. The Company entered into an exclusive
license agreement with Torii in May 1996 to develop, manufacture and
commercialize in Japan BCX-34 and certain other PNP inhibitor compounds for
three indications. The Company has also entered into collaborative arrangements
with 3-Dimensional Pharmaceuticals, Inc. to share resources and technology to
expedite the identification of inhibitors of key serine protease enzymes and
with Novartis and intends to pursue additional collaborations in the future.
There can be no assurance that the Company will be able to negotiate additional
acceptable collaborative arrangements or that such arrangements will be
successful. No assurance can be given that the Company's collaborative partners
will be able to obtain FDA approval for any licensed compounds, that any such
licensed compounds, if so approved, will be able to be commercialized
successfully, or that the Company will realize any revenues pursuant to such
arrangements. Although the Company believes that parties to collaborative
arrangements generally have an economic motivation to succeed in performing
their contractual responsibilities, the amount and timing of resources which
they devote to these activities are not within the control of the Company. There
can be no assurance that such parties will perform their obligations as expected
or that current or potential collaborators will not pursue treatments for other
diseases or seek alternative means of developing treatments for the diseases
targeted by collaborative programs with the Company or that any additional
revenues will be derived from such arrangements. If any of the Company's
collaborators breaches or terminates its agreement with the Company or otherwise
fails to conduct its collaborative activities in a timely manner, the
development or commercialization of the product candidate or research program
under such collaboration agreement may be delayed, the Company may be required
to undertake unforeseen additional responsibilities or to devote unforeseen
additional resources to such development or commercialization, or such
development or commercialization could be terminated. The termination or
cancellation of collaborative arrangements could also adversely affect the
Company's financial condition, intellectual property position and operations. In
addition, disagreements between collaborators and the Company have in the past
and could in the future lead to delays in the collaborative research,
development or commercialization of certain product candidates, or could require
or result in legal process or arbitration for resolution. These consequences
could be time-consuming, expensive and could have material adverse effects on
the Company.
The successful commercialization of the Company's compounds and product
candidates is also dependent upon the Company's ability to develop collaborative
arrangements with academic institutions and consultants to support research and
development efforts and to conduct clinical trials. The Company's primary
academic collaboration is with UAB. The Company is highly dependent upon its
collaborative arrangements with UAB to support its ongoing research and
development programs and the termination or cessation of such relationship could
have a material adverse effect upon the Company. There can be no assurance that
the Company's current arrangements with UAB will continue or that the Company
will be able to develop successful collaborative arrangements with academic
institutions and consultants in the future.
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in part on its ability to obtain and enforce
patent protection for its products, preserve its trade secrets, and operate
without infringing on the proprietary rights of third parties, both in the
United States and in other countries. In the absence of patent protection, the
Company's business may be adversely affected by competitors who develop
substantially equivalent technology. Because of the substantial length of time
and expense associated with bringing new products through development and
regulatory approval to the marketplace, the pharmaceutical and biotechnology
industries place considerable importance on obtaining and maintaining patent and
trade secret protection for new technologies, products and processes. To date,
the Company has been issued seven United States patents related to its PNP
inhibitor compounds. One of these compounds is under a patent issued to
Warner-Lambert and the Company may require a license from Warner-Lambert to
market a product containing one or both of these compounds. The Company has the
right of first refusal to negotiate a license from
12
<PAGE>
Warner-Lambert for that compound, however, there can be no assurance that such a
license would be available or obtainable on terms acceptable to the Company. A
patent has also been issued by the U.S. Patent and Trademark Office ("PTO") on a
new process to prepare BCX-34 and other PNP inhibitors and an additional patent
application has been filed for another new process to prepare BCX-34 and other
PNP inhibitors. In addition, two patent applications have been filed with the
PTO relating to inhibitors of influenza neuraminidase. Also, two provisional
