View:
Download DOC
Download PDF
Download XLS 




     Biocryst Pharmaceuticals






















 



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, 2000




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
(State or other jurisdiction of

incorporation or organization)		
62-1413174
(I.R.S. employer identification no.)		















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:
17,429,994 shares of the Company’s Common Stock, $.01 par value, were
outstanding as of April 28, 2000. 


































BIOCRYST PHARMACEUTICALS, INC.
















INDEX












     Part I. Financial Information
     Page No.





     Item 1.
      
     Financial Statements:
      
      
      



      
     Condensed Balance Sheets - March 31, 2000 and December 31, 1999 
     2 



      
     Condensed Statements of Operations - Three Months Ended March 31, 2000 and 1999 
     3 



      
     Condensed Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 
     4 



      
     Notes to Condensed Financial Statements 
     5 



     Item 2. 
     Management’s Discussion and Analysis of Financial Condition and Results of Operations 
     5 



     Item 3. 
     Quantitative and Qualitative Disclosures about Market Risk 
     15 



      



      
     Part II. Other Information       



     Item 1. 
     Legal Proceedings 
     16 



     Item 2. 
     Changes in Securities and Use of Proceeds 
     16 



     Item 3. 
     Defaults Upon Senior Securities 
     16 



     Item 4. 
     Submission of Matters to a Vote of Security Holders 
     16 



     Item 5. 
     Other Information 
     16 



     Item 6. 
     Exhibits and Reports on Form 8-K 
     16 



      
     Signatures 
     18 















1




























PART I. FINANCIAL INFORMATION





Item 1. Financial Statements






BIOCRYST PHARMACEUTICALS, INC. 
CONDENSED
 BALANCE SHEETS 
March 31, 2000 and December 31, 1999














     
     2000
(Unaudited) 		
     1999
(Note 1)



     
                   
                ASSETS
      
     
         
     
         



     Cash and cash equivalents 
     $9,786,180
         
     $8,631,447
         



     Securities held-to-maturity 
     16,903,763
         
     14,545,471
         



     Prepaid expenses and other current assets 
     705,813
         
     1,376,734
         



     



        Total current assets 
     27,395,756
         
     24,553,652
         



     Securities held-to-maturity 
     46,369,099
         
     46,870,573
         



     Furniture and equipment, net 
     1,875,285
         
     1,780,900
         



     Patents 
     188,701
         
     181,771
         



     



        Total assets 
     $75,828,841
         
     $73,386,896
         



     



     
                    
LIABILITIES AND STOCKHOLDERS’ EQUITY 



     Accounts payable 
     $405,236
         
     $291,545
         



     Accrued expenses 
     290,033
         
     670,012
         



     Deferred revenue 
     581,504
         
     700,000
         



     Current maturities of capital lease obligations 
     26,299
         
     14,970
         



     



        Total current liabilities 
     1,303,072
         
     1,676,527
         



     Obligations under capital lease obligations 
     2,731
         
     6,896
         



     Deferred license fee 
     300,000
         
     300,000
         



     



        Total liabilities 
     1,605,803
         
     1,983,423
         



     



     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 - 



         17,429,994 in 2000 and 17,263,878 in 1999 
     174,300
         
     172,639
         



       Additional paid-in capital 
     130,657,803
         
     129,698,040
         



       Accumulated deficit 
     (56,609,065
        )
     (58,467,206
        )



     



        Total stockholders’ equity 
     74,223,038
         
     71,403,473
         



     



        Total liabilities and stockholders’ equity 
     $75,828,841
         
     $73,386,896
         



     
















See accompanying notes to condensed financial statements. 




2



































BIOCRYST PHARMACEUTICALS, INC. 
CONDENSED
STATEMENTS OF OPERATIONS 
Three Months Ended March 31, 2000 and 1999













     
     2000

     1999



     Collaborative and other research and development
      
     $4,146,417
         
     $216,133
         



     Interest and other
      
     1,076,809
      
        322,748
 



     



        Revenues
      
     5,223,226
      
     538,881
         



     



     Research and development 
     1,936,380
         
     2,169,876
         



     General and administrative 
     1,027,619
         
     768,043
         



     Royalty expense 
     400,000
         
     0
         



     Interest 
     1,086
         
     1,452
         



     



        Expenses 
     3,365,085
         
     2,939,371
         



     



     Income/(loss) before income taxes 
     1,858,141
         
     (2,400,490
        )



     Income taxes 
     0
         
     0
         

     



     Net income/(loss) 
     $1,858,141
         
     $(2,400,490
        )

     



     Net income/(loss) per share (Note 2): 



         Basic 
     $.11
         
     $(.16
        )



         Diluted 
     $.10
         
     $(.16
        )



     Weighted average shares outstanding (Note 2): 



         Basic 
     17,341,943
         
     14,975,433
         



         Diluted 
     18,961,290
         
     14,975,433
         
















See accompanying notes to condensed financial statements. 





