SCYNEXIS, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results. SCYNEXIS is a biotechnology company developing ibrexafungerp for fungal infections; BREXAFEMME was FDA-approved for vulvovaginal candidiasis (VVC) in June 2021.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $1.6 million | $0.5 million | $3.6 million | $12.6 million |
| Operating expenses | $23.4 million | $20.0 million | $66.8 million | $51.1 million |
| Operating loss | $21.8 million | $19.4 million | $63.3 million | $38.5 million |
| Net loss | $29.6 million | $0.6 million | $48.4 million | $3.6 million |
| Net loss per share, basic and diluted | $0.62 | $0.02 basic; $0.06 diluted | $1.18 | $0.14 basic; $0.73 diluted |
| Cash used in operating activities | Not separately presented for the quarter | $57.1 million | $29.0 million |
- Q3 revenue was BREXAFEMME product sales only. Nine-month 2021 revenue included $12.1 million of Hansoh license revenue; no license revenue was recognized in 2022.
- Product gross margin was approximately 88% in both 2022 periods, based on reported product revenue less cost of product revenue. This is not a measure of overall profitability.
- R&D expense rose 46% in Q3 and 21% year to date, largely reflecting clinical development, including the MARIO and VANQUISH studies. SG&A rose 9% in Q3 and 35% year to date, principally from commercial launch costs.
- Q3 net loss included a $6.5 million noncash loss from warrant-liability remeasurement, versus an $18.8 million gain in Q3 2021. For the first nine months, warrant-liability gains were $13.2 million in 2022 versus $35.4 million in 2021. These fair-value changes materially affect reported earnings.
- Cash, cash equivalents and short-term investments totaled $96.1 million at September 30, 2022, down from $104.5 million at year-end 2021. Cash, cash equivalents and restricted cash were $68.8 million at quarter-end. Nine-month investing cash outflow of $27.4 million mainly reflected purchases of short-term investments.
- Total assets were $112.3 million; total liabilities $95.1 million; and stockholders’ equity $17.2 million. Debt included a $34.2 million carrying value for the term loan and $11.0 million for convertible debt and its derivative liability. The term loan had $35.0 million principal outstanding, variable interest of at least 9.05%, and a March 2025 maturity, subject to possible extension. Deferred Amplity fees were $4.9 million and accrue interest at 12.75%.
- The company raised $41.8 million net in the April 2022 public offering. Common shares outstanding were 32.7 million at September 30; the offering also included 11.7 million pre-funded warrants and warrants to purchase up to 15.0 million shares, presenting potential dilution.
Material changes, outlook and risks
- Strategy update after quarter-end: In October 2022, SCYNEXIS said it would seek a U.S. partner to out-license BREXAFEMME, wind down promotional activity, end its Amplity commercial partnership (expected November 30, 2022), and reduce its workforce. It intends to refocus resources on hospital-based ibrexafungerp development. BREXAFEMME was to remain available to patients.
- The company said existing cash and investments were expected to fund operations into the second quarter of 2024 under its operating plan. The filing also cautions that estimates may prove wrong, states that additional funding may be needed, and identifies risks including clinical and regulatory outcomes, operating costs, and the ability to secure a U.S. commercialization partner. A separate note says capital resources were believed sufficient for at least 12 months after financial-statement issuance.
- Management expected SG&A to decline as BREXAFEMME promotion winds down, while significant R&D costs and operating losses continue. Additional capital could come from equity, debt, partnerships, licensing or other third-party funding; equity financing may dilute shareholders.
- The FDA granted Priority Review to the supplemental application for BREXAFEMME to prevent recurrent VVC, with a November 30, 2022 target decision date. This was pending at the filing date.
- Management described ongoing clinical programs, including MARIO (topline results expected in first half 2024), FURI and CARES (study completion/data activities anticipated in 2023–early 2024), and a planned 2023 Phase 2 study of the liposomal IV formulation. The company anticipated an NDA submission in 2024 and a potential first hospital-indication approval later in 2024; these are forward-looking expectations, not assured outcomes.
- Three wholesalers represented 45%, 29% and 20% of gross product revenue for the first nine months of 2022, indicating material customer concentration. The loan’s revenue covenant and terms governing any further loan tranches are also relevant to liquidity.
- Management concluded disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022; no material change in internal control over financial reporting was reported for the quarter.
Investor verification priorities
- Track the recurrent-VVC FDA decision and the subsequent commercial-partner search, promotional wind-down, workforce changes and realized cost savings.
- Reconcile cash burn and updated runway against clinical spending, debt service, deferred Amplity repayments, and financing needs; test the stated Q2 2024 runway assumptions.
- Monitor enrollment, timing and results for MARIO, FURI, CARES, VANQUISH and SCYNERGIA, as well as regulatory milestones and development costs.
- Assess BREXAFEMME prescription growth and net sales, wholesaler concentration, gross-to-net adjustments, and the effect of reduced company promotion.
- Review dilution and accounting volatility from warrants and pre-funded warrants, plus loan covenants, interest rates and maturity obligations.