United States patent applications have been filed with the PTO on complement
inhibitors. The Company has filed certain corresponding foreign patent
applications and intends to file additional foreign patent applications and
additional United States patent applications, as appropriate. There can be no
assurance that patents will be issued from such applications, that the Company
will develop additional products that are patentable or that present or future
patents will provide sufficient protection to the Company's present or future
technologies, products and processes. In addition, there can be no assurance
that others will not independently develop substantially equivalent proprietary
information, design around the Company's patents or obtain access to the
Company's know-how or that others will not successfully challenge the validity
of the Company's patents or be issued patents which may prevent the sale of one
or more of the Company's product candidates, or require licensing and the
payment of significant fees or royalties by the Company to third parties in
order to enable the Company to conduct its business. Legal standards relating to
the scope of claims and the validity of patents in the fields in which the
Company is pursuing research and development are still evolving, are highly
uncertain and involve complex legal and factual issues. No assurance can be
given as to the degree of protection or competitive advantage any patents issued
to the Company will afford, the validity of any such patents or the Company's
ability to avoid infringing any patents issued to others. Further, there can be
no guarantee that any patents issued to or licensed by the Company will not be
infringed by the products of others. Litigation and other proceedings involving
the defense and prosecution of patent claims can be expensive and time
consuming, even in those instances in which the outcome is favorable to the
Company, and can result in the diversion of resources from the Company's other
activities. An adverse outcome could subject the Company to significant
liabilities to third parties, require the Company to obtain licenses from third
parties or require the Company to cease any related research and development
activities or sales.
The Company's success is also dependent upon the skills, knowledge and
experience (none of which is patentable) of its scientific and technical
personnel. To help protect its rights, the Company requires all employees,
consultants, advisors and collaborators to enter into confidentiality agreements
which prohibit the disclosure of confidential information to anyone outside the
Company and requires disclosure and assignment to the Company of their ideas,
developments, discoveries and inventions. There can be no assurance, however,
that these agreements will provide adequate protection for the Company's trade
secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure or the lawful development by others of such
information.
The Company's management and scientific personnel have been recruited primarily
from other pharmaceutical companies and academic institutions. In many cases,
these individuals are continuing research in the same areas with which they were
involved prior to joining BioCryst and may be restricted by agreement from
disclosing to the Company trade secrets they learned elsewhere. As a result, the
Company could be subject to allegations of violation of such agreements and
similar claims and litigation regarding such claims could ensue.
DEPENDENCE ON KEY MANAGEMENT AND QUALIFIED PERSONNEL
The Company is highly dependent upon the efforts of its senior management and
scientific team. The loss of the services of one or more members of the senior
management and scientific team could significantly impede the achievement of
development objectives. Although the Company maintains, and is the beneficiary
of, a $2 million key-man insurance policy on the life of Charles E. Bugg, Ph.D.,
Chairman of the Board of Directors and Chief Executive Officer, the Company does
not believe the proceeds would be adequate to compensate for his loss. Due to
the specialized scientific nature of the Company's business, the Company is also
highly dependent upon its ability to attract and retain qualified scientific,
technical and key management personnel. There is intense competition for
qualified personnel in the areas of the Company's activities, and there can be
no assurance that the Company will be able to continue to attract and retain
qualified personnel necessary for the development of its existing business and
its expansion into areas and activities requiring additional expertise, such as
production and marketing. The loss of, or failure to recruit, scientific,
technical and managerial personnel could have a material adverse effect on the
Company. In addition, the Company relies on members of its Scientific Advisory
Board and consultants to assist the
12
<PAGE>
Company in formulating its research and development strategy. All of the members
of the Scientific Advisory Board and all of the Company's consultants are
employed by other employers, and each such member or consultant may have
commitments to, or consulting or advisory contracts with, other entities that
may limit their availability to the Company.
