Syndax Pharmaceuticals, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Unaudited consolidated financial statements; dollar figures below are in millions unless otherwise noted. Syndax is a clinical-stage biopharmaceutical company with no approved products and no product-sales revenue.
Business context and development
The company’s lead candidate, entinostat, was in a Phase 3 trial for advanced HR-positive, HER2-negative breast cancer and in combination trials across other cancer indications. SNDX-6352, an anti-CSF-1R antibody, was in a Phase 1 study in healthy volunteers. In April 2017, Syndax added a microsatellite-stable colorectal cancer cohort to its entinostat combination trial with Merck.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Revenue, entirely license fees | $0.305 | $0.305 |
| Research and development expense | $9.552 | $4.786 |
| General and administrative expense | $3.930 | $4.272 |
| Total operating expenses | $13.482 | $9.058 |
| Loss from operations | $(13.177) | $(8.753) |
| Net loss | $(12.971) | $(10.330) |
| Net loss per share, basic and diluted | $(0.71) | $(2.85) |
| Net cash used in operating activities | $(12.668) | $(6.403) |
- R&D expense doubled year over year, primarily from increased trial activity; external R&D expense rose 112% to $7.264 million. G&A declined 8%.
- Cash and cash equivalents were $22.356 million and short-term investments were $70.429 million at March 31, totaling $92.785 million, versus $105.330 million at December 31, 2016. Current assets were $97.057 million and current liabilities were $10.989 million.
- Q1 cash declined by $1.488 million. Investing activities provided $11.063 million, mainly from investment maturities net of purchases; financing activities provided $0.117 million, primarily option-exercise proceeds.
- Accumulated deficit was $318.279 million. The filing reports deferred revenue of $15.135 million, including current and long-term portions. No material borrowing balance is reported; the historical term loans had been repaid.
- Revenue was recognized ratably from the KHK entinostat license and was not product revenue. The filing provides no meaningful commercial gross margin; the company remained loss-making.
Material changes, outlook, and risks
- Management said existing cash, cash equivalents, and short-term investments were expected to fund planned operations for at least the next 12 months. It also expected continued substantial losses and rising R&D expenses, with no positive operating cash flow anticipated for the foreseeable future.
- E2112, the Phase 3 breast cancer trial, was 73% enrolled at the end of April 2017. ECOG-ACRIN expected enrollment completion and progression-free-survival analysis in the first half of 2018; overall-survival data was expected no sooner than the second half of 2019.
- The melanoma cohort of ENCORE 601 met its prespecified response threshold for the first 13 patients and advanced to Stage 2. Syndax expected enrollment completion by the end of Q3 2017. A go/no-go decision for the other initial cohorts was expected by the end of Q2 2017.
- For SNDX-6352, 20 healthy volunteers had been enrolled by March 31. The company expected to complete Phase 1 enrollment by the end of Q2 2017 and begin a multiple-ascending-dose study in cancer patients in Q3 2017.
- In April 2017, Syndax established an at-the-market equity facility of up to $50 million, with Cowen acting as sales agent and fees of up to 3% of gross proceeds. No shares had been sold through May 5, 2017; future sales could dilute shareholders.
- Key risks include clinical-trial failure or delay, patient-enrollment challenges, reliance on collaborators and third-party manufacturers, need for additional financing, and uncertain regulatory approval and commercialization. The filing notes that the entinostat composition-of-matter patent RE39,754 was due to expire in September 2017; a separate crystalline-polymorph patent was described as expiring in August 2029. The current Phase 3 trial may not be sufficient for European approval.
- The company reported effective disclosure controls as of March 31, 2017, no material change in internal control over financial reporting, and no material pending legal proceedings. A 100-basis-point immediate interest-rate change was not expected to materially affect the fair value of its short-term investments.
Important facts for investors to verify
- Trial progress, enrollment and timing of E2112 PFS and overall-survival analyses, and whether results support regulatory filings.
- Actual cash burn and financing needs relative to management’s stated minimum 12-month runway; any future ATM sales, dilution, and use of proceeds.
- Patent coverage and remaining protection for entinostat following the September 2017 composition-of-matter patent expiration.
- Clinical safety and efficacy of entinostat combinations and SNDX-6352, plus the ability of collaborators and suppliers to meet obligations.
- Potential milestone, royalty, and other license obligations, including the contingent payments under the UCB agreement.