3
































BIOCRYST PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2000 and 1999


   










     
     2000

     1999



     Operating activities
      
     
         
     
         



     Net income/(loss) 
     $ 1,858,141
         
     $(2,400,490
        )



     Depreciation and amortization 
     154,780
         
     124,362
         



     Non-monetary compensation 
     27,765
         
     12,267
         



     Changes in operating assets and liabilities, net 
     286,137
         
     (381,734
        )



     



       Net cash provided/(used) by operating activities 
     2,326,823
         
     (2,645,595
        )



     



     Investing activities 



     Purchases of capital assets 
     (256,095
        )
     (183,216
        )



     Purchase of marketable securities 
     (4,926,986
        )
     (4,975,912
        )



     Maturities of marketable securities 
     3,070,168
         
     3,572,218
         



     



        Net cash (used)/provided by investing activities 
     (2,112,913
        )
     (1,586,910
        )



     



     Financing activities 



     Principal payments on debt and capital lease obligations 
     (4,295
        )
     (2,951
        )



     Proceeds of sale/leasebacks 
     11,459
         



     Proceeds from sale of common stock, net of issuance cost 
     933,659
         
     137,048
         



     



        Net cash provided by financing activities 
     940,823
         
     134,097
         



     



     Increase/(decrease) in cash and cash equivalents 
     1,154,733
         
     (4,098,408
        )



     Cash and cash equivalents at beginning of period 
     8,631,447
         
     12,311,348
         



     



     Cash and cash equivalents at end of period 
     $ 9,786,180
         
     $   8,212,940
         



     













See accompanying notes to condensed financial statements. 





4





























BIOCRYST PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS




Note 1. Basis of Preparation




     The condensed balance sheet as of
March 31, 2000 and the condensed statements of operations and cash flows for the
three months ended March 31, 2000 and 1999 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, 2000 and the results of operations and cash flows for the
three months ended March 31, 2000 and 1999. These condensed financial statements
should be read in conjunction with the financial statements for the year ended
December 31, 1999 and the notes thereto included in the Company’s 1999
Annual Report on Form 10-K. Interim operating results are not necessarily
indicative of operating results for the full year. The balance sheet as of
December 31, 1999 has been prepared from the audited financial statements
included in the previously mentioned Annual Report. 





Note 2. Net Income/(Loss) Per Share




     The Company computes net
income/(loss) per share in accordance with Statement of Financial Accounting
Standards No. 128, Earnings per Share. Basic net income/(loss) per share is
based upon the weighted average number of common shares outstanding during the
period. Diluted net income (loss) per share is based upon the weighted average
number of common shares outstanding and dilutive common stock equivalents during
the period. Common stock equivalents are options under the Company’s stock
option plan and common shares expected to be issued under the Company’s
employee stock purchase plan and are calculated under the treasury stock method.
Common equivalent shares from unexercised stock options are excluded from the
computation when there is a loss as their effect is anti-dilutive. 




     Common stock equivalents of
approximately 1,619,347 shares (2,576,098 shares of common stock equivalents
less 956,751 shares considered repurchased under the treasury stock method) were
included in the weighted average shares outstanding used to calculate diluted
income per share for the three months ending March 31, 2000. For the three
months ended March 31, 1999, common stock equivalents of approximately 2,488,174
shares were not included in the weighted average shares outstanding used to
calculate diluted income (loss) per share because of their anti-dilutive effect.
There were no reconciling items in calculating the numerator for basic and
diluted income (loss) per share for any of the periods presented. 




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 tofuture
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 our inception in 1986, we
have been engaged in research and development activities and organizational
efforts, including: 


















•
identification
and licensing of enzyme targets;
 














•

drug discovery; 













5






































•

structure-based design of drug candidates;  













•

small-scale synthesis of compounds; 













•

conducting preclinical studies and clinical trials; 













•

recruiting our scientific and management personnel; 













•

establishing laboratory facilities; and 













•

raising capital. 















     Our revenues have generally been
limited to license fees, milestone payments, interest income, collaboration
research, development and option fees. Research and development revenue on
cost-reimbursing agreements is recognized as expenses are incurred up to
contractual limits. Research and development revenues, license fees, milestone
payments and option fees are recognized as revenue when irrevocably due.
Payments received that are related to future performance are deferred and taken
into income as earned over a specified future performance period. We have not
received any revenue from the sale of pharmaceutical products. It could be
several years, if ever, before we will recognize significant revenues from
royalties received pursuant to our license agreements, and we do not expect to
ever generate revenues directly from product sales. Future revenues, if any, are
likely to fluctuate substantially from quarter to quarter. 




     We have incurred operating losses
since our inception. Our accumulated deficit at March 31, 1999 was
$56.6 million. We will require substantial expenditures relating to the
development of our current and future drug candidates. During the three years
ended December 31, 1999, we spent 39.0% of our research and development
expenses on contract research and development, including: 


















•

payments to consultants; 













•

funding of research at academic institutions; 













•

large scale synthesis of compounds; 













•

preclinical studies; 













•

engaging investigators to conduct clinical trials; 













•

hiring contract research organizations to monitor and gather data on clinical
trials; and 













•

using statisticians to evaluate the results of clinical trials. 
















     The above expenditures for
contract research and development for our current and future drug candidates
will vary from quarter to quarter depending on the status of our research and
development projects. Changes in our existing and future research and
development and collaborative relationships will also impact the status of our
research and development projects. While we may, in some cases, be able to
control the timing of development expenses, in part by accelerating or
decelerating certain of these costs, many of these costs will be incurred
irrespective of whether or not we are able to discover drug candidates or obtain
collaborative partners for commercialization. As a result, we believe that
quarter-to-quarter comparisons of our financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
If we fail to meet the clinical and financial expectations of securities
analysts and investors, it could have a material adverse effect on the price of
our common stock. 
















