SCYNEXIS, Inc. — Q2 2020 Form 10-Q
Business context and period: Biotechnology company developing ibrexafungerp, a late-stage antifungal candidate for vulvovaginal candidiasis (VVC) and invasive fungal infections. This unaudited report covers the three and six months ended June 30, 2020; financial amounts below are in U.S. dollars unless noted.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $57,000 | $0 | $121,000 |
| Research and development expense | $8.469m | $8.474m | $18.335m | $18.158m |
| Selling, general and administrative expense | $3.357m | $2.779m | $5.966m | $5.021m |
| Net loss | $6.381m | $8.403m | $13.383m | $31.311m |
| Basic and diluted loss per share | $0.64 | $1.58 | $1.35 | $6.10 |
| Net cash used in operating activities | Not stated for quarter | Not stated for quarter | $22.913m | $14.259m |
At June 30, 2020, cash and cash equivalents were $34.021m and short-term investments were $3.594m, totaling $37.615m, down from $48.414m at December 31, 2019. Total assets were $45.267m; total liabilities were $38.934m; stockholders’ equity was $6.333m. The filing reports $34.294m of cash, cash equivalents and restricted cash at quarter-end. No product-sales revenue had been generated.
Debt includes senior unsecured convertible notes bearing 6% interest: the April 2020 notes had $10.0m original principal, with $2.0m converted in June, and mature in 2026; the March 2019 notes mature in 2025. The balance sheet presents $18.254m of convertible debt and derivative liabilities combined. Warrant liabilities were $10.034m. Lease liabilities totaled $3.373m. The filing does not present a conventional debt-only total in the balance sheet.
Six-month financing cash flow was $12.111m, including $10.0m gross proceeds from the April notes and common-stock sales. Investing cash flow was $2.903m. The company reported $22.913m of operating cash use, compared with $14.259m in the prior-year period.
Material changes versus prior period
- Q2 net loss narrowed by $2.022m year over year; six-month net loss fell by $17.928m. The six-month comparison was materially affected by fair-value movements in warrant and derivative liabilities, which produced gains in 2020 versus losses in 2019, and by a $3.144m New Jersey tax-credit/NOL sale benefit in 2020.
- Operating expenses rose 5% in Q2 and 5% for the first half. R&D was broadly flat; lower VANISH trial spending was offset by higher manufacturing, CANDLE and NDA-preparation costs. SG&A increased 21% in Q2 and 19% in the first half, including higher professional and commercial-related expenses.
- Operating cash use increased by $8.654m year over year for the first half, while available cash and investments declined by $10.799m from year-end.
- Revenue from the R-Pharm upfront-payment amortization ended in 2019, leaving no reported revenue in 2020.
Outlook, management commentary and risks
- Management planned to submit an NDA for ibrexafungerp for VVC in Q4 2020, following pre-NDA discussions with FDA. It anticipated a potential FDA decision around mid-2021, subject to review and approval. CANDLE Phase 3 data and a supplemental NDA for recurrent VVC were anticipated in the second half of 2021; SCYNERGIA topline data were anticipated in the first half of 2021.
- Management reported positive topline results in both VANISH pivotal VVC trials, with superiority over placebo on key endpoints and no drug-related serious adverse events reported. Common treatment-emergent adverse events were primarily gastrointestinal. These are company-reported trial findings, not regulatory approval.
- COVID-19 had caused delays at some clinical sites, particularly in site startup and patient screening. Management said current clinical drug supply and planned NDA registration batches were sufficient at the time, but the pandemic’s future effects remained uncertain.
- Going concern: The filing states that available resources may not be sufficient to fund obligations and operations over the next 12 months without positive cash flow or additional outside capital, and that substantial doubt exists about the company’s ability to continue as a going concern. Separately, management estimated that current resources and potential NOL-sale proceeds might fund operations past a potential mid-2021 PDUFA date. Both statements depend on assumptions and should be read together; management warned that funds would not cover all development and commercialization needs.
- Potential funding sources include equity, debt, the Cantor at-the-market facility, the Aspire Capital agreement (up to $20m, subject to limits), NOL monetization and partnerships. Additional equity or convertible debt may dilute shareholders; the Aspire agreement’s commitment shares were valued at $0.6m and recorded as expense.
- A 1-for-10 reverse stock split became effective July 17, 2020, after the reporting date; share and per-share figures in the filing were retrospectively adjusted. SCYNEXIS reported regaining Nasdaq minimum-bid-price compliance in August 2020.
Key facts for investors to verify
- Current cash burn, financing availability and the assumptions underlying the stated runway, particularly in light of the explicit going-concern warning.
- FDA review and timing for the VVC NDA, as well as completion, results and regulatory implications of CANDLE and other clinical programs.
- Potential dilution and conversion terms of the notes, warrants, ATM facility and Aspire Capital purchase agreement.
- Effects of COVID-19 on enrollment, site activation, manufacturing and regulatory timelines, and whether reported trial supply remains adequate.
- The impact of noncash warrant and derivative fair-value changes on reported earnings, and the sustainability of the one-time NOL-sale tax benefit.