Syndax Pharmaceuticals, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; unaudited. Syndax is a clinical-stage biopharmaceutical company with no approved products and no product-sale revenue. Its pipeline includes entinostat, SNDX-6352 and preclinical Menin inhibitors.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 | Change |
|---|---|---|---|
| Revenue, all license fees | $0.379 million | $0.305 million | Up 24% |
| Research and development expense | $15.339 million | $9.552 million | Up 61% |
| General and administrative expense | $4.791 million | $3.930 million | Up 22% |
| Total operating expenses | $20.130 million | $13.482 million | Up 49% |
| Operating loss | $(19.751) million | $(13.177) million | Loss widened |
| Net loss | $(19.398) million | $(12.971) million | Loss widened 50% |
| Net loss per share, basic and diluted | $(0.79) | $(0.71) | |
| Net cash used in operating activities | $(19.870) million | $(12.668) million | Cash use increased |
- Cash, cash equivalents and short- and long-term investments totaled $113.223 million at March 31, 2018, down from $133.220 million at December 31, 2017. Cash, cash equivalents and restricted cash were $28.196 million; short-term investments were $85.242 million.
- Current assets were $119.306 million and current liabilities were $16.907 million. Total liabilities were $33.007 million, principally deferred revenue and operating liabilities. The filing reports no debt balance.
- Cash and restricted cash decreased $7.193 million during the quarter. Investing activities provided $12.644 million, mainly from net maturities of available-for-sale investments; financing activities provided $0.033 million.
- Revenue was recognized under the Kyowa Hakko Kirin (KHK) entinostat license. There were no commercial milestone payments or royalties to date. Operating margins are not a useful indicator given the company’s development-stage status and minimal license revenue.
Material changes and unusual items
- R&D expense increased by $5.787 million, reflecting higher development activity, professional fees and employee compensation. Management cited increased SNDX-6352 CMC costs and Menin program development, partly offset by completion of Phase 1 clinical pharmacology trials and lower E2112 costs.
- G&A expense rose $0.861 million, primarily due to professional fees for pre-commercialization activities and higher patent-related legal expenses.
- On January 1, 2018, Syndax adopted ASC 606 using the modified retrospective method. Adoption reduced opening deferred revenue by $0.649 million and increased opening equity by the same amount. The reported Q1 license fee revenue was $14,000 lower than it would have been under the previous guidance; cash flows were unaffected.
- Bayer exercised its warrant through a cashless net exercise in March, resulting in issuance of 299,215 common shares and no net cash proceeds. Common shares outstanding were 24,697,944 at quarter-end.
Outlook, risks and commitments
- Management said existing cash, cash equivalents and investments were expected to fund planned operations for at least 12 months from issuance of the financial statements. The company expects continuing losses and negative operating cash flow and says additional capital will be needed for longer-term plans; future financing is not assured.
- Management expects R&D expense to increase as programs advance, with external spending growing faster than internal spending. G&A may also rise to support development and potential commercialization.
- Clinical outlook: The Phase 3 E2112 entinostat-plus-exemestane breast cancer trial was 92% enrolled at the end of April. Management expected enrollment completion in Q3 2018 and anticipated release of the progression-free-survival analysis then. The filing also described planned 2018 data presentations for melanoma, NSCLC and colorectal cancer cohorts; topline results for TNBC and ovarian cancer trials were anticipated in the first half of 2019. SNDX-6352 Phase 1 data and a Phase 2 strategy were anticipated in the second half of 2018; Menin inhibitor trials were expected to begin in the first half of 2019. These are forward-looking expectations, not reported outcomes.
- The ECOG-ACRIN Phase 3 trial carried approximately $11.9 million of remaining payment obligations over an estimated four years. Additional potential development, regulatory and sales milestones and royalties under license agreements may be substantial but are contingent on future events.
- Key risks include clinical failure or delays, regulatory uncertainty, dependence on collaborators and third-party manufacturers, competition, intellectual-property challenges, and the need for additional financing. The company noted entinostat’s composition-of-matter patent expired in September 2017; a patent covering crystalline polymorph B was stated to expire in 2029. Management reported no material legal proceedings at March 31, 2018.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level and no material change in internal control over financial reporting occurred during the quarter.
Investor verification points
- Check subsequent E2112 enrollment, timing and results of the PFS and overall-survival analyses, and any regulatory filing plans.
- Review clinical data and progress for the entinostat combination studies, SNDX-6352 and Menin program against the stated timelines.
- Monitor cash burn, investment balances and financing needs relative to the stated minimum 12-month runway, along with any use of the remaining ATM capacity ($48.2 million available at quarter-end).
- Verify future KHK revenue recognition and any milestone receipts, as well as material changes in collaboration, clinical-trial and license obligations.
- Assess whether the clinical, regulatory, manufacturing, collaboration and intellectual-property risks described in the filing have changed.