Syndax Pharmaceuticals, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Filed August 6, 2020. Syndax is a clinical-stage biopharmaceutical company with no approved products and no product-sales revenue; reported revenue consists of license fees.
Financial performance
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $0.379m | $0.379m | $0.758m | $0.758m |
| Research and development expense | $10.943m | $12.290m | $20.505m | $23.569m |
| General and administrative expense | $6.046m | $3.463m | $11.963m | $7.374m |
| Operating loss | $16.610m | $15.374m | $31.710m | $30.185m |
| Net loss | $17.062m | $14.916m | $32.298m | $29.218m |
| Basic and diluted net loss per share | $0.42 | $0.47 | $0.97 | $1.00 |
Revenue was recognized ratably under the Kyowa Kirin entinostat license agreement. The filing reports no product revenue. Gross margin is not presented and is not a meaningful measure of the company’s reported revenue mix.
- Period-over-period: Q2 revenue was unchanged; R&D expense declined 11%, while G&A rose 75%. For the six months, R&D declined 13%, G&A increased 62%, and net loss widened by $3.1m. Increased pre-commercialization and employee-related costs contributed to higher G&A. Lower clinical activity and the prior-year $4.0m Menin-program milestone expense contributed to lower R&D.
- Cash and liquidity: At June 30, cash and cash equivalents were $53.611m, short-term investments $133.142m, and restricted cash $0.115m. Cash, cash equivalents and short-term investments totaled $186.8m. Current assets were $191.8m versus current liabilities of $12.5m.
- Cash flows, six months: Operating activities used $37.332m, investing activities used $97.665m, and financing activities provided $163.999m. Financing included $142.767m net proceeds from stock offerings and $19.730m net proceeds from debt. Investing outflow primarily reflects purchases of short-term securities, not operating expenditure.
- Debt: The company borrowed $20.0m under its Hercules loan; the balance-sheet carrying value was $19.896m after fees. Interest was 9.85% at June 30. Interest-only payments run through October 2021, followed by principal and interest payments; stated maturity is September 2023. An additional $10m tranche is subject to lender investment committee approval. The loan is secured by substantially all company and subsidiary assets other than intellectual property and includes a $12.5m minimum-cash covenant beginning October 1, 2020, subject to specified conditions.
- Equity and dilution: The company raised approximately $107.9m net in a May 2020 offering and approximately $34.9m net in a January offering. Shares issued and outstanding were 38.5m at June 30, compared with 27.1m at December 31, 2019. The six-month common-stockholder loss of $36.204m includes a $3.906m deemed dividend related to warrant repricing; this is distinct from the $32.298m net loss.
Business developments, outlook and risks
- Pipeline focus: Lead candidates are SNDX-5613, a menin inhibitor being studied in acute leukemias, and axatilimab, an anti-CSF-1R antibody being studied in chronic graft-versus-host disease (cGVHD). Management deprioritized entinostat after the Phase 3 E2112 trial failed to demonstrate a statistically significant overall-survival benefit over hormone therapy alone.
- Clinical outlook: Management expected to identify a recommended Phase 2 dose for SNDX-5613 by year-end 2020, with full data from the amended Phase 1 portion expected in early 2021. Additional axatilimab Phase 1 results were expected in Q4 2020. These are forward-looking expectations, not reported outcomes.
- COVID-19: The company reported no financial impact and no change to 2020 clinical-data timelines to date, but warned that the pandemic could delay enrollment, trial-site activity, manufacturing, supply and regulatory interactions. It had shifted employees to remote work and adopted remote or virtual trial approaches where possible. It expected adequate SNDX-5613 and axatilimab supplies for 2020, while noting that prolonged disruption could affect supply and trial continuity.
- Runway and funding: Management stated that available cash, cash equivalents and marketable securities as of August 6, 2020 were expected to fund current operating plans for at least 12 months. The filing also says the company expects continued significant losses and may need additional financing; timing and amount depend on clinical, regulatory, manufacturing and other factors. Management warned that pandemic-related market disruption could make future capital harder to access.
- Other commitments and risks: A July 2020 axatilimab clinical milestone triggered a $2.0m payment to UCB. Estimated remaining payments under the ECOG-ACRIN E2112 agreement were approximately $3.8m over about two years. Principal risks include clinical and regulatory uncertainty, trial enrollment and COVID-19 disruption, reliance on third-party manufacturers and CROs, financing needs, competition, and license and intellectual-property obligations. No material legal proceedings were reported.
Investor facts to verify
- Whether SNDX-5613 and axatilimab trials meet the disclosed data and development timelines, and whether COVID-19 affects enrollment, sites or supply.
- Cash burn and liquidity runway against the stated at-least-12-month operating-plan estimate, including whether additional capital is needed.
- Terms, covenant compliance and repayment implications of the Hercules loan, including the conditional tranche and minimum-cash covenant.
- Potential dilution from outstanding pre-funded warrants, Series 1 and Series 2 warrants, stock options and any further equity issuance.
- Financial and strategic effects of deprioritizing entinostat after E2112, including remaining trial commitments and potential license obligations.