6

























Results of Operations (first three months of 2000 compared to
the first three months of 1999) 




     Revenues increased 869.3% to
$5,223,226 in the first three months of 2000 from $538,881 in the first three
months of 1999. The increase was primarily attributable a $4.0 million milestone
payment received from our licensee for the start of Phase III clinical trials
with our influenza neuraminidase inhibitor and interest earned on the proceeds
from our November 1999 public offering. 




     Research and development expenses
decreased 10.8% to $1,936,380 in the first three months of 2000 from $2,169,876
in the first three months of 1999. The decrease is primarily attributable to a
decrease in costs associated with conducting clinical trials. These costs tend to
fluctuate from period to period depending upon the status of the Company’s
research projects and collaborative efforts. 




     General and administrative
expenses increased 33.8% to $1,027,619 in the first three months of 2000 from
$768,043 in the first three months of 1999. The increase is primarily the result
of a new state of Alabama shares tax being greater than the replaced franchise
tax, increased personnel costs and increased legal costs. 




     Royalty expense in 2000 represents
the payment to The University of Alabama at Birmingham in connection with the
milestone payment received from our licensee. 





Liquidity and Capital Resources




     Cash expenditures have exceeded
revenues since the Company’s inception. Our operations have principally
been funded through various sources, including the following: 


















•

public offerings and private placements of equity and debt securities, 













•

equipment lease financing, 













•

facility leases, 













•

collaborative and other research and development agreements (including licenses
and options for licenses), 













•

research grants and 













•

interest income. 
















     In addition, we have attempted to
contain costs and reduce cash flow requirements by renting scientific equipment
and facilities, contracting with other parties to conduct certain research and
development and using consultants. We expect to incur additional expenses,
potentially resulting in significant losses, as we continue and expand our
research and development activities and undertake additional preclinical studies
and clinical trials of compounds which have been or may be discovered. We also
expect to incur substantial expenses related to the filing, prosecution,
maintenance, defense and enforcement of patent and other intellectual property
claims. 




     At March 31, 2000, our cash,
cash equivalents and securities held-to-maturity were $73.1 million, an
increase of $3.1 million from December 31, 1999, principally due to
the $4.0 million milestone payment and interest earned on the proceeds of our
November 1999 public offering offset by the cash used in operations. 




     We have financed some of our
equipment purchases with lease lines of credit. We currently have a $500,000
line of credit with our bank to finance capital equipment. In January 1992,
we entered into an operating lease for our current facilities which expires on
June 30, 2003. We have an option to renew the lease for an additional three
years at current market rates. The operating lease requires us to pay monthly
rent ranging from $23,803 and escalating annually to a minimum of $26,011 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, 1999, we had
long-term capital lease and operating lease obligations which provide for
aggregate minimum payments of $301,171 in 2000, $299,253 in 2001 and $300,828 in
2002. 



















7





























     Under the terms of our license
agreement with The R.W. Johnson Pharmaceutical Research Institute and
Ortho-McNeil for the development and commercialization of our influenza
neuraminidase inhibitors, we received an initial $6.0 million payment from
Ortho-McNeil and an additional $6.0 million common stock equity investment
from Johnson & Johnson Development Corporation in 1998. In June 1999,
we received a $2.0 million milestone payment from Ortho-McNeil in
connection with the initiation of Phase II clinical testing in the United
States. In February 2000, we received a $4.0 million milestone payment from
Ortho-McNeil in connection with the initiation of Phase III clinical testing. In
addition, we may receive cash payments upon specified developmental and
regulatory milestones and royalties on product sales, if any. We cannot assure
you that The R.W. Johnson Pharmaceutical Research Institute or Ortho-McNeil will
continue to develop the product or, if they do so, that such development will
result in receiving milestone payments, obtaining regulatory approval or
achieving future sales of licensed products. 




     We previously entered into an
exclusive license agreement with Torii under which Torii paid us
$1.5 million in initial license fees and made a $1.5 million equity
investment in us in 1996. The first milestone payment of $1.0 million was
received in 1997. This exclusive license agreement was terminated by Torii in
July 1999. 




     We plan to finance our needs
principally from the following: 

















•

our existing capital resources and interest earned on that capital; 













•

payments under collaborative and licensing agreements with corporate partners;
and 













•

through lease or loan financing and future public or private financings. 
















     We believe that our available
funds will be sufficient to fund our operations at least through 2002. However,
this is a forward-looking statement, and there may be changes that would consume
available resources significantly before such time. Our long-term capital
requirements and the adequacy of our available funds will depend upon many
factors, including: 


















•

the progress of our research, drug discovery and development programs; 













•

changes in existing collaborative relationships; 













•

our ability to establish additional collaborative relationships; 













•

the magnitude of our research and development programs; 













•

the scope and results of preclinical studies and clinical trials to identify
drug candidates; 













•

competitive and technological advances; 













•

the time and costs involved in obtaining regulatory approvals; 













•

the costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims; 













•

our dependence on others, including The R.W. Johnson Pharmaceutical Research
Institute and Ortho-McNeil, for development and commercialization of our
product candidates, in particular, our neuraminidase inhibitors; and 













•

successful commercialization of our products consistent with our licensing
strategy. 














