Syndax Pharmaceuticals, Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. The filing also reports fourth-quarter results. Syndax is a clinical-stage biopharmaceutical company with no approved products and no product sales; revenue consisted of license fees.
Financial highlights
| Metric | FY2016 | FY2015 |
|---|---|---|
| Revenue | $1.22 million | $0.63 million |
| Research and development expense | $31.67 million | $9.55 million |
| General and administrative expense | $13.32 million | $11.59 million |
| Total operating expenses | $44.99 million | $21.14 million |
| Operating loss | $43.77 million | $20.51 million |
| Net loss | $44.47 million | $24.12 million |
| Net cash used in operating activities | $35.16 million | $2.43 million |
At year-end, cash, cash equivalents and short-term investments totaled $105.33 million, up from $86.49 million. Working capital was $98.14 million; total liabilities were $24.87 million. The company reported no interest-bearing debt at December 31, 2016. Management said existing cash and investments were expected to fund planned operations for at least 12 months. No meaningful product gross margin was reported; operating margins are not informative given the company’s development-stage status.
Q4 2016: Revenue was $305,000, operating expenses were $11.45 million and net loss was $10.82 million, versus $305,000, $4.98 million and $5.26 million, respectively, in Q4 2015.
Material changes and business developments
- Annual net loss increased by $20.35 million from 2015, while R&D expense rose 232%, mainly due to increased E2112 and ENCORE 601/602 clinical activity, and the $5 million upfront payment for SNDX-6352.
- Operating cash use increased substantially year over year. The comparatively low 2015 cash use reflected the timing of the upfront KHK license payment and related deferred revenue.
- The March 2016 IPO generated approximately $50.5 million in net proceeds. Preferred stock converted into common stock at the IPO; year-end common shares outstanding were 18.22 million.
- Syndax acquired exclusive worldwide rights to SNDX-6352 from UCB in July 2016 for a $5 million upfront payment. Potential future payments include up to $119.5 million in development and regulatory milestones, up to $250 million in sales milestones, and low-double-digit royalties.
Pipeline, outlook and risks
- Entinostat: The lead candidate was in a Phase 3 trial for advanced HR-positive, HER2-negative breast cancer, with FDA Breakthrough Therapy designation based on Phase 2b results. The company reported Phase 2b median progression-free survival of 4.3 months versus 2.3 months, and median overall survival of 28.1 versus 19.8 months. These results are not confirmatory evidence of Phase 3 success.
- The E2112 Phase 3 study was approximately 64% enrolled. PFS data were anticipated no earlier than the end of 2017; overall survival analysis was expected no earlier than 2019. Enrollment had been slower than expected, and the company did not control trial conduct. FDA designation and the trial’s Special Protocol Assessment do not guarantee approval.
- ENCORE 601 combines entinostat with Keytruda in NSCLC and melanoma. In February 2017, the melanoma cohort met its prespecified response threshold and advanced to the next stage; decisions on the other cohorts were expected in the first half of 2017. ENCORE 602 (TNBC) had opened its Phase 2 portion, with data anticipated in 2018. ENCORE 603 (ovarian cancer) began enrollment in January 2017, with Phase 1b safety data expected in the first half of 2017.
- SNDX-6352 was in a single-ascending-dose Phase 1 trial in healthy volunteers. The company planned to use safety results to inform subsequent multiple-dose and combination studies.
- Management expected R&D and G&A spending to continue increasing and anticipated ongoing losses and negative operating cash flow for the foreseeable future. Additional capital would be needed to continue development and commercialization plans; financing may dilute shareholders or require less favorable collaborations or licensing.
- Key risks include clinical failure or delays, patient-enrollment challenges, adverse effects, dependence on collaborators and third-party manufacturers, uncertain regulatory and reimbursement outcomes, intense competition, and potential limits on use of tax-loss carryforwards. The company also disclosed that its licensed entinostat composition-of-matter U.S. patent was due to expire in September 2017; separate polymorph patent protection extended to 2029.
- The company had no material legal proceedings and reported effective disclosure controls. Its independent auditor issued an unqualified opinion on the financial statements; it did not provide an opinion on internal control over financial reporting.
Important facts for investors to verify
- Cash runway assumptions against actual quarterly operating cash use and the expected pace of clinical spending.
- E2112 enrollment progress, timing and results for PFS and overall survival, and any implications for U.S. or European regulatory plans.
- Whether ENCORE 601’s melanoma signal is confirmed with additional patients and whether the NSCLC cohorts advance.
- Emerging safety and efficacy data from ENCORE 602, ENCORE 603 and the SNDX-6352 Phase 1 program.
- Terms and potential impact of future financing, license milestones and royalties, and entinostat patent protection following the September 2017 composition-of-matter patent expiration.