SCYNEXIS, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. SCYNEXIS is a development-stage biotechnology company; its lead candidate is ibrexafungerp, an oral and intravenous antifungal. It had not generated product-sale revenue.
Financial results and liquidity
- Q2 revenue: $57,000, versus $64,000 in Q2 2018, consisting of amortization of an upfront payment under the R-Pharm collaboration.
- Q2 operating expenses: $11.3 million, up 45.7% year over year. Research and development was $8.5 million (+51.3%), mainly reflecting Phase 3 VVC and CANDLE study costs; selling, general and administrative expense was $2.8 million (+30.9%). Operating loss was $11.2 million, versus $7.7 million.
- Q2 net loss: $8.4 million, compared with $10.8 million. The improvement reflected $3.4 million of gains from fair-value adjustments to warrant and derivative liabilities, which are noncash and stock-price-sensitive; operating loss increased.
- Six-month results: Revenue was $121,000 versus $129,000; operating expenses were $23.2 million versus $15.0 million; net loss was $31.3 million versus $14.8 million. The higher loss included increased development spending, a $4.5 million warrant-liability fair-value loss, a $2.1 million derivative-liability fair-value loss, and $1.0 million of debt-extinguishment losses.
- Cash and investments: Cash and cash equivalents were $19.2 million and short-term investments were $16.1 million at June 30, totaling $35.2 million, down from $44.2 million at December 31, 2018. Six-month operating cash use was $14.3 million, compared with $16.1 million in the prior-year period. Ending cash, cash equivalents, and restricted cash were $19.5 million.
- Debt and equity: SCYNEXIS issued $16.0 million of 6% convertible notes in March and used net proceeds to repay its Solar term loan. After a $2.0 million note conversion in April, approximately $14.0 million principal remained; the notes mature in 2025 and are convertible at an initial price of about $1.35 per share. The balance sheet reports $14.6 million combined convertible debt and derivative liability. Common shares outstanding rose to 54.5 million from 48.0 million at year-end; 11.4 million shares were reserved for possible note conversion.
- Margins and liquidity: The filing does not provide a meaningful product gross margin because revenue is limited to collaboration-payment amortization. Management said existing cash, cash equivalents, and investments were expected to fund operations for at least 12 months; its operating-plan estimate extended funding past a planned acute-VVC NDA submission in the second half of 2020.
Material developments and outlook
- Research and development spending increased as the company advanced ibrexafungerp. A Merck milestone became payable upon initiation of the VANISH Phase 3 VVC program and was paid in March; the license agreement provides for up to $19.0 million in potential milestones and mid- to high-single-digit royalties.
- Management expected top-line results from VANISH 303 in Q1 2020 and VANISH 306 in Q2 2020. Subject to positive results, it anticipated an NDA for acute VVC in H2 2020. The CANDLE Phase 3 recurrent-VVC study was expected to begin enrollment in Q3 2019; a supplemental NDA was anticipated in 2021 if successful.
- Enrollment continued in the FURI and CARES Phase 3 studies for refractory invasive fungal infections and the SCYNERGIA Phase 2 study for invasive aspergillosis. The company reported completion of long-term toxicology evaluations intended to support extended dosing and its planned VVC NDA.
- Management expected R&D expenses to rise, particularly for the Phase 3 VVC program, and anticipated needing additional capital thereafter. Potential funding sources include equity or debt offerings, grants, and collaborations or licensing. Additional financing may dilute shareholders or require concessions; funding may not be available on favorable terms or at all.
- The company increased authorized common shares from 125 million to 250 million and sold 4.9 million shares through its at-the-market facility in the first half, receiving $6.6 million net. A wholly owned Australian subsidiary was incorporated in July 2019 to support clinical and research activities.
- Other notable items: adoption of lease accounting recognized a $3.3 million right-of-use asset and $3.4 million lease liability; management reported effective disclosure controls and no material change in internal control. The filing reported no material changes to the risk factors in its 2018 Form 10-K.
Important facts for investors to verify
- Actual timing, enrollment, and clinical outcomes for VANISH, CANDLE, FURI, CARES, and SCYNERGIA, and whether results support the stated regulatory timelines.
- Cash runway against actual operating cash use and planned development costs, including the timing and terms of any additional financing.
- Convertible-note terms, potential share dilution, and the effects of fair-value changes in warrant and derivative liabilities on reported earnings.
- Milestone and royalty obligations under the Merck license, and the assumptions underlying management’s expected funding horizon.