Syndax Pharmaceuticals, Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. Syndax is a clinical-stage oncology company with no approved products and no product-sales revenue. Financial statements are unaudited.
Financial results and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue, entirely license fees | $0.379m | $0.305m | $0.758m | $0.610m |
| Research and development expense | $14.851m | $9.862m | $30.190m | $19.414m |
| General and administrative expense | $4.479m | $4.285m | $9.270m | $8.215m |
| Operating loss | $(18.951)m | $(13.842)m | $(38.702)m | $(27.019)m |
| Net loss | $(18.388)m | $(13.639)m | $(37.785)m | $(26.610)m |
| Basic and diluted loss per share | $(0.74) | $(0.70) | $(1.54) | $(1.41) |
| Cash used in operating activities | — | $(35.019)m | $(24.468)m |
- At June 30, cash and cash equivalents were $32.2m and short-term investments were $66.2m, totaling $98.4m; restricted cash was $0.2m. Management said these resources were expected to fund projected operations and capital needs for at least 12 months.
- Total assets were $105.4m and total liabilities $35.0m. The filing shows no borrowings; liabilities primarily include accounts payable, accrued expenses and deferred revenue.
- Six-month investing cash flow was positive $31.9m, mainly reflecting net maturities of available-for-sale investments. Financing cash flow was $0.1m; there were no ATM sales in the first half.
- No operating margin is meaningful given the absence of product sales and continued development-stage losses.
Changes versus prior comparable periods
- Q2 revenue increased 24% and six-month revenue increased 24%, reflecting recognition of the KHK license fee over time.
- R&D expense rose 51% in Q2 and 56% for the first half. Management cited greater SNDX-6352 manufacturing and development costs, Menin program work, activity in ENCORE 602/603, higher headcount, and NDA-preparation professional fees. Lower E2112 costs and completed Phase 1 pharmacology trials partly offset increases.
- G&A increased 5% in Q2 and 13% for the first half, mainly from legal and professional fees, including pre-commercialization and patent work.
- Six-month net loss increased 42%, to $37.8m. The larger loss and operating cash use were primarily associated with increased clinical-trial activity and CMC expenses.
Outlook, clinical programs and notable items
- Entinostat Phase 3 E2112: 98% enrolled as of late July. The company expected enrollment completion in Q3 2018 and release of the final progression-free-survival analysis then. Interim overall-survival analyses were scheduled every May and November; the next was expected in November. Management described the trial as proceeding as planned.
- Other entinostat programs: Updated NSCLC cohort data and development plans were expected in Q3/Q4 2018; updated melanoma data and a registration-plans decision were expected by year-end. MSS colorectal enrollment was expected to finish in Q3, with a stage-two decision anticipated in first-half 2019. Topline TNBC and ovarian trial results were expected in first-half 2019. ENCORE 606 enrollment was expected to begin in first-half 2019.
- SNDX-6352: Phase 1/1b solid-tumor testing continued, including a recently initiated durvalumab combination. A recommended dose and schedule were anticipated in first-half 2019. A cGVHD Phase 1 trial was expected to start by year-end 2018, with initial results anticipated in second-half 2019.
- Menin inhibitors: Development continued; clinical trials were expected to begin in first-half 2019.
- Management expects substantial continuing losses and rising R&D and G&A costs, and stated additional capital will be needed beyond current resources. Future funding may dilute shareholders or require less favorable collaborations. The company had $48.2m available under its ATM program at June 30; through August 6 it sold 633,231 shares for net proceeds of $4.4m, leaving $43.6m available.
- ASC 606 adoption reduced deferred revenue by $0.649m and increased opening accumulated equity by the same amount. It reduced 2018 license revenue by $0.014m for Q2 and $0.028m for the first half versus prior guidance, with no cash-flow impact.
- Other notable equity activity: Bayer exercised its warrant cashlessly in March, resulting in 299,215 shares issued for no net cash proceeds. In June, BVF exchanged 2.0m common shares for 2.0m warrant shares exercisable at $0.0001 per share, subject to a 9.99% ownership limit.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of June 30. It identified clinical failure or delay, reliance on collaborators and third-party manufacturers, financing needs, competition, and intellectual-property protection among significant risks. The entinostat composition-of-matter patent had expired in September 2017; the licensed polymorph patent was stated to expire in August 2029.
Important facts for investors to verify
- Whether E2112 enrollment completed and what the final PFS analysis showed, including how it affects any NDA filing plans and the pending overall-survival analyses.
- Whether the projected 12-month cash runway remains adequate given the $35.0m first-half operating cash outflow, planned trials, and management’s expectation of continued expense growth.
- Progress and timing for the expected 2019 results and decisions across NSCLC, melanoma, MSS colorectal cancer, TNBC, ovarian cancer, SNDX-6352 and Menin programs.
- ATM share issuance, remaining capacity, and resulting dilution after the August 6 update; also review the BVF warrant and outstanding equity awards.
- Potential contingent license obligations, including development and sales milestones and royalties payable under the Bayer, UCB and Allergan agreements, and the approximately $11.9m remaining E2112-related payment obligations disclosed for an estimated four-year period.