Syndax Pharmaceuticals, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; the supplied filing text does not provide standalone fourth-quarter financial results.
Business context
Syndax is a clinical-stage biopharmaceutical company with no approved products and no product-sale revenue. Its lead programs are SNDX-5613 for genetically defined acute leukemias and axatilimab for chronic graft-versus-host disease (cGVHD) and potentially other fibrotic diseases. Entinostat development was deprioritized.
Financial performance and position
- Revenue: $139.7 million, versus $1.5 million in 2020. Revenue was license fees, principally $126.6 million recognized for the Incyte axatilimab license and $13.3 million related to KKC. No product sales or commercial royalties were reported.
- Profit and margins: Net income was $24.9 million, compared with a $73.2 million net loss in 2020; diluted earnings per share were $0.46. Operating income was $26.2 million. The reported operating margin was approximately 18.8%, but it reflects largely nonrecurring license revenue and is not indicative of product economics.
- Expenses: Research and development expense rose 75% to $88.2 million; general and administrative expense rose 12% to $25.2 million. R&D increases included clinical trial activity and manufacturing costs for the lead programs.
- Cash flow: Operating activities provided $29.1 million, versus $71.3 million used in 2020. Investing activities used $40.9 million, mainly reflecting purchases of marketable securities net of maturities. Financing activities provided $118.5 million, including equity proceeds.
- Liquidity: Cash, cash equivalents and short-term investments totaled $439.9 million at year-end. Management said these resources were expected to fund projected operating expenses and capital requirements for at least 12 months.
- Debt: $20.0 million principal was outstanding under the Hercules term loan. The loan is secured by substantially all personal property and other assets, excluding intellectual property. Its amended maturity date is April 1, 2024; the amended facility permits up to $80 million of borrowing in tranches, subject to conditions.
- Equity: Year-end common shares outstanding were 55.0 million. Incyte invested $35 million for shares, and the company also raised equity through offerings and its ATM program.
Material changes versus 2020
- Reported results moved from a substantial loss to a profit primarily because of Incyte-related license revenue and recognition of $12.4 million of previously deferred KKC revenue after KKC discontinued entinostat and cancelled its license.
- R&D spending increased materially as SNDX-5613 and axatilimab clinical and manufacturing activities advanced.
- Year-end cash, cash equivalents and short-term investments increased from $293.1 million to $439.9 million.
- The Incyte collaboration became effective in December 2021. Incyte obtained exclusive commercialization rights outside the U.S.; U.S. co-commercialization is contemplated, with Syndax holding a co-promotion option. The parties share certain development costs, with Incyte responsible for 55% and Syndax 45%; Incyte funds ex-U.S.-specific trials.
Outlook, commentary and risks
- Syndax expected topline data from the pivotal Phase 2 AGAVE-201 axatilimab trial in cGVHD in 2023. It planned a Phase 2 proof-of-concept axatilimab trial in idiopathic pulmonary fibrosis in the first half of 2022 and additional cGVHD trials with Incyte in 2022.
- SNDX-5613’s pivotal Phase 2 cohorts were underway. The FDA agreed with the recommended Phase 2 dose and proposed design and endpoints. The company also planned frontline, maintenance, and combination studies.
- Company-reported interim SNDX-5613 results included a 7% incidence of Grade 3 QT prolongation among patients treated at doses meeting the recommended Phase 2 criteria; no treatment-related adverse-event discontinuations were reported. Axatilimab interim results showed responses in 21 of 31 evaluable patients at the tested doses, but these were preliminary, company-reported data and require confirmation in the pivotal trial.
- The Incyte agreements included up to $220 million in development and regulatory milestones, up to $230 million in commercialization milestones, and tiered royalties outside the U.S. A government-challenge termination right remained relevant at filing; if exercised, Syndax could be required to return the $117 million upfront license payment and settle the equity investment as described in the agreement.
- Key risks include clinical and regulatory failure, changing or incomplete interim data, patient-enrollment and COVID-19-related disruption, reliance on third-party manufacturers, dependence on Incyte for axatilimab, and the need for additional capital beyond the stated runway. The company cautioned that it expects continued losses despite FY2021 net income.
- Contingency: In February 2022, UCB demanded a share of consideration it claimed was sublicensing revenue. Syndax said it believed it had satisfied its obligation and was discussing the matter with UCB; no contingent liability was recorded at year-end.
- Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls were effective.
Most important facts for investors to verify
- Whether the reported $24.9 million profit and positive operating cash flow are understood as driven by collaboration/license accounting rather than recurring product sales.
- Current cash runway, planned spending, and any financing or loan draws after year-end; the stated runway was at least 12 months from year-end.
- Final and pivotal-trial results for SNDX-5613 and axatilimab, including safety, durability, and whether preliminary response data are confirmed.
- Incyte collaboration milestones, cost-sharing and commercialization terms, the status and consequences of the termination right, and any future royalty or milestone receipts.
- Resolution and potential financial impact of UCB’s sublicensing-payment demand, plus compliance with Hercules loan covenants and repayment terms.
- Potential dilution from outstanding pre-funded warrants, options, and future equity issuance.