SCYNEXIS, Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018; filed August 9, 2018. SCYNEXIS is a clinical-stage biotechnology company developing ibrexafungerp, an oral and intravenous antifungal candidate. It has no product-sales revenue and expects continued operating losses.
Financial performance and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $64,000 | $64,000 | $129,000 | $129,000 |
| Research and development expense, net | $5.6 million | $4.4 million | $10.9 million | $8.5 million |
| SG&A expense | $2.1 million | $2.4 million | $4.1 million | $4.4 million |
| Net loss | $10.8 million | $4.2 million | $14.8 million | $9.1 million |
| Net loss per share | $0.23 | $0.16 | $0.37 | $0.35 |
- Revenue was the amortization of an upfront R-Pharm collaboration payment; there was no product revenue. Operating margins are not meaningful given minimal revenue and ongoing development costs.
- Q2 operating expenses rose 13% year over year, mainly from higher preclinical and clinical development spending; six-month R&D expense rose 29%. SG&A declined 10% for the quarter and 7% for the six-month period.
- Q2 results included a $2.9 million noncash warrant fair-value expense, versus a $2.9 million gain in Q2 2017. For the six-month period, the warrant remeasurement produced a $0.7 million gain, compared with a $4.4 million gain in 2017. These valuation changes materially affect reported net loss.
- At June 30, cash and cash equivalents were $6.8 million, short-term investments $48.4 million, and restricted cash $0.3 million. Cash, cash equivalents and short-term investments totaled $55.2 million. Six-month operating cash use was $16.1 million; investing cash use was $16.3 million, primarily reflecting purchases and maturities of short-term investments; financing provided $28.1 million, largely from the March public offering.
- Total liabilities were $31.5 million, including $12.2 million of warrant liabilities. The Solar term loan had $15.0 million of principal outstanding before unamortized discounts; principal payments were scheduled to resume October 2018, with maturity in September 2020. The loan is secured by substantially all assets other than intellectual property and includes minimum-liquidity and other covenants.
- Accumulated deficit was $220.0 million. Common shares outstanding increased from 29.0 million at year-end 2017 to 46.8 million at June 30, 2018. The March 2018 offering generated approximately $27.9 million net proceeds and included warrants for up to 21.3 million additional shares.
Developments, outlook and risks
- Management said existing cash and short-term investments were expected to fund operating requirements into 2020, based on its current operating plan. This estimate depends on assumptions that may prove incorrect; the company expects continued losses and increasing R&D expense and anticipates needing additional capital.
- In July 2018, SCYNEXIS reported positive Phase 2b DOVE results in vulvovaginal candidiasis and identified a 600 mg, one-day regimen as its preferred Phase 3 dose, subject to an FDA End-of-Phase 2 meeting. The filing describes activity as comparable to fluconazole on key measures, but the extracted text does not provide clear numerical endpoint results.
- The liposomal IV formulation encountered unexpected injection-site tolerability differences after manufacturing scale-up, delaying further preclinical work and advancement into human trials. The company was working with vendors and CMC experts to resume activities.
- Potential Merck payments include up to $19.0 million in development and regulatory milestones, plus tiered mid- to high-single-digit royalties on worldwide sales if ibrexafungerp is commercialized. Other licensing agreements also include contingent milestones and royalties.
- A purported securities class action filed in 2017 remained pending. SCYNEXIS disputed the claims and had not accrued a liability at June 30, 2018. A new risk disclosure addressed possible GDPR penalties and compliance costs related to personal data, including clinical-trial information.
- The company entered an 11-year office lease with total payments of approximately $7.3 million. Management reported disclosure controls were effective at the reasonable-assurance level and no material change in internal control during the quarter.
Most important facts for investors to verify
- Whether FDA discussions support the proposed DOVE Phase 3 dose and what the complete trial data show.
- Whether the IV formulation tolerability issue is resolved and how it affects development timing and costs.
- Cash burn, funding runway and financing needs relative to the stated “into 2020” estimate.
- Potential dilution from outstanding warrants and future equity financing, and the effects of warrant fair-value volatility on reported earnings.
- Loan covenant and repayment requirements, securities-litigation developments, and contingent license-payment obligations.