LACK OF MANUFACTURING, MARKETING OR SALES CAPABILITY
The Company has not yet manufactured or marketed any products and currently does
not have the facilities to manufacture its product candidates in commercial
quantities under GMP as prescribed and required by the FDA. To be successful,
the Company's products must be manufactured in commercial quantities under GMP
and at acceptable costs. Although the Company is formulating and packaging under
GMP conditions small amounts of certain drug formulations which are the subject
of preclinical studies and clinical trials, the current facilities of the
Company are not adequate for commercial scale production. Therefore, the Company
will need to develop its own GMP manufacturing facility and/or depend on its
collaborators, licensees or contract manufacturers for the commercial
manufacture of its products. The Company has no experience in such commercial
manufacturing and no assurance can be given that the Company will be able to
make the transition to commercial production successfully or at an acceptable
cost. In addition, no assurance can be given that the Company will be able to
make arrangements with third parties to manufacture its products on acceptable
terms, if at all. The inability of the Company to manufacture or provide for the
manufacture of any products it may develop on a cost-effective basis would have
a material adverse effect on the Company.
The Company has no experience in marketing, distributing or selling
pharmaceutical products and will have to develop a pharmaceutical sales force
and/or rely on its collaborators, licensees or arrangements with others to
provide for the marketing, distribution and sales of any products it may
develop. There can be no assurance that the Company will be able to establish
marketing, distribution and sales capabilities or make arrangements with
collaborators, licensees or others to perform such activities.
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT AND PRODUCT PRICING
Successful commercialization of any pharmaceutical products the Company may
develop will depend in part upon the availability of reimbursement or funding
from third-party health care payors such as government and private insurance
plans. There can be no assurance that third-party reimbursement or funding will
be available for newly approved pharmaceutical products or will permit price
levels sufficient to realize an appropriate return on the Company's investment
in its pharmaceutical product development. The U.S. Congress is considering a
number of legislative and regulatory reforms that may affect companies engaged
in the health care industry in the United States. Although the Company cannot
predict whether these proposals will be adopted or the effects such proposals
may have on its business, the existence and pendency of such proposals could
have a material adverse effect on the Company in general. In addition, the
Company's ability to commercialize potential pharmaceutical products may be
adversely affected to the extent that such proposals have a material adverse
effect on other companies that are prospective collaborators with respect to any
of the Company's pharmaceutical product candidates.
Third-party payors are continuing their efforts to contain or reduce the cost of
health care through various means. For example, third-party payors are
increasingly challenging the prices charged for medical products and services.
Also, the trend toward managed health care in the United States and the
concurrent growth of organizations, such as health maintenance organizations,
which can control or significantly influence the purchase of health care
services and products, as well as legislative proposals to reform health care or
reduce government insurance programs, may result in lower prices for
pharmaceutical products. The cost containment measures that health care
providers are instituting and the effect of any health care reform could
materially adversely affect the Company's ability to sell its products if
successfully developed and approved.
RISK OF PRODUCT LIABILITY; AVAILABILITY OF INSURANCE
The Company's business may be affected by potential product liability risks
which are inherent in the testing, manufacturing and marketing of pharmaceutical
and other products under development by the Company. There can
13
<PAGE>
be no assurance that product liability claims will not be asserted against the
Company, its collaborators or licensees. The use of compounds or drug candidates
developed by the Company in clinical trials and the subsequent sale of such
products is likely to cause BioCryst to bear all or a portion of those risks.
The Company does not have product liability insurance but does maintain coverage
for clinical trials in the amount of $6 million per occurrence and in the
aggregate. No assurance can be given that such insurance will be adequate to
cover claims made with respect to the clinical trials. There can be no assurance
that the Company will be able to obtain or maintain adequate product liability
insurance on acceptable terms or that such insurance will provide adequate
coverage against potential liabilities. Furthermore, there can be no assurance
that any collaborators or licensees of BioCryst will agree to indemnify the
Company, be sufficiently insured or have a net worth sufficient to satisfy any
such product liability claims.
HAZARDOUS MATERIALS; COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company's research and development involves the controlled use of hazardous
materials, chemicals and various radioactive compounds. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources of
the Company. The Company may incur substantial costs to comply with
environmental regulations if the Company develops manufacturing capacity.
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS; EFFECT OF CERTAIN ANTI-TAKEOVER
CONSIDERATIONS
The Company's directors, executive officers and certain principal stockholders
and their affiliates own beneficially approximately 30.8% of the Common Stock.
Accordingly, such holders, if acting together, may have the ability to exert
significant influence over the election of the Company's Board of Directors and
other matters submitted to the Company's stockholders for approval. The voting
power of these holders may discourage or prevent any proposed takeover of the
Company unless the terms thereof are approved by such holders. Pursuant to the
Company's Composite Certificate of Incorporation (the "Certificate of
Incorporation"), shares of Preferred Stock may be issued by the Company in the
future without stockholder approval and upon such terms as the Board of
Directors may determine. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock could have the effect of discouraging a third party from acquiring a
majority of the outstanding Common Stock of the Company and preventing
stockholders from realizing a premium on their shares. The Company's Certificate
of Incorporation also provides for staggered terms for the members of the Board
of Directors. A staggered Board of Directors and certain provisions of the
Company's by-laws and of Delaware law applicable to the Company could delay or
make more difficult a merger, tender offer or proxy contest involving the
Company.
PRICE VOLATILITY
The securities markets have from time to time experienced significant price and
volume fluctuations that have often been unrelated to the operating performance
of particular companies. In addition, the market prices of the common stock of
many publicly traded emerging pharmaceutical and biopharmaceutical companies
have in the past been, and can in the future be expected to be, especially
volatile. Announcements of technological innovations or new products by the
Company or its competitors, developments or disputes concerning patents or
proprietary rights or collaboration partners, achieving or failing to achieve
development milestones, publicity regarding actual or potential medical results
relating to products under development by the Company or its competitors,
regulatory developments in both U.S. and foreign countries, public concern as to
the safety of pharmaceutical products and economic and other external factors,
as well as period-to-period fluctuations in the Company's financial results, may
have a significant impact on the market price of the Common Stock.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS:
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
ITEM 5. OTHER INFORMATION:
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
a. Exhibits:
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
<S> <C>
3.1 Composite Certificate of Incorporation of Registrant. Incorporated by
reference to Exhibit 3.1 to the Company's Form 10-Q for the second
quarter ending June 30, 1995 dated August 11, 1995.
3.2 Bylaws of Registrant. Incorporated by reference to Exhibit 3.1 to the
Company's Form 10-Q for the second quarter ending June 30, 1995 dated
August 11, 1995.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Composite Certificate of
Incorporation and Bylaws of the Registrant defining rights of holders
of Common Stock of the Registrant.
10.1 1991 Stock Option Plan, as amended and restated. Incorporated by
reference to Exhibit 99.1 to the Company's Form S-8 Registration
Statement (Registration No. 333-30751).
10.2 Form of Notice of Stock Option Grant and Stock Option Agreement.
Incorporated by reference to Exhibit 99.2 and 99.3 to the Company's
Form S-8 Registration Statement (Registration No. 33-95062).
10.3 Warehouse Lease dated January 17, 1992 between Principal Mutual Life
Insurance Company and the Registrant. Incorporated by reference to
Exhibit 10.21 to the Company's Form S-1 Registration Statement
(Registration No. 33-73868).
10.4 Equipment Leases dated February 25, 1993, August 25, 1993, and November
25, 1993 between Ventana Leasing, Inc. and the Registrant. Incorporated
by reference to Exhibit 10.23 to the Company's Form S-1 Registration
Statement (Registration No. 33-73868).
10.5 Common Stock Purchase Warrants issued in connection with the issuance
of Series A Convertible Preferred Stock. Incorporated by reference to
Exhibit 10.32 to the Company's Form S-1 Registration Statement
(Registration No. 33-73868).
10.6 Fourth Amended and Restated Registration Rights Agreement among the
Registrant and certain securityholders. Incorporated by reference to
Exhibit 10.35 to the Company's Form S-1 Registration Statement
(Registration No. 33-73868).
10.7 Common Stock Purchase Warrants issued in connection with the issuance
of Series B Convertible Preferred Stock. Incorporated by reference to
Exhibit 10.36 to the Company's Form S-1 Registration Statement
(Registration No. 33-73868).
15
<PAGE>
10.8 Common Stock Purchase Warrants dated December 7, 1993 to purchase
49,400 shares of Common Stock issued to each of John Pappajohn, Lindsay
A. Rosenwald and William M. Spencer. Incorporated by reference to
Exhibit 10.37 to the Company's Form S-1 Registration Statement
(Registration No. 33-73868).
10.9 Employment Agreement dated December 17, 1996 between the Registrant and
Charles E. Bugg, Ph.D. Incorporated by reference to Exhibit 10.11 to
the Company's Form 10-K for the year ended December 31, 1996 dated
March 28, 1997.
10.10 Employment Agreement dated December 18, 1996 between the Registrant and
J. Claude Bennett. Incorporated by reference to Exhibit 10.12 to the
Company's Form 10-K for the year ended December 31, 1996 dated March
28, 1997.
10.11 License Agreement dated April 15, 1993 between Ciba-Geigy Corporation
(now merged into Novartis) and the Registrant. Incorporated by
reference to Exhibit 10.40 to the Company's Form S-1 Registration
Statement (Registration No. 33-73868).
10.12 Employee Stock Purchase Plan. Incorporated by reference to Exhibit 99.4
to the Company's Form S-8 Registration Statement (Registration No.
33-95062).
10.13 First Amendment to Lease Agreement between Registrant and Principal
Mutual Life Insurance Company, Inc. for office/warehouse space.
Incorporated by reference to Exhibit 10.21 to the Company's Form 10-K
for the year ending December 31, 1994 dated March 28, 1995.
10.14 Form of Stock Purchase Agreement dated May 1995 between Registrant and
various parties to purchase 1,570,000 shares of common stock.
Incorporated by reference to Exhibit 10.22 to the Company's Form 10-Q
for the second quarter ending June 30, 1995 dated August 11, 1995.
10.15 Form of Registration Rights Agreement dated May 1995 between Registrant
and various parties. Incorporated by reference to Exhibit 10.23 to the
Company's Form 10-Q for the second quarter ending June 30, 1995 dated
August 11, 1995.
10.16 Form of Stock Purchase Agreement dated March 22, 1996 among Registrant
and certain investors to purchase 1,000,000 shares of common stock.
Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K
dated March 22, 1996.
10.17 Form of Registration Rights Agreement dated March 22, 1996 among
Registrant and certain investors. Incorporated by reference to Exhibit
10.2 to the Company's Form 8-K dated March 22, 1996.
10.18# License Agreement, dated May 31, 1996, between Registrant and Torii
Pharmaceutical Co., Ltd. ("Torii"). Incorporated by reference to
Exhibit 10.1 to the Company's Form 8-K/A dated May 3, 1996 and filed
August 2, 1996.
10.19# Stock Purchase Agreement, dated May 31, 1996, between Registrant and
Torii. Incorporated by reference to Exhibit 10.2 to the Company's Form
8-K/A dated May 3, 1996 and filed August 2, 1996.
10.20 Second Amendment to Lease Agreement between Registrant and Principal
Mutual Life Insurance Company, Inc. for office/warehouse space.
Incorporated by reference to Exhibit 10.24 to the Company's Form 10-Q
for the first quarter ending March 31, 1997 dated May 12, 1997.
10.21 Third Amendment to Lease Agreement between Registrant and Principal
Mutual Life Insurance Company, Inc. for office/warehouse space.
27.1 Financial Data Schedule.
</TABLE>
----------
# Confidential treatment granted.
b. Reports on Form 8-K:
None.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOCRYST PHARMACEUTICALS, INC.
<TABLE>
<CAPTION>
<S> <C>
Date: April 29, 1998 /s/ Charles E. Bugg
------------------------------------
Charles E. Bugg
Chairman and Chief Executive Officer
Date: April 29, 1998 /s/ Ronald E. Gray
------------------------------------
Ronald E. Gray
Chief Financial Officer and Chief Accounting Officer
</TABLE>
<PAGE>
EXHIBIT 10.21
STATE OF ALABAMA )
SHELBY COUNTY )
THIRD AMENDMENT TO LEASE AGREEMENT
THIS THIRD AMENDMENT TO LEASE AGREEMENT, hereinafter referred to as the
"Agreement" is made and entered into on this 27th day of February, 1998 by and
between PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, hereinafter referred to as
"Lessor" and BIOCRYST PHARMACEUTICAL, INC., hereinafter referred to as "Lessee";
WHEREAS, Lessor and Lessee, entered into a Lease Agreement, dated January
17, 1992 and amended by the First Amendment to Lease Agreement dated January 10,
1995 and amended by the Second Amendment to Lease Agreement dated March 31,
1997, collectively referred to as the "Lease", for approximately 28,440 gross
leasable square feet of office/warehouse space consisting of Suite B, and Suite
C, collectively referred to as the "Premises", at the building known as
Riverchase Business Park, the "Building", located at 2190 and 2192 Parkway Lake
Drive, Birmingham, Alabama 35244.
WHEREAS, the parties hereto have reached additional agreements to amend
the Lease in the manner hereafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable considerations, the
receipt and sufficiency of which is hereby acknowledged, Lessor and Lessee
understand and agree as follows:
1. Lessee shall expand into 2190 Parkway Lake Drive, Suite A, the
"Expansion Area" consisting of approximately 9,600 gross leasable
square feet.
2. This Agreement shall commence on April 1, 1998.
3. Monthly rent for the Expansion Area shall commence April 1, 1998 and is
$4,4000.00 per month, adjusting in the month of April of each year as
described in Paragraph Two (2) of the First Amendment To Lease
Agreement dated January 10, 1995.
4. The Lease shall expire on March 31, 2001.
5. Lessor shall provide a Tenant Improvement allowance of $2.00 per square
foot. Any costs which exceed this allowance will be the responsibility
of the Lessee.
6. All other terms, covenants and conditions of the Lease shall remain
unchanged except as herein expressly changed and amended. In the event
the terms, covenants and condition of this Agreement differ from, or at
variance with, the terms of the Lease, the terms of this Agreement
shall prevail and take precedent.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the day and year first above written.
WITNESS LESSOR: Principal Mutual Life Insurance Company
/s/Sharon K.Lane By: /s/ Bill Bramwell By: /s/ Ralph C. Eucher
- ---------------- ----------------- -------------------
Its: Senior Regional Asset Manager Its: 2nd Vice President
----------------------------- ------------------------
WITNESS LESSEE: BioCryst Pharmaceuticals, Inc.
/s/Ronald E. Gray By: /s/Charles E. Bugg
--------------------------------------------
Its: CEO
--------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the BioCryst
Pharmaceuticals, Inc Financial Statements, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,501,811
<SECURITIES> 18,857,357
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,508,701
<PP&E> 3,390,813
<DEPRECIATION> 1,762,872
<TOTAL-ASSETS> 24,500,542
<CURRENT-LIABILITIES> 1,369,742
<BONDS> 0
0
0
<COMMON> 139,402
<OTHER-SE> 22,659,880
<TOTAL-LIABILITY-AND-EQUITY> 24,500,542
<SALES> 0
<TOTAL-REVENUES> 381,987
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,027
<INCOME-PRETAX> (3,005,743)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,005,743)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,005,743)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
