Syndax Pharmaceuticals, Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. Syndax is a clinical-stage biopharmaceutical company with no approved products and no product-sales revenue. Its candidates are entinostat and SNDX-6352.
Financial results and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $0.305 million | $0.305 million | $0.610 million | $0.610 million |
| Research and development | $9.862 million | $6.131 million | $19.414 million | $10.917 million |
| General and administrative | $4.285 million | $2.808 million | $8.215 million | $7.080 million |
| Net loss | $13.639 million | $8.358 million | $26.610 million | $18.688 million |
| Net loss per share, basic and diluted | $0.70 | $0.47 | $1.41 | $1.91 |
Revenue consisted of license-fee recognition under the Kyowa Hakko Kirin agreement; the filing reports no product revenue. Product gross margins are not applicable. Q2 operating expenses increased 58%, principally as clinical development activity expanded. Six-month R&D rose 78%, reflecting trial activity, increased staffing, and related costs; G&A rose 16%.
At June 30, cash and cash equivalents were $22.988 million and short-term investments were $106.967 million, totaling approximately $130.0 million in cash, equivalents, and investments. Current assets were $134.167 million and current liabilities $11.505 million. Total liabilities were $25.329 million, mostly deferred revenue; the filing reports no outstanding borrowings. Accumulated deficit was $331.919 million.
Six-month operating cash use was $24.468 million, versus $13.293 million a year earlier. Investing cash use was $25.492 million, largely reflecting purchases of short-term investments net of maturities. Financing provided $49.104 million, primarily from the May follow-on offering. Cash and cash equivalents alone declined $0.856 million, while cash, equivalents, and investments increased from $105.330 million at year-end 2016.
Material changes and capital
- In May 2017, Syndax sold approximately 3.95 million shares at $13.25 per share and received approximately $48.7 million net. Shares outstanding were 22,219,843 at June 30; 22,219,978 were reported outstanding on August 10.
- R&D spending rose as the company expanded ENCORE 601 cohorts, advanced ENCORE 602 and ENCORE 603, and incurred SNDX-6352 trial start-up and manufacturing-related costs.
- The company had an at-the-market sales agreement allowing up to $50 million in sales; no shares had been sold under it through August 10, 2017.
- Management said existing cash, cash equivalents, and investments were expected to fund planned operations for at least 12 months. It also expects significant losses and no positive operating cash flow for the foreseeable future, and anticipates R&D expenses will continue to increase. Future financing may dilute shareholders or require less favorable collaborations.
Outlook, risks, and commitments
- Entinostat’s Phase 3 E2112 trial in advanced HR-positive, HER2-negative breast cancer was 78% enrolled at the end of July. The company expected progression-free-survival analysis in the first half of 2018; overall-survival data was expected no sooner than the second half of 2019. An NDA submission in 2018 was conditional on favorable trial results.
- For ENCORE 601, the company expected a year-end decision on advancing the PD-(L)1-naive NSCLC cohort. It expected to complete enrollment in the PD-(L)1-refractory NSCLC cohort in Q4 2017 and reported second-stage enrollment complete for the refractory melanoma cohort. It expected further data in late 2017 and the first half of 2018.
- Enrollment had begun in the microsatellite-stable colorectal cancer cohort. The company expected a decision on proceeding to its second stage in the first half of 2018. It expected the TNBC trial’s Phase 2 enrollment to finish by year-end 2017 and the ovarian cancer trial’s Phase 2 enrollment in the first half of 2018.
- The SNDX-6352 single-ascending-dose study in healthy volunteers had completed enrollment; data were expected in Q4 2017, and a multiple-ascending-dose cancer-patient trial was planned for Q3 2017.
- The company reported approximately $13.7 million remaining under its ECOG-ACRIN Phase 3 trial obligations, payable over an estimated four years. The UCB SNDX-6352 license includes up to $119.5 million in development and regulatory milestones and up to $250 million in sales-based milestones, plus royalties if commercialized. Bayer entinostat obligations include milestones and royalties.
- A key intellectual-property risk is that the licensed entinostat composition-of-matter patent was due to expire in September 2017; the polymorph patent was stated to expire in August 2029. Patent-term extension or the scope and enforceability of remaining protection is uncertain.
- Clinical, regulatory, collaboration, manufacturing, reimbursement, financing, and intellectual-property risks are substantial. The filing notes that the Phase 3 Special Protocol Assessment does not guarantee approval and that the current trial may be insufficient for European approval. No material legal proceedings were reported.
Important facts for investors to verify
- Whether E2112 enrollment and the expected 2018 progression-free-survival analysis remain on schedule, and whether the results support the conditional NDA plan.
- Actual cash runway against the stated 12-month expectation, ongoing operating cash use, and any future equity issuance under the ATM facility.
- Clinical readouts and advancement decisions for ENCORE 601, ENCORE 602, ENCORE 603, and SNDX-6352 versus the timelines described.
- Entinostat patent coverage after the September 2017 composition-of-matter patent expiry, including any extensions and the practical protection provided by the polymorph patent.
- Potential milestone, royalty, and trial-funding obligations, and whether collaboration partners meet their development and supply responsibilities.