SCYNEXIS, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. SCYNEXIS is a clinical-stage biotechnology company developing ibrexafungerp, an antifungal drug candidate. It had not generated product-sales revenue.
Key financial results
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $12.05 million | $0 |
| Research and development expense | $6.95 million | $9.87 million |
| Selling, general and administrative expense | $6.70 million | $2.61 million |
| Loss from operations | $1.59 million | $12.48 million |
| Net loss | $4.68 million | $7.00 million |
| Basic / diluted loss per share | $(0.18) / $(0.23) | $(0.72) / $(0.72) |
| Net cash used in operating activities | $0.76 million | $14.06 million |
Revenue was primarily the upfront consideration under the February 2021 Hansoh licensing agreement. It included a $10.0 million cash payment, amounts related to transfer of manufacturing data, and $1.1 million of withholding taxes remitted by Hansoh on SCYNEXIS’s behalf. The company recorded a matching $1.1 million income tax expense. No gross profit or margin was presented.
At March 31, cash and cash equivalents were $92.0 million, down from $93.0 million at year-end; cash, cash equivalents and restricted cash totaled $92.3 million. Total assets were $100.1 million, total liabilities $74.1 million, and stockholders’ equity $25.9 million. The balance sheet showed $12.2 million of convertible debt and derivative liability and $49.9 million of warrant liabilities. The remaining $6.0 million of April 2020 convertible notes was converted into 959,080 shares in January; the conversion generated a $2.7 million extinguishment loss.
Changes and drivers
- Net loss improved by $2.3 million year over year, primarily reflecting the new licensing revenue and lower R&D expense, partly offset by higher SG&A, debt-extinguishment loss, and tax expense.
- R&D fell 29.6%, mainly because certain clinical studies and VANISH Phase 3 activities were substantially complete and prior-year drug-product costs did not recur.
- SG&A rose 156.3% as commercial-launch preparation, business development, IT and personnel costs increased.
- Operating cash use decreased substantially, mainly because the $10.0 million Hansoh cash payment offset operating spending. The quarter’s reported cash burn should not be read as a recurring run rate.
- Fair-value gains on warrant liabilities were $1.3 million, compared with $4.8 million in Q1 2020; these noncash gains reduced reported expense. A $0.1 million derivative-liability fair-value loss also affected Q1 2021 results.
Outlook, developments and risks
- As of the filing, the FDA had accepted the VVC treatment NDA for priority review and set a June 1, 2021 action date. SCYNEXIS was discussing prescribing-information language with the FDA; approval was not assured.
- Management expected the final patient visit in the Phase 3 CANDLE recurrent-VVC study by year-end 2021, with top-line results and a potential supplemental NDA in the first half of 2022 and potential approval in late 2022. These are forward-looking estimates.
- Enrollment continued in the FURI and CARES invasive fungal infection studies and the SCYNERGIA study; dosing began in March 2021 in a Phase 1 study of an IV liposomal formulation.
- Management said existing resources were expected to fund operations for at least 12 months after the statements were issued, and estimated funding into 2023 based on cash, a planned New Jersey NOL sale and anticipated Brexafemme sales. That outlook depends on regulatory outcomes, commercialization, spending and access to additional funding. The company expected R&D spending to decline as certain studies progressed or completed, while SG&A would rise to support a potential launch.
- After quarter-end, SCYNEXIS reported a May agreement to sell unused New Jersey NOLs for about $4.2 million and a loan facility of up to $60 million. It received an initial $20 million; further tranches are conditional. The loan carries a variable rate of at least 9.05%, includes a revenue covenant (subject to a cash-based waiver) and has warrants attached.
- The Hansoh agreement grants Greater China rights and provides eligibility for up to $110 million in development and commercial milestones plus low-double-digit royalties. Merck retains mid- to high-single-digit royalties on worldwide ibrexafungerp sales; an amendment eliminated specified cash milestones but also forfeited previously accrued royalty credits.
- Key risks include clinical and regulatory uncertainty, launch and market uptake, continued operating losses, potential need for additional capital and dilution, and contractual obligations. Management reported no significant adverse business effects identified from COVID-19 at the time of filing.
Important facts for investors to verify
- FDA decision and any labeling, safety or launch requirements for the VVC NDA.
- CANDLE, FURI, CARES and other trial timelines, results and costs against management’s stated expectations.
- Cash runway assumptions, actual Brexafemme sales, NOL-sale proceeds and conditions for drawing remaining loan tranches.
- Loan covenant compliance, interest and repayment burden, collateral terms, and dilution from lender and existing warrants.
- Potential dilution: 27.5 million common shares were reserved for future issuance at March 31, 2021; warrants and other equity-linked instruments are substantial.
- Reported revenue is licensing consideration, not product sales; verify how milestone, royalty and tax-withholding amounts are recognized as events occur.