Syndax Pharmaceuticals, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Syndax is a clinical-stage biopharmaceutical company with no products approved for sale. Its candidates include entinostat, SNDX-5613 and SNDX-6352.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data.
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | 0.4 | 0.4 | 0.8 | 0.8 |
| Research and development expense | 12.3 | 14.9 | 23.6 | 30.2 |
| General and administrative expense | 3.5 | 4.5 | 7.4 | 9.3 |
| Net loss | (14.9) | (18.4) | (29.2) | (37.8) |
| Net loss per share | (0.47) | (0.74) | (1.00) | (1.54) |
- All reported revenue was license-fee revenue under the Kyowa Hakko Kirin (KHK) entinostat agreement; Syndax reported no product-sales revenue. Product or operating margins are not meaningful for this pre-commercial business.
- At June 30, 2019, cash and cash equivalents were $26.7 million and short-term investments were $53.9 million, totaling $80.5 million. Current assets were $85.8 million; current liabilities were $17.5 million.
- Six-month operating cash use was $29.4 million. Investing activities used $6.2 million, while financing provided $28.4 million, primarily from the March registered direct offering and ATM sales.
- Total liabilities were $32.1 million, including $15.4 million of deferred revenue and $1.3 million of operating lease liabilities. The filing reports no conventional borrowings or funded debt balance.
- Accumulated deficit was $468.6 million. Management said existing cash, cash equivalents and short-term investments were expected to fund projected operating expenses and capital requirements for at least the next 12 months.
Changes versus the prior comparable period
- For the first half, net loss narrowed by $8.6 million, or 23%, as operating expenses declined 22%. R&D expense fell 22%, and G&A fell 20%; revenue was unchanged.
- Management attributed lower R&D costs mainly to reduced professional fees, SNDX-6352 manufacturing activity, and ENCORE and SNDX-6352 clinical activity. These reductions included a $4.0 million R&D expense for achieved Menin-program milestones in June 2019.
- Quarterly net loss narrowed 19% year over year. Weighted-average shares used for per-share calculations rose to 31.6 million from 24.7 million for Q2, reflecting equity issuance and warrant-related share treatment.
- Cash, cash equivalents and restricted cash decreased $7.1 million during the first half, versus a $3.0 million decrease in the first half of 2018. The company raised $27.4 million net from its March offering and $0.8 million net through its ATM program.
Outlook, developments and risks
- Entinostat: The Phase 3 E2112 breast-cancer trial passed its fourth interim overall-survival analysis in May and continued as planned. Management anticipated another interim OS analysis in Q4 2019; if needed, a final assessment after 410 death events was expected in Q2 2020. The trial had not met the statistical hurdle for progression-free survival, its other primary endpoint, and OS benefit and regulatory approval remain uncertain.
- SNDX-5613: The FDA cleared the IND in July 2019 for a Phase 1/2 trial in relapsed/refractory acute leukemia. Management expected initial clinical data in 2020.
- SNDX-6352: Enrollment continued in the Phase 1 cGVHD trial; results were anticipated in the second half of 2020. The company also described a Phase 1/1b cancer trial program.
- Management had placed initiation of a potential entinostat registration trial in NSCLC, and further work on entinostat/checkpoint-inhibitor combinations, on hold pending E2112 final OS results.
- The company expects continued significant losses and R&D spending. Its stated runway is an estimate; trial timing, enrollment, costs, regulatory requirements and access to future financing could change funding needs. Additional capital may dilute shareholders or require unfavorable collaboration terms.
- License agreements could require substantial future milestone payments and royalties. In June, Syndax recorded a $4.0 million accrued milestone payable to Allergan/Vitae. KHK deferred revenue was $15.4 million and is expected to be recognized through the remainder of the agreement term.
- Other notable disclosures: the company reported no material legal proceedings; management concluded disclosure controls were effective as of June 30, 2019. Adoption of the new lease standard resulted in approximately $1.3 million of lease assets and liabilities at adoption and did not materially affect reported results.
Important facts for investors to verify
- Timing and outcome of E2112 OS analyses, particularly in light of the failed PFS endpoint and the differing timing references in the filing.
- Whether the stated minimum 12-month cash runway remains supportable as clinical activity, milestone payments and operating costs evolve.
- Progress, enrollment, safety and data timing for the SNDX-5613 and SNDX-6352 trials.
- Potential dilution and warrant terms from the March 2019 financing, and remaining ATM capacity; the filing reported $31.2 million available under the ATM program at June 30.
- Future license milestones, royalties and other contingent obligations, including amounts payable under the Allergan/Vitae, UCB and Bayer agreements.