Syndax Pharmaceuticals, Inc. — Q2 2016 Form 10-Q
Reporting period: Three and six months ended June 30, 2016. Unaudited results; amounts below are in millions of dollars except per-share data. Syndax is a clinical-stage oncology company with no approved products and no product-sales revenue.
Business context and developments
Entinostat is the lead candidate. Its programs included a Phase 3 trial with exemestane for advanced HR-positive, HER2-negative breast cancer (E2112) and combination trials in lung cancer, melanoma and triple-negative breast cancer. E2112 enrollment was reported above 50% and accelerating. The filing said progression-free-survival data were not expected before the second half of 2017 and overall-survival data not before the second half of 2019.
On July 1, 2016, after the quarter, Syndax licensed SNDX-6352, an IND-ready anti-CSF-1R antibody, from UCB. The company expected to begin a Phase 1 healthy-volunteer study in Q4 2016. The March 2016 IPO raised approximately $50.5 million net; all outstanding preferred shares converted to common stock at the IPO closing.
Financial performance and position
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $0.305 | $0.017 | $0.610 | $0.017 |
| Research and development expense | $6.131 | $2.271 | $10.917 | $3.994 |
| General and administrative expense | $2.808 | $3.288 | $7.080 | $5.999 |
| Operating loss | $(8.634) | $(5.542) | $(17.387) | $(9.976) |
| Net loss | $(8.358) | $(6.214) | $(18.688) | $(11.125) |
| Net loss per share, basic and diluted | $(0.47) | $(440.52) | $(1.91) | $(649.30) |
Revenue consisted of license-fee recognition under the Kyowa Hakko Kirin agreement, not product sales. The filing reports no meaningful product gross margin. Q2 R&D growth reflected higher E2112 enrollment costs, ENCORE 601 spending, initiation of ENCORE 602, and increased staffing and related costs. Six-month G&A rose overall, including public-company costs and stock compensation. The exceptionally high 2015 per-share losses reflect the much smaller pre-IPO share base and preferred-stock accretion; they are not directly comparable with 2016.
At June 30, cash and cash equivalents were $14.441 million and short-term investments were $111.016 million, totaling $125.457 million; restricted cash was $0.054 million. Total assets were $127.856 million, total liabilities $21.615 million, and stockholders’ equity $106.241 million. There was no interest-bearing debt outstanding. Management believed available cash, cash equivalents and short-term investments would fund planned operations for at least 12 months.
For the first six months, operating cash flow was $(13.293) million, investing cash flow $(47.761) million and financing cash flow $52.316 million; cash and cash equivalents declined $8.738 million to $14.441 million. Investing cash use principally reflects purchases of short-term investments, rather than equivalent operating consumption. The 2015 comparison included a large KHK upfront payment recorded as deferred revenue, contributing to positive operating cash flow that year.
Material changes, outlook and risks
- Six-month net loss increased to $18.688 million from $11.125 million; R&D expense rose 173% to $10.917 million as clinical programs advanced.
- The company expects significant losses and increasing R&D and G&A expenses for the foreseeable future and does not expect positive operating cash flow in the near term. It expects to need additional capital beyond the stated 12-month runway; financing may dilute shareholders or require unfavorable terms.
- The Phase 3 breast-cancer trial depends on ECOG-ACRIN and NCI execution and patient enrollment. The FDA Special Protocol Assessment does not assure approval; the filing said the existing trial might not suffice for European approval.
- Entinostat’s combination strategy remains clinically unproven; efficacy, safety, trial timing, competing treatments, collaborator performance, drug supply, regulatory approval and reimbursement are key uncertainties. The entinostat composition-of-matter patent was reported to expire in 2017; other patent protection and possible extensions remain important.
- The Bayer warrant liability was remeasured and reclassified to equity at the IPO; the six-month results include a $1.703 million warrant fair-value expense. IPO proceeds were invested in cash equivalents and short-term investments; the filing stated none had been used as of June 30.
- Management concluded disclosure controls were effective as of June 30. The company was not yet required to assess internal control over financial reporting in this quarterly report. No material legal proceedings were reported.
Important facts for investors to verify
- Whether cash burn, trial spending and the claimed minimum 12-month funding runway remain consistent with the development plan.
- Enrollment progress, costs and data timing for E2112, including the expected PFS and overall-survival milestones.
- Terms and obligations under the UCB SNDX-6352 license, including development milestones, royalties, supply and transfer arrangements.
- Clinical results and safety of entinostat combinations, and any changes to regulatory strategy or trial timelines.
- Entinostat patent coverage and extension prospects, together with potential financing, dilution and collaboration requirements.