SCYNEXIS, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. SCYNEXIS is a biotechnology company developing ibrexafungerp. The FDA approved oral BREXAFEMME for vulvovaginal candidiasis in June; U.S. commercialization began in August, after quarter-end.
Financial results and liquidity
| Metric | Q2 2021 | First six months 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | $0 | $12.05 million | $0 |
| Research and development expense | $4.73 million | $11.68 million | Q2: $8.47 million; six months: $18.34 million |
| Selling, general and administrative expense | $12.77 million | $19.47 million | Q2: $3.36 million; six months: $5.97 million |
| Operating loss | $17.51 million | $19.10 million | Q2: $11.83 million; six months: $24.30 million |
| Net income (loss) | $1.66 million | $(3.02) million | Q2: $(6.38) million; six months: $(13.38) million |
| Operating cash flow | Not separately stated | $(12.45) million | $(22.91) million for six months |
Q2 net income reflected large noncash gains from warrant and derivative fair-value remeasurements and a $4.14 million tax benefit from selling New Jersey tax attributes; it does not indicate operating profitability. The six-month revenue principally came from the Hansoh Greater China license. No product-sales revenue was reported in the quarter. No gross margin was reported.
At June 30, cash and cash equivalents were $112.45 million (versus $93.04 million at year-end); current assets were $115.63 million and current liabilities $19.88 million. Total liabilities were $88.81 million and stockholders’ equity $32.32 million. The company had $30 million principal outstanding under its new term loan, reported as $28.38 million net of discount and issuance costs, plus $11.996 million of convertible debt and derivative liability. Cash, cash equivalents and restricted cash totaled $112.72 million. Six-month financing cash inflow was $32.11 million, mainly from the term loan.
Material changes and developments
- Revenue increased from zero to $12.05 million for the first half following the Hansoh license agreement. The agreement includes up to $110 million in potential development and commercial milestones and low double-digit royalties; these contingent amounts were not recognized as revenue.
- R&D expense fell 36% for the first half, mainly as clinical and manufacturing activity declined. SG&A rose 226%, primarily due to BREXAFEMME launch preparation and commercialization, medical affairs, personnel and IT costs.
- In January, the remaining $6 million principal of the April 2020 notes converted into shares; SCYNEXIS recorded a $2.73 million extinguishment loss. Common shares issued and outstanding rose to 23.15 million from 19.66 million at year-end.
- The company entered a loan agreement for up to $60 million and drew $30 million by quarter-end. Up to a further $30 million was available subject to milestones and other conditions. Debt bears a variable rate of at least 9.05%, with interest-only payments initially and principal repayment thereafter.
Outlook, commentary and risks
- Management said existing cash, sale of New Jersey tax attributes and anticipated BREXAFEMME sales were expected to fund operations into 2023, based on the current operating plan. The company expects continued losses and substantial funding needs; actual cash use may exceed estimates.
- Management expected R&D expense to decrease following completion of the VANISH registration program and CANDLE enrollment, while SG&A would rise to support commercialization.
- CANDLE enrollment was complete; the company expected last-patient/last-visit by year-end 2021, top-line results and a potential supplemental NDA in the first half of 2022, and potential approval in late 2022. Enrollment continued in refractory invasive fungal infection studies and the SCYNERGIA study; an IV formulation study was also ongoing.
- Key risks include successful BREXAFEMME adoption and market access, clinical and regulatory outcomes, commercialization costs, need for additional capital and potential dilution, and loan covenants. The loan’s revenue covenant begins in June 2022, subject to a cash-based waiver provision. COVID-19 had not caused significant adverse effects identified by the company as of the filing.
- Amplity supports the U.S. launch under a five-year agreement; some direct service costs are deferred in 2021–2022 and repayable from 2023. Merck is entitled to mid- to high-single-digit royalties on ibrexafungerp sales.
Important facts for investors to verify
- BREXAFEMME launch progress, payer coverage, sales and resulting revenue and cash burn.
- CANDLE trial results and timing of any supplemental NDA; progress and outcomes of other ibrexafungerp trials.
- Cash runway assumptions and access to remaining loan tranches or other financing.
- Loan interest, repayment terms, revenue covenant and conditions for any covenant waiver.
- Potential share dilution: 25.25 million shares were reserved for future issuance at June 30, including warrants and convertible-note shares.
- How much of reported earnings reflects noncash fair-value movements and tax-attribute sales rather than recurring operations.