SCYNEXIS, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. SCYNEXIS is a clinical-stage biotechnology company developing ibrexafungerp, an antifungal candidate; it had no product sales. Financial statements are unaudited.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $0 | $64,000; prior-period collaboration revenue was fully amortized in 2019 |
| Research and development expense | $9.9 million | $9.7 million, up 1.9% |
| Selling, general and administrative expense | $2.6 million | $2.2 million, up 16.6% |
| Operating loss | $12.5 million | $11.9 million |
| Net loss | $7.0 million; $0.07 per share | $22.9 million; $0.46 per share |
| Net cash used in operating activities | $14.1 million | $6.5 million |
| Cash, cash equivalents and short-term investments | $34.5 million | $48.4 million at December 31, 2019 |
| Total assets / stockholders’ equity | $41.5 million / $6.5 million | $57.2 million / $12.9 million at December 31, 2019 |
Operating margin is not meaningful because the company reported no revenue in Q1 2020. The lower net loss largely reflected noncash gains from lower fair values of warrant liabilities ($4.8 million) and the embedded derivative liability ($0.7 million), plus the absence of the $0.8 million debt-extinguishment loss recorded in Q1 2019. These valuation gains do not represent operating cash inflows.
At March 31, current assets were $36.8 million and current liabilities $7.1 million. The balance sheet reported $11.1 million of convertible debt and derivative liability; the notes mature in 2025 and bear 6% interest. Warrant liabilities were $13.6 million. Cash and investments declined by $13.9 million from year-end, while cash, cash equivalents and restricted cash fell $21.7 million during the quarter. Management stated that existing resources were expected to fund operations for at least 12 months after issuance of the financial statements, but warned that adverse events or costs could shorten that period.
Changes and operating developments
- R&D expense was nearly flat year over year. Higher clinical-development and manufacturing costs were mostly offset by the prior-year Merck milestone payment. SG&A increased primarily due to professional fees and commercial-related costs.
- Operating cash use increased by $7.6 million year over year, primarily reflecting ibrexafungerp development and changes in payables and accrued expenses. Investing cash use was $7.8 million, mainly from net purchases of short-term investments.
- Common shares outstanding increased from 97.4 million at year-end to 97.9 million at March 31. The filing also lists substantial potential dilution from warrants, options, restricted stock units and convertible notes.
Outlook, risks and unusual items
- In April 2020, SCYNEXIS announced positive top-line results from the Phase 3 VANISH-306 VVC trial. Together with VANISH-303, the results showed statistically significant superiority over placebo on key endpoints, and management expected to submit an NDA for acute VVC in the second half of 2020. These were post-quarter developments, not Q1 revenue or earnings.
- Enrollment continued in the Phase 3 CANDLE recurrent-VVC prevention study; management anticipated top-line results and a supplemental NDA submission in the second half of 2021, subject to successful completion. The company also continued FURI, CARES and SCYNERGIA studies, with SCYNERGIA top-line data anticipated in the first half of 2021.
- Management expected R&D expense to decrease following completion of the VANISH registration program, while SG&A could rise to support a potential commercial launch. The company anticipated needing additional capital and said its operating plan could fund requirements past a potential mid-2021 FDA decision date, but estimates relied on assumptions and could prove wrong.
- COVID-19 had caused some clinical-site start-up and study-activity delays, including potential enrollment disruption. Management reported adequate supply for ongoing trials and no then-anticipated supply-chain disruption, while emphasizing that the ultimate operational, financial and liquidity effects were uncertain.
- After quarter-end, the company issued $10 million of 6% convertible notes due 2026, obtained the right to sell up to $20 million of common stock to Aspire Capital, and received $3.1 million from the sale of New Jersey tax attributes. These provide potential or actual liquidity but add debt or dilution risk.
- Nasdaq notified the company in April that its bid price had been below the $1.00 minimum for 30 consecutive business days. The company had until December 28, 2020, under the stated compliance period to regain compliance; failure could threaten listing and capital-market access.
- Merck could receive up to $19 million in future development and regulatory milestones, plus mid- to high-single-digit royalties on worldwide ibrexafungerp sales. No material change to previously disclosed risk factors was reported beyond COVID-19, Aspire Capital dilution, and Nasdaq bid-price compliance risks.
Important facts for investors to verify
- Whether the acute-VVC NDA was submitted on the expected timetable and the FDA’s review and decision timing.
- Clinical progress, enrollment effects and data timing for CANDLE, SCYNERGIA, FURI and CARES, including any continuing COVID-19 disruption.
- Cash burn, remaining runway and financing needs, including the terms and use of the April 2020 notes, Aspire facility and tax-attribute proceeds.
- Potential dilution from the convertible notes, warrants, equity facilities and equity awards, and the related fair-value effects on reported earnings.
- Nasdaq bid-price compliance status and any consequences for listing or access to capital markets.