8




























     Additional funding, whether
through additional sales of securities or collaborative or other arrangements
with corporate partners or from other sources, may not be available when needed
or on terms acceptable to us. 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, could have the effect of
diluting or adversely affecting the holdings or rights of our existing
stockholders. In addition, collaborative arrangements may require us to transfer
certain material rights to such corporate partners. Insufficient funds may
require us to delay, scale-back or eliminate certain of our research and
development programs. 




Certain Risk Factors That May Affect Future Results, Financial
Condition and the Market Price of Securities 




We have incurred substantial losses since our inception in
1986, expect to continue to incur such losses, may never be profitable and may
need additional financing 




     Since our inception in 1986, we
have not been profitable. We expect to incur additional losses for the
foreseeable future, and our losses could increase as our research and
development efforts progress. As of March 31, 2000, our accumulated deficit was
approximately $56.6 million. To become profitable, we must successfully
develop drug candidates, enter into profitable agreements with other parties and
our drug candidates must receive regulatory approval. These other parties must
then successfully manufacture and market our drug candidates. It could be
several years, if ever, before we receive royalties under our existing license
agreements or any future license agreements. In addition, we never expect to
generate revenue directly from product sales. If we do not generate revenue, or
if our drug development expenses increase, we may need to raise additional funds
through new or existing collaborations or through private or public equity or
debt financings. If financing is not available on acceptable terms, or not
available at all, we may not have enough capital to continue our current
business strategy. 




If The R.W. Johnson Pharmaceutical Research Institute and
Ortho-McNeil were to terminate, substantially modify or fail to fulfill their
obligations under their license agreement with us, we would lose substantially
all of our revenue 




     If The R.W. Johnson Pharmaceutical
Research Institute and Ortho-McNeil change their exclusive worldwide license
agreement with us, including by terminating it or failing to fulfill their
obligations, we would lose substantially all of our revenue. Approximately 79.4%
of our revenues for the three months ended March 31, 2000, approximately 46.9 %
of our revenues for the year ended December 31, 1999 and approximately 83.5% of
our revenues for the year ended December 31, 1998 resulted from this
license agreement. These revenues represent approximately 48.1% of our total
revenues since our inception in 1986. 




     Under this agreement, The R.W.
Johnson Pharmaceutical Research Institute and Ortho-McNeil have several rights
that could delay or stop the development of our flu drug candidate, including
sole discretion on all elements of research and development of RWJ-270201,
including timing and design of further clinical trials, sole control over the
amount of resources devoted to the research and development of RWJ-270201 and
the right to terminate or cancel the agreement, which they may do at any time on
four months notice. 




If our development collaborations with other parties fail,
the development of our drug candidates will be delayed or stopped 




     We rely completely upon other
parties for many important stages of our drug development programs, including: 


















•

discovery of proteins that cause or enable biological reactions necessary for
the progression of the disease or disorder, called enzyme targets; 













•

execution of some preclinical studies and late-stage development for our
compounds and drug candidates; and 













•

manufacturing, sales, marketing and distribution of our drug candidates. 













9




























     Our failure to engage in
successful collaborations at any one of these stages would greatly impact our
business. For example, if we do not license enzyme targets from academic
institutions or from other biotechnology companies on acceptable terms, our
product development efforts would suffer. Similarly, if the contract research
organizations that conduct our initial clinical trials breached their
obligations to us, this would delay or prevent the development of our drug
candidates. 




     Even more critical to our success
is our ability to enter into successful collaborations for the late-stage
clinical development, regulatory approval, manufacture, marketing, sales and
distribution of our drug candidates. Our strategy is to rely upon other parties
for all of these steps so that we can focus exclusively on the key areas of our
expertise. This heavy reliance upon third parties for these critical functions
presents several risks, including: 


















•

these contracts may expire or the other parties to the contract may terminate
them, as was the case with our Torii Pharmaceutical Co., Ltd. contract; 













•

our partners may choose to pursue alternative technologies, including those of
our competitors; 













•

we may have disputes with a partner that could lead to litigation or
arbitration; 













•

our partners may not devote sufficient capital or resources towards our drug
candidates; and 













•

our partners may not comply with applicable government regulatory requirements. 















     Any problems encountered with our
partners could delay or prevent the development of our compounds, which would
severely affect our business, because if our compounds do not reach the market
in a timely manner, or at all, we will experience a significant decrease in
milestone payments received by us and may never receive any royalty payments. 




