SCYNEXIS, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. SCYNEXIS is a clinical-stage anti-infectives company focused primarily on SCY-078, an oral and intravenous antifungal candidate. Amounts below are in U.S. dollars; financial statement figures are in thousands unless stated otherwise.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Revenue | $64 | $65 |
| Research and development, net | $4,743 | $3,787 |
| Selling, general and administrative | $2,533 | $2,210 |
| Operating loss | $(7,212) | $(5,932) |
| Net loss | $(7,184) | $(6,384) |
| Basic and diluted loss per share | $(0.52) | $(0.75) |
| Net cash used in operating activities | $(8,960) | $(4,547) |
- Revenue was the amortization of R-Pharm’s non-refundable upfront payment; SCYNEXIS reported no product-sales revenue.
- R&D expense is presented net of R-Pharm reimbursements: $219 in Q1 2016 versus $194 in Q1 2015. SCY-078 accounted for $4,743 of Q1 2016 net R&D expense.
- Cash and cash equivalents were $38.0 million at March 31, 2016, down from $47.0 million at December 31, 2015. Total current assets were $39.9 million and current liabilities were $5.0 million. Total liabilities were $5.6 million; the filing reports no debt balance.
- Accumulated deficit was $157.3 million. No gross margin or operating margin was reported; the filing does not provide a clear product-level margin measure.
Material changes versus Q1 2015
- R&D expense rose 25.2% and SG&A rose 14.6%; total operating expenses increased 21.3%. Management attributed the R&D increase principally to clinical development and chemistry, manufacturing and controls work on SCY-078.
- Operating cash use increased by $4.4 million, primarily reflecting higher SCY-078 development and public-company costs, as well as cash payments reducing accrued severance and retention obligations.
- Q1 2015 included a $453,000 loss from discontinued operations; Q1 2016 did not. As a result, net loss increased by $800,000 year over year despite the absence of that prior-year discontinued-operations loss.
- The former contract research services business was sold to Accuratus in July 2015. SCYNEXIS recorded $1.177 million of Q1 2016 R&D expense for services provided by Accuratus under the post-sale services agreement.
Outlook, development, and risks
- Management said existing cash was expected to fund operating expenses and capital expenditures into the first half of 2017, based on its then-current operating plan. It cautioned that assumptions could prove incorrect and that cash could be used sooner; it was evaluating the cash impact of updates to SCY-078 development plans. The company expected continued losses and rising R&D spending and anticipated needing additional capital.
- Management expected to complete enrollment in the Phase 2 invasive-Candida step-down study in June 2016, with top-line data expected in July 2016. Enrollment in the Phase 2 vulvovaginal candidiasis study was complete, with top-line results expected in June 2016.
- The initial IV formulation produced reversible, mild-to-moderate infusion-site reactions at high doses and with repeat infusions. SCYNEXIS planned to test an optimized alternative formulation, with Phase 1 studies scheduled to start in Q2 2016 and expected to finish in Q3 2016. Planned later-stage program timing depended on development progress.
- SCY-078 had FDA Fast Track and Qualified Infectious Disease Product designations for oral and IV formulations for invasive candidiasis and invasive aspergillosis. Management reported that the annual safety update disclosed no new information changing the candidate’s overall safety profile.
- After quarter-end, SCYNEXIS terminated its Cowen ATM agreement, under which no shares had been sold, and entered a new Cantor agreement permitting up to $40 million of at-the-market common-stock sales. This creates potential dilution if shares are issued.
- Potential future obligations include up to $19 million in Merck milestones for SCY-078, plus tiered mid- to high-single-digit royalties on worldwide sales if commercialized; other compound licenses could require up to $2.3 million in milestone payments. These are contingent, not reported current debt.
- Management cited financing needs and the uncertain costs, timing, and outcomes of clinical development and regulatory approval as key risks. The company also disclosed that cash deposits exceeded federal insurance limits. No material change to the risk factors in its 2015 Form 10-K was reported.
Important facts for investors to verify
- Whether SCY-078 trