SCYNEXIS, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited results. SCYNEXIS is a biotechnology company developing antifungal medicines. Its lead candidate, ibrexafungerp, is licensed to GSK outside Greater China and certain other territories; SCY-247 is in preclinical development.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $1.4 million | $1.1 million |
| Product revenue | $0 | $1.1 million |
| GSK license revenue | $1.4 million | $0 |
| Research and development expense | $7.2 million | $6.8 million |
| Selling, general and administrative expense | $3.7 million | $4.8 million |
| Operating loss | $9.5 million | $10.7 million |
| Net income (loss) | $0.4 million | $(33.9) million |
| Net cash used in operating activities | $4.0 million | $18.9 million |
- Q1 2024 net income reflected a $9.6 million noncash gain from revaluing warrant liabilities, as well as higher interest income; it does not indicate operating profitability. The comparable 2023 period included a $21.7 million warrant fair-value loss.
- Gross margin is not meaningfully comparable: no product sales or product cost were recorded in Q1 2024, while Q1 2023 included $1.1 million of product revenue and $0.1 million of product cost.
- At March 31, 2024, cash, cash equivalents and investments totaled $94.2 million, down from $98.0 million at year-end. Cash, cash equivalents and restricted cash were $36.0 million. Total assets were $118.3 million; total liabilities were $44.1 million; stockholders’ equity was $74.1 million.
- The balance sheet reports $12.4 million of convertible debt and derivative liability, classified as current at quarter-end. The March 2019 notes bear 6% interest and mature March 15, 2025 unless earlier converted, redeemed or repurchased. The prior Hercules loan was repaid and terminated in May 2023.
Material changes and business developments
- BREXAFEMME was recalled and ibrexafungerp clinical studies were put on hold after the company identified potential cross-contamination risk: a non-antibacterial beta-lactam drug substance was manufactured on equipment also used for ibrexafungerp. Actual contamination is unconfirmed, and the company reported no related adverse events.
- The FDA concurred with the clinical hold in September 2023. It affects the Phase 3 MARIO study and a Phase 1 lactation study; completed studies are not affected. The company says it has contracted for new ibrexafungerp batches intended to support lifting the hold and restarting affected studies. The FDA’s resolution path and timing are not provided.
- Under the amended GSK arrangement, potential regulatory approval milestones were reduced to up to $49 million, invasive candidiasis commercial milestones to up to $57.5 million, and sales milestones to up to $179.5 million, $169.75 million or $145.5 million depending on the timing of a U.S. BREXAFEMME relaunch. Potential development milestones total up to $72.35 million, including amounts already paid and milestones tied to study reports and MARIO. GSK royalties remain in the mid-single-digit to mid-teen range.
- R&D expense rose 5.5%, mainly from $1.6 million higher chemistry, manufacturing and controls costs, including drug product purchases, partly offset by lower clinical costs. SG&A fell 24.2%, primarily due to lower professional and commercial expenses.
Outlook, risks and contingencies
- Management believes available capital can fund operations for at least 12 months after issuance of the financial statements, but expects significant ongoing R&D and SG&A spending and anticipates needing additional funding. The company warns that actual cash needs may exceed estimates and that capital availability, regulatory outcomes, GSK milestones and development costs could materially affect liquidity.
- SCYNEXIS anticipates initiating a Phase 1 study of SCY-247 in the second half of 2024. This is forward-looking and subject to execution and funding risks.
- A securities class action alleges misleading statements and omissions concerning manufacturing cross-contamination risks and internal oversight. A shareholder derivative complaint based on similar allegations was filed May 1, 2024. The company disputes the allegations and intends to defend itself; it has not recorded an expense for these contingencies. The filing does not provide a clear estimate of potential damages.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Progress with the FDA and GSK toward resolving the manufacturing issue, lifting the clinical hold, restarting MARIO and the lactation study, and any plans or timing for a BREXAFEMME relaunch.
- Whether GSK development, regulatory and commercial milestones remain achievable under the amended terms, and the assumptions supporting the $19.5 million GSK contract asset.
- Cash burn and the stated 12-month liquidity outlook, including the timing and terms of any additional financing.
- Repayment, conversion or refinancing plans for the $12.4 million convertible notes due March 2025, and potential dilution: 41.9 million common shares were reserved for future issuance at March 31, 2024.
- Developments in the securities and derivative litigation and any resulting financial or operational exposure.