If the clinical trials of our drug candidates fail, our drug
candidates will not be marketed, which would result in a decrease in, or
complete absence of, revenue 




     To receive the regulatory
approvals necessary for the sale of our drug candidates, we or our licensees
must demonstrate through preclinical studies and clinical trials that each drug
candidate is safe and effective. If we or our licensees are unable to
demonstrate that our drug candidates are safe and effective, our drug candidates
will not receive regulatory approval and will not be marketed, which would
result in a decrease in, or complete absence of, revenue. The clinical trial
process is complex and uncertain. Positive results from preclinical studies and
early clinical trials do not ensure positive results in clinical trials designed
to permit application for regulatory approval, called pivotal clinical trials.
We may suffer significant setbacks in pivotal clinical trials, even after
earlier clinical trials show promising results. Any of our drug candidates may
produce undesirable side effects in humans. These side effects could cause us or
regulatory authorities to interrupt, delay or halt clinical trials of a drug
candidate. These side effects could also result in the FDA or foreign regulatory
authorities refusing to approve the drug candidate for any targeted indications.
We, our licensees, the FDA or foreign regulatory authorities may suspend or
terminate clinical trials at any time if we or they believe the trial
participants face unacceptable health risks. Clinical trials may fail to
demonstrate that our drug candidates are safe or effective. 




     Clinical trials are lengthy and
expensive. We or our licensees incur substantial expense for, and devote
significant time to, preclinical testing and clinical trials, yet cannot be
certain that the tests and trials will ever result in the commercial sale of a
product. For example, clinical trials require adequate supplies of drug and
sufficient patient enrollment. Delays in patient enrollment can result in
increased costs and longer development times. Even if we or our licensees
successfully complete clinical trials for our product candidates, our licensees
might not file the required regulatory submissions in a timely manner and may
not receive regulatory approval for the drug candidate. 

















10






















     We licensed our drug candidate,
RWJ-270201, to Ortho-McNeil and to PRI, who is conducting Phase III clinical
trials. However, the Phase III clinical trials may not be successful. Even if
PRI completes the Phase III trials, we do not know when, if ever, it will
receive FDA or foreign regulatory agency approvals for, or when Ortho-McNeil
will begin marketing of, RWJ-270201. If PRI is unable to complete the clinical
trials or demonstrate the safety and efficacy of our compounds, the loss of our
future revenues that depend on the success of RWJ-270201 will harm our business.
Even if the results of PRI’s trials are positive, a product is not likely
to be commercially available for one or more years, if at all. 




If we or our licensees do not obtain and maintain
governmental approvals for our products under development, we or our partners
will not be able to sell these potential products, which would significantly
harm our business because we will receive no revenue 




     We or our licensees must obtain
regulatory approval before marketing or selling our future drug products. If we
or our licensees are unable to receive regulatory approval and do not market or
sell our future drug products, we will never receive any revenue from such
product sales. In the United States, we or our partners must obtain FDA approval
for each drug that we intend to commercialize. The FDA approval process is
typically lengthy and expensive, and approval is never certain. Products
distributed abroad are also subject to foreign government regulation. The FDA or
foreign regulatory agencies have not approved any of our drug candidates. If we
or our licensees fail to obtain regulatory approval we will be unable to market
and sell our future drug products. We have several drug products in various
stages of preclinical and clinical development, however, we are unable to
determine when, if ever, any of these products will be commercially available.
Because of the risks and uncertainties in biopharmaceutical development, our
drug candidates could take a significantly longer time to gain regulatory
approval than we expect or may never gain approval. If the FDA delays regulatory
approval of our drug candidates, our management’s credibility, our
company’s value and our operating results may suffer. Even if the FDA or
foreign regulatory agencies approve a drug candidate, the approval may limit the
indicated uses for a drug candidate and/or may require post-marketing studies. 




     The FDA regulates, among other
things, the record-keeping and storage of data pertaining to potential
pharmaceutical products. We currently store all of our preclinical research data
at our. While we do store duplicate copies of some of our data offsite, we could
lose important preclinical data if our facilities incur damage. 




     If we get approval to market our
potential products, whether in the United States or internationally, we will
continue to be subject to extensive regulatory requirements. These requirements
are wide ranging and govern, among other things: 


















•

adverse drug experience reporting regulations; 













•

product promotion; 













•

product manufacturing, including good manufacturing practice requirements; and 













•

product changes or modifications. 
















     Our failure to comply with
existing or future regulatory requirements, or our loss of, or changes to,
previously obtained approvals, could have a material adverse effect on our
business because we will not receive royalty revenues if our licensees do not
receive approval of our products for marketing. 




     In June 1995, we notified the
FDA that we submitted incorrect efficacy data for our Phase II trials of BCX-34
applied to the skin for the treatment of cutaneous T-cell lymphoma and
psoriasis. Cutaneous T-cell lymphoma is a skin cancer in which T-cells, which
normally help fight disease in the body, duplicate rapidly and cause skin
cancer. Psoriasis is a disease where the immune system attacks the body’s
own skin cells. The FDA inspected us and issued to us Lists of Inspectional
Observations, on Form FDA 483, that cited our failure to follow good clinical
practices. The FDA also issued a Form FDA 483 to a principal investigator at a
clinical trial site, and the FDA notified us that they will not accept any work
performed by this investigator without further validation. Because of these
investigations by the FDA, our ongoing and future clinical studies or trials may
receive increased scrutiny, which would delay the regulatory review process. 

















