Syndax Pharmaceuticals, Inc. — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017. Syndax is a clinical-stage oncology company with no approved products and no product-sales revenue. Its lead candidate, entinostat, was in a Phase 3 breast cancer trial and multiple combination studies; SNDX-6352 was in Phase 1 testing.
Financial performance and position
| Metric | Three months ended Sep. 30, 2017 | Three months ended Sep. 30, 2016 | Nine months ended Sep. 30, 2017 | Nine months ended Sep. 30, 2016 |
|---|---|---|---|---|
| Revenue | $0.305 million | $0.305 million | $0.915 million | $0.915 million |
| Research and development expense | $12.188 million | $12.274 million | $31.603 million | $23.191 million |
| General and administrative expense | $3.563 million | $3.269 million | $11.777 million | $10.349 million |
| Net loss | $15.088 million | $14.969 million | $41.699 million | $33.657 million |
| Basic and diluted loss per share | $0.68 | $0.84 | $2.08 | $2.70 |
| Operating cash used | Not provided for quarter | Not provided for quarter | $34.649 million | $24.741 million |
All revenue was license-fee recognition from the KHK agreement; Syndax reported no product revenue. Nine-month operating expenses rose 29%, principally reflecting increased clinical-trial activity and headcount. Nine-month net loss increased 24%; lower loss per share reflects a higher weighted-average share count.
At September 30, cash and cash equivalents were $20.732 million, short-term investments $99.862 million, and restricted cash $0.100 million. Cash plus short-term investments totaled $120.594 million, versus $105.330 million at December 31, 2016. Total liabilities were $27.779 million, including $14.525 million of deferred revenue; no debt balance is reported. Stockholders’ equity was $96.714 million. Management said available cash, equivalents and investments were expected to fund planned operations for at least 12 months.
For the first nine months, financing provided $50.108 million, mainly from a May follow-on offering ($48.7 million net) and ATM sales ($1.1 million net). Cash and cash equivalents decreased $3.112 million to $20.732 million; investing cash use of $18.571 million largely reflects purchases of short-term investments net of maturities.
Material developments, outlook and risks
- Clinical progress: The Phase 3 E2112 breast cancer trial was 83% enrolled at the end of October. Its final progression-free-survival analysis and first interim overall-survival analysis had been completed, but results remained confidential; enrollment was expected to finish in the first half of 2018. The filing described further Phase 2 data and enrollment milestones across entinostat combination trials, generally expected in the first half of 2018.
- Pipeline expansion after quarter-end: On October 13, Syndax licensed preclinical Menin inhibitors from Allergan/Vitae, paid a nonrefundable $5 million upfront, and may owe up to $99 million in development/regulatory milestones and up to $70 million in sales milestones, plus royalties. Preclinical studies were expected to begin in Q4 2017, with clinical trials anticipated in 2019.
- Post-quarter financing and milestone: On October 17, Syndax sold 2,021,018 shares to BVF for expected net proceeds of approximately $24.8 million; the company estimated cash, equivalents and short-term investments of approximately $138.6 million as of October 20. KHK also announced first-patient enrollment in its Japanese pivotal study, triggering a $5 million milestone payable within 30 days. These events occurred after the balance-sheet date.
- Funding and development uncertainty: Management expects significant losses and rising R&D spending for the foreseeable future and may need additional capital beyond the stated 12-month runway. Trial timing, enrollment, results, regulatory requirements, collaborators, manufacturing, and financing availability could materially affect plans. Additional equity financing may dilute shareholders.
- IP and other risks: The licensed entinostat composition-of-matter patent expired in September 2017; a patent covering the clinical crystalline polymorph was stated to expire in 2029 and could face validity or competitive challenges. The filing also highlights clinical efficacy and safety risks, competition, dependence on collaborators and third-party manufacturers, and uncertain reimbursement. No material legal proceedings were reported; disclosure controls were deemed effective.
Most important facts for investors to verify
- Whether E2112 enrollment completes on schedule and what the confidential analyses and eventual efficacy/safety results show.
- Whether the forecast cash runway remains adequate after planned trials, the Menin license obligations, and other spending; confirm receipt and use of post-quarter proceeds and the KHK milestone.
- Progress and data from entinostat combination studies and SNDX-6352, including whether stated enrollment and data timelines are met.
- The implications of entinostat patent expiry and the scope, validity, and remaining protection of relevant licensed patents.
- The potential dilution and financing capacity under the remaining ATM program and other equity arrangements.