Syndax Pharmaceuticals, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; balance sheet compared with December 31, 2018. Filed November 7, 2019. Syndax is a clinical-stage biotechnology company with no approved products or product-sale revenue.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | 9M 2019 | 9M 2018 |
|---|---|---|---|---|
| Revenue, all license fees | $0.4m | $0.4m | $1.1m | $1.1m |
| Research and development | $9.9m | $14.1m | $33.5m | $44.3m |
| General and administrative | $3.6m | $4.1m | $11.0m | $13.4m |
| Operating loss | ($13.1m) | ($17.8m) | ($43.3m) | ($56.5m) |
| Net loss | ($12.8m) | ($17.3m) | ($42.0m) | ($55.1m) |
| Basic and diluted loss per share | ($0.41) | ($0.68) | ($1.40) | ($2.21) |
- Revenue was entirely from the KHK entinostat license for Japan and Korea; no product sales have occurred. Revenue is recognized over the agreement term, currently expected through 2029.
- Margins are not meaningful for this pre-commercial business. The company reported an accumulated deficit of $481.5m at September 30, 2019.
- Cash, cash equivalents and short-term investments totaled $72.2m at September 30, versus $80.9m at year-end 2018. Nine-month operating cash use was $37.9m, compared with $53.5m in 2018; investing activities provided $6.2m and financing provided $28.5m. Cash, cash equivalents and restricted cash declined $3.2m to $30.8m.
- Management said existing cash, cash equivalents and short-term investments were expected to fund projected operating and capital requirements for at least 12 months. The company also stated it would need additional capital to support ongoing development.
- No conventional borrowings are presented. Total liabilities were $32.3m, including $15.0m of deferred revenue and approximately $1.0m of operating-lease liabilities. Stockholders’ equity was $44.0m.
Material changes and notable items
- Nine-month operating expenses fell 23% and net loss narrowed 24% year over year. R&D declined 24%, primarily reflecting lower clinical-program activity, SNDX-6352 manufacturing, professional fees and employee costs; increases in the Menin program partly offset the decreases.
- R&D included a $4.0m expense in June for achieved development and regulatory milestones under the Allergan/Vitae Menin license; the amount remained payable in accounts payable at quarter-end.
- In March 2019, Syndax raised approximately $27.6m gross in a registered direct offering of common stock and pre-funded warrants, together with Series 1 and Series 2 warrants. Nine-month financing cash proceeds from the offering were $27.4m net. The company also had a new $50m ATM program, with no sales under that program through the filing date.
- At September 30, 2019, cash and short-term investments were mainly held in cash equivalents and short-term, available-for-sale securities with maturities under one year. Management said a 100-basis-point immediate interest-rate change would not materially affect their fair value.
- ASC 842 lease adoption added approximately $1.3m of lease assets and liabilities at January 1, 2019, with no material effect on reported results or cash flows.
Pipeline, outlook and principal risks
- Entinostat: The Phase 3 E2112 trial in advanced HR-positive, HER2-negative breast cancer did not meet its progression-free-survival statistical hurdle, as previously disclosed. In October 2019, the company reported that the trial passed its fifth and final interim overall-survival analysis. It expected 410 death events in Q2 2020 to trigger the final OS analysis; a positive result could support a U.S. regulatory filing. The filing cautions that trial results and FDA approval are uncertain. The trial is conducted by ECOG-ACRIN with NCI sponsorship, limiting Syndax’s control over execution.
- SNDX-5613: The Phase 1/2 AUGMENT-101 trial had dosed its first patient. Initial clinical data were expected in 2020.
- SNDX-6352: The FDA agreed to broaden the cGVHD trial’s eligibility, including removing the general requirement for prior ibrutinib progression and allowing adolescents. Enrollment was ongoing; results were anticipated in the second half of 2020.
- Potential registration trials in NSCLC and melanoma remained on hold pending final E2112 OS results. Management expected R&D and G&A expenses to continue increasing over time, with R&D spending fluctuating based on trial and manufacturing activity.
- Key risks include clinical failure or delay, regulatory uncertainty, reliance on collaborators and third-party manufacturers, competition, intellectual-property and licensing risks, and the need for additional financing. Future equity financing may dilute shareholders. Entinostat’s composition-of-matter patent had expired in 2017; a licensed crystalline-form patent was reported to expire in 2029, subject to validity and enforcement risks.
- The company reported no material legal or arbitration proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls were effective at the reasonable-assurance level.
Investor verification points
- Confirm E2112’s final OS event timing, results, and whether the outcome supports a U.S. filing; also assess implications of the failed PFS hurdle and the company’s reliance on ECOG-ACRIN/NCI.
- Track cash burn, trial spending and financing needs against management’s stated 12-month liquidity outlook; distinguish the year-over-year expense reduction from changes in clinical activity.
- Review dilution and potential proceeds from the 2019 ATM, pre-funded warrants, and Series 1 and Series 2 warrants, including their exercise-price adjustment terms.
- Verify progress and data timing for SNDX-5613 and SNDX-6352, and whether the on-hold NSCLC and melanoma programs resume.
- Monitor the $4.0m Menin milestone payable, remaining clinical-trial commitments, and contingent milestone, royalty and license obligations.