11























If our drug candidates do not achieve broad market acceptance,
our business may never become profitable




     Our drug candidates, including our
influenza neuraminidase inhibitors, may not gain the market acceptance required
for us to be profitable even after they receive approval for sale by the FDA or
foreign regulatory agencies. Influenza neuraminidase inhibitors are drugs
designed to stop the spread of the flu virus in the body. The degree of market
acceptance of any drug candidates that we or our partners develop will depend on
a number of factors, including: 


















•

cost-effectiveness of our drug candidates; 













•

their safety and effectiveness relative to alternative treatments, such as
existing drugs amantadine and rimantadine, Hoffmann-La Roche’s and Glaxo
Wellcome’s influenza neuraminidase inhibitors; or vaccines for prevention of
influenza; 













•

reimbursement policies of government and third-party payors; and 













•

marketing and distribution support for our drug candidates. 
















     Physicians, patients, payors or
the medical community in general may not accept or use our drug candidates even
after the FDA or foreign regulatory agencies approve the drug candidates. If our
drug candidates do not achieve significant market acceptance, we will not have
enough revenues to become profitable. 




If competitive products from other companies are better than
our product candidates, our future revenues might fail to meet expectations 




     The biotechnology and
pharmaceutical industries are highly competitive and are subject to rapid and
substantial technological change. Other products and therapies that either
currently exist on the market or are under development could compete directly
with some of the compounds that we are seeking to develop and market. These
other products may render some or all of our compounds under development
noncompetitive or obsolete. 




     If our influenza neuraminidase
inhibitor drug candidate, RWJ-270201, receives FDA or foreign regulatory
approval, it will have to compete with a number of products that are already on
the market such as vaccines, the two influenza neuraminidase inhibitors already
on the market, the drugs amantadine and rimantadine and with additional products
that may beat RWJ-270201 to the market. If approved, RWJ-270201 will be, at
best, the third neuraminidase inhibitor to the market, because the FDA approved
Glaxo-Wellcome plc’s neuraminidase inhibitor product in the U.S. and in
several other countries, and because the FDA also approved Hoffman-La
Roche’s neuraminidase inhibitor. Both Glaxo-Wellcome and Hoffmann-La Roche,
the companies responsible for the development and marketing of the two
neuraminidase inhibitors that reached the market before RWJ-270201, are large
multinational pharmaceutical companies that have significant financial,
technical and human resources and could therefore establish brand recognition
and loyalty with consumers before RWJ-270201 is on the market. In addition, a
vaccine is currently in preclinical development that may immunize people against
all strains of the flu virus, rendering flu drug products like ours obsolete.
Products marketed by our competitors may prove to be more effective than our
own, and our products, if any, may not offer an economically feasible or
preferable alternative to existing therapies. If we fail to adequately protect
or enforce our intellectual property rights or secure rights to patents of
others, the value of those rights would diminish. 

















12




























     Our success will depend in part on
our ability and the abilities of our licensors to obtain patent protection for
our products, methods, processes and other technologies to preserve our trade
secrets, and to operate without infringing the proprietary rights of third
parties. If we or our partners are unable to adequately protect or enforce our
intellectual property rights for our products, methods, processes and other
technologies, the value of the drug candidates that we license to derive revenue
would diminish. Additionally, if our products, methods, processes and other
technologies infringe the proprietary rights of other parties, we could incur
substantial costs. To date, the U.S. Patent and Trademark Office has issued
to us nine U.S. patents for our various inventions. We have filed additional
patent applications and provisional patent applications with the U.S. Patent and
Trademark Office. We have filed a number of corresponding foreign patent
applications and intend to file additional foreign and U.S. patent applications,
as appropriate. We cannot assure you as to: 


















•

the degree and range of protection any patents will afford against competitors
with similar products; 













•

if and when patents will issue; or 













•

whether or not others will obtain patents claiming aspects similar to those
covered by our patent applications. 
















     If the U.S. Patent and
Trademark Office upholds patents issued to others or if the U.S. Patent and
Trademark Office grants patent applications filed by others, we may have to: 


















•

obtain licenses or redesign our products or processes to avoid infringement; 













•

stop using the subject matter claimed in those patents; or 













•

pay damages. 















     We may initiate, or others may
bring against us, litigation or administrative proceedings related to
intellectual property rights, including proceedings before the U.S. Patent and
Trademark Office. Any judgement adverse to us in any litigation or other
proceeding arising in connection with a patent or patent application could
materially and adversely affect our business, financial condition and results of
operations. In addition, the costs of any such proceeding may be substantial
whether or not we are successful. 




     Our success is also dependent upon
the skills, knowledge and experience, none of which is patentable, of our
scientific and technical personnel. To help protect our rights, we require all
employees, consultants, advisors and collaborators to enter into confidentiality
agreements that prohibit the disclosure of confidential information to anyone
outside of our company and require disclosure and assignment to us of their
ideas, developments, discoveries and inventions. These agreements may not
provide adequate protection for our 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, and if any of our proprietary
information is disclosed, our business will suffer because our revenues depend
upon our ability to license our technology and any such events would
significantly impair the value of such a license. 




