SCYNEXIS, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. SCYNEXIS is a biotechnology company developing ibrexafungerp for serious fungal infections. BREXAFEMME, an oral ibrexafungerp product, is approved in the U.S. for vulvovaginal candidiasis and prevention of recurrent vulvovaginal candidiasis.
Financial results and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Product revenue | $1.13 million | $0.69 million; up 64.5% |
| Research and development expense | $6.84 million | $5.74 million; up 19.2% |
| Selling, general and administrative expense | $4.84 million | $14.59 million; down 66.8% |
| Operating loss | $10.68 million | $19.74 million |
| Net loss | $33.88 million | $5.45 million |
| Net loss per share, basic | $0.71 | $0.17 |
| Cash used in operating activities | $18.92 million | $15.99 million |
| Cash, cash equivalents and short-term investments | $54.82 million at March 31, 2023 | $73.50 million at December 31, 2022 |
| Loan principal outstanding | $35.0 million | Repayment obligations amended in March 2023 |
Product revenue less cost of product revenue was approximately $0.99 million, or 87.9% of revenue. This is a calculated gross margin, not a separately stated filing metric.
Net loss increased sharply despite a lower operating loss, primarily because SCYNEXIS recorded a $21.67 million noncash loss from revaluing warrant liabilities, compared with a $10.03 million gain in Q1 2022. The prior-year period also included a $4.70 million tax benefit from selling tax attributes; Q1 2023 had no tax benefit. Interest income increased to $0.59 million from $0.01 million, while interest expense rose to $1.45 million from $1.06 million.
At quarter-end, total assets were $70.30 million and total liabilities were $100.21 million, resulting in a $29.91 million stockholders’ deficit. Accumulated deficit was $456.16 million. Operating cash use exceeded the prior-year period by $2.94 million; the 2023 outflow included payment of $5.8 million of deferred Amplity fees and increased inventory purchases.
Material changes, agreements and outlook
- On March 30, 2023, SCYNEXIS signed an exclusive, royalty-bearing license agreement with GSK for ibrexafungerp, including BREXAFEMME, in territories excluding Greater China and certain countries already licensed to third parties. The agreement had not closed as of the filing; customary conditions, including the HSR waiting period, remained. The companies expected closing in Q2 2023.
- Upon closing, SCYNEXIS is to receive a $90 million upfront payment. The agreement also provides for potential regulatory milestones of up to $70 million, invasive-candidiasis commercial milestones of up to $115 million, sales milestones of up to $242.5 million, and development milestones of up to $75.5 million. These amounts are contingent, not assured. SCYNEXIS remains responsible for the costs of ongoing clinical studies; GSK is to receive the licensed development and commercialization rights.
- A loan amendment requires repayment of outstanding principal and accrued interest, a $262,500 prepayment fee, a $1.38 million final payment, and any other sums. Payment is due at the earliest of one business day after receipt of the GSK upfront payment, June 1, 2023, or termination of the license agreement. The filing estimates the amount payable at approximately $37.1 million.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern. The $90 million GSK payment was excluded from its going-concern assessment because closing conditions were outstanding. If the deal did not close, management said the company could need additional financing or strategic alternatives, including reducing or delaying spending, asset sales, a company sale, or bankruptcy.
- The term loan requires minimum cash equal to at least 50% of outstanding principal to avoid a separate product-revenue covenant. SCYNEXIS met the minimum-cash requirement through the filing’s issuance date, but management gave no assurance it could maintain it for the following 12 months. If required to satisfy the revenue covenant, management did not expect to comply during that period. A covenant breach could lead to lender remedies.
- Management expects continued operating losses and significant R&D spending, while SG&A is expected to decrease after active BREXAFEMME promotion ceased in Q4 2022. The filing provides no specific financial revenue, earnings, or cash-burn guidance.
- Clinical milestones: MARIO enrollment was continuing, with topline results expected in the first half of 2024; FURI and CARES had reached target enrollment, with topline data also expected in the first half of 2024. The company anticipated a potential hospital-indication approval later in 2024. If the GSK agreement closes, GSK would submit the planned NDA and hold any resulting approval. SCYNERGIA enrollment was complete but below initial projections; VANQUISH enrollment was also complete.
Investor facts to verify
- Whether and when the GSK transaction closed, the $90 million upfront payment was received, and the loan was repaid.
- Current liquidity, cash burn and compliance with loan covenants after the quarter; the filing states that substantial doubt existed about going concern.
- Actual clinical progress and results for MARIO, FURI and CARES, and the timing and responsibility for any NDA submission.
- BREXAFEMME sales trends after active promotion ended, including the effect of wholesaler concentration: three wholesalers represented 46%, 26% and 25% of gross revenue, respectively.
- Potential share dilution: the filing reported 42.99 million common shares reserved for future issuance, including warrants and equity awards; warrant remeasurement also caused material noncash earnings volatility.