If we fail to retain our existing key personnel or fail to
attract and retain additional key personnel, the development of our drug
candidates and the expansion of our business will be delayed or stopped 




     We are highly dependent upon our
senior management and scientific team, the loss of whose services might impede
the achievement of our development and commercial objectives. Although we
maintain, and are the beneficiary of, a $1.8 million key-man insurance
policy on the life of Charles E. Bugg, Ph.D., Chairman of the Board of Directors
and Chief Executive Officer, we do not believe the proceeds would be adequate to
compensate for his loss. We are actively seeking additional members for our
senior management team. Competition for key personnel with the experience that
we require is intense and is expected to continue to increase. Our inability to
attract and retain the required number of skilled and experienced management,
operational and scientific personnel, will harm our business because we rely
upon these personnel for many critical functions of our business. In addition,
we rely on members of our scientific advisory board and consultants to assist us
in formulating our research and development strategy. All of the members of the
scientific advisory board and all of our consultants are otherwise employed and
each such member or consultant may have commitments to other entities that may
limit their availability to us. 



















13


























If users of our drug products are not reimbursed for use,
future sales of our drug products will decline 





     The lack of reimbursement for the
use of our product candidates by hospitals, clinics, patients or doctors will
harm our business. Medicare, Medicaid, health maintenance organizations and
other third-party payors may not authorize or otherwise budget for the
reimbursement of our products. Governmental and third-party payors are
increasingly challenging the prices charged for medical products and services.
We cannot be sure that third-party payors would view our product candidates as
cost-effective, that reimbursement will be available to consumers or that
reimbursement will be sufficient to allow our product candidates to be marketed
on a competitive basis. Changes in reimbursement policies, or attempts to
contain costs in the health care industry, limit or restrict reimbursement for
our product candidates, would materially and adversely affect our business,
because future product sales would decline and we would receive less royalty
revenue. 




If we face clinical trial liability claims related to the use
or misuse of our compounds in clinical trials, our management’s time will
be diverted and we will incur litigation costs 




     We face an inherent business risk
of liability claims in the event that the use or misuse of our compounds results
in personal injury or death. We have not experienced any clinical trial
liability claims to date, but we may experience these claims in the future.
After commercial introduction of our products we may experience losses due to
product liability claims. We currently maintain clinical trial liability
insurance coverage in the amount of $1.0 million per occurrence and
$2.0 million in the aggregate, with an additional $5.0 million
potentially available under our umbrella policy. The insurance policy may not be
sufficient to cover claims that may be made against us. Clinical trial liability
insurance is expensive, difficult to obtain and may not be available in the
future on acceptable terms, if at all. Any claims against us, regardless of
their merit, could materially and adversely affect our financial condition,
because litigation related to these claims would strain our financial resources
in addition to consuming the time and attention of our management. 




If our computer systems fail, our business will suffer harm 




     Our drug development activities
depend on the security, integrity and performance of the computer systems
supporting them, and the failure of our computer systems would delay or stop our
drug development efforts. We currently store all of our preclinical and clinical
data at our facilities, do not store duplicate copies of all data off-site and
could lose important data if our systems were impaired. Any significant
degradation or failure of our computer systems could cause us to inaccurately
calculate or lose our data. Loss of data could result in significant delays in
our drug development process. We have not undertaken formal system protections,
do not have a detailed emergency plan and any system failure could harm our
business and operations. We are in the process of upgrading our computer network
and systems company-wide. Software we are currently installing is designed to
automatically archive critical scientific raw data. We are purchasing additional
hardware that is designed to keep us operational in case of computer system
failure. 




If, because of our use of hazardous materials, we violate any
environmental controls or regulations that apply to such materials, we may incur
substantial costs and expenses in our remediation efforts 




     Our research and development
involves the controlled use of hazardous materials, chemicals and various
radioactive compounds. We are subject to federal, state and local laws and
regulations governing the use, storage, handling and disposal of these materials
and some waste products. Accidental contamination or injury from these materials
could occur. In the event of an accident, we could be liable for any damages
that result and any liabilities could exceed our resources. Compliance with
environmental laws and regulations could require us to incur substantial
unexpected costs which would materially and adversely affect our results of
operations. 




Because stock ownership is concentrated, you and other
investors will have minimal influence on stockholder decisions 




     Our directors, executive officers and
some principal stockholders and their affiliates, including Johnson &
Johnson Development Corporation, beneficially own approximately 31.5% of our
outstanding common stock. As a result, these holders, if acting together, are
able to significantly influence matters requiring stockholder approval,
including the election of directors. This concentration of ownership may delay,
defer or prevent a change in our control. 



















14




























We have anti-takeover provisions in our corporate charter
documents that may result in outcomes with which you do not agree 




     Our board of directors has the
authority to issue up to 5,000,000 shares of undesignated preferred stock and to
determine the rights, preferences, privileges and restrictions of those shares
without further vote or action by our stockholders. The rights of the holders of
any preferred stock that may be issued in the future may adversely affect the
rights of the holders of common stock. The issuance of preferred stock could
make it more difficult for third parties to acquire a majority of our
outstanding voting stock. 




     In addition, our certificate of
incorporation provides for staggered terms for the members of the board of
directors and super majority approval of the removal of any member of the board
of directors and prevents our stockholders from acting by written consent. Our
certificate also requires supermajority approval of any amendment of these
provisions. These provisions and other provisions of our by-laws and of Delaware
law applicable to us could delay or make more difficult a merger, tender offer
or proxy contest involving us. 




Our stock price is likely to be highly volatile and the value
of your investment could decline significantly 




     The market prices for securities
of biotechnology companies in general have been highly volatile and may continue
to be highly volatile in the future. Moreover, our stock price has fluctuated
frequently, and these fluctuations are often not related to our financial
results. The 52-week range of the market price of our stock has ranged from
$6.94 to $37.25 per share, which is a significantly greater change than that
experienced by many other companies. The following factors, in addition to other
risk factors described in this section, may have a significant impact on the
market price of our common stock: 


















•
announcements
of technological innovations or new products by us or our competitors; 













•
developments
or disputes concerning patents or proprietary rights; 













•
our
licensees achieving or failing to achieve development milestones; 













•
publicity
regarding actual or potential medical results relating to products under
development by us or our competitors; 













•
regulatory
developments in both the United States and foreign countries; 













•
public
concern as to the safety of pharmaceutical products; 













•
actual
or anticipated fluctuations in our operating results; 













•
changes
in financial estimates or recommendations by securities analysts; 













•
economic
and other external factors or other disasters or crises; and 













•
period-to-period
fluctuations in our financial results. 
















Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK 




     The primary objective of our
investment activities is to preserve principal while at the same time maximize
the income we receive from our investments without significantly increasing our
risk. We invest excess cash principally in U.S. marketable securities from a
diversified portfolio of institutions with strong credit ratings and in U.S.
government and agency bills and notes, and by policy, limit the amount of credit
exposure at any one institution. Some of the securities we invest in may have
market risk. This means that a change in prevailing interest rates may cause the
principal amount of the investment to fluctuate. To minimize this risk, we
schedule our investments to coincide with our cash flow needs, thus avoiding the
need to redeem an investment prior to its maturity date. Accordingly, we believe
we have no material exposure to interest rate risk arising from our investments.
Therefore, no quantitative tabular disclosure is provided. 

















15



























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:













Number
 Description 













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

Amendment No. 1 to the 1991 Stock Option Plan, as amended and restated.
Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the
second quarter ending June 30, 1999 dated August 12, 1999. 












10.3

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). 












10.4

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). 












10.5

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. 













16





































10.6

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. 












10.7

Third 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, 1998 dated April 29, 1998. 












10.8

Fourth Amendment to Lease Agreement between Registrant and Principal Mutual
Life Insurance Company, Inc. for office/warehouse space. Incorporated by
reference to Exhibit 10.22 to the Company’s Form 10-Q for the second quarter
ending June 30, 1998 dated April 29, 1998. 












10.9

Fifth Amendment to Lease Agreement between Registrant and Principal Mutual Life
Insurance Company, Inc. for office/warehouse space. Incorporated by reference
to Exhibit 10.9 to the Company’s Form 10-Q for the second quarter ending June
30, 1999 dated August 12, 1999. 












10.10

Employment Agreement dated December 27, 1999 between the Registrant and Charles
E. Bugg, Ph.D. Incorporated by reference to Exhibit 10.10 to the Company’s Form
10-K for the year ending December 31, 199 dated March 24, 2000. 












10.11

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. 












10.12#

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). 












10.13

Employee Stock Purchase Plan. Incorporated by reference to Exhibit 99.4 to the
Company’s Form S-8 Registration Statement (Registration No. 33-95062). 












10.14

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#

License Agreement dated as of September 14, 1998 between Registrant and The
R.W. Johnson Pharmaceutical Research Institute and Ortho-McNeil Pharmaceutical,
Inc. Incorporated by reference to Exhibit 10.23 to the Company’s Form 10-Q for
the third quarter ending September 30, 1998 dated November 10, 1998. 












10.21

Stock Purchase Agreement dated as of September 14, 1998 between Registrant and
Johnson & Johnson Development Corporation. Incorporated by reference to Exhibit
10.24 to the Company’s Form 10-Q for the third quarter ending September 30,
1998 dated November 10, 1998. 













17





































10.22

Stockholder’s Agreement dated as of September 14, 1998 between Registrant and
Johnson & Johnson Development Corporation. Incorporated by reference to Exhibit
10.25 to the Company’s Form 10-Q for the third quarter ending September 30,
1998 dated November 10, 1998. 












27.1

Financial Data Schedule. 
















__________ 














#


Confidential
treatment granted.

























b.


Reports
on Form 8-K:
















     None. 





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.

 		
      



     Date: May 5, 2000
      
     /s/ Charles E. Bugg          
      



        
     Charles E. Bugg 



        
     Chairman and Chief Executive Officer

 



     Date: May 5, 2000 
     /s/ W. Randall Pittman       



        
     W. Randall Pittman 



        
     Chief Financial Officer and Chief Accounting Officer 











18















 



                     5

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.




                                            
                                         3-MOS
                               Dec-31-2000
                                    Mar-31-2000
                                            9,786,180
                                     63,272,862
                                             0
                                              0
                                               0
                                 27,395,756
                                            3,926,889
                                    2,051,604
                                   75,828,841
                             1,303,072
                                                   0
                                     0
                                               0
                                            174,300
                                       74,048,738
                     75,828,841
                                                   0
                                  5,223,226
                                                     0
                                     3,363,999
                                          0
                                          0
                                    1,086
                                   1,858,141
                                              0
                               1,858,141
                                            0
                                           0
                                                 0
                                      1,858,141
                                             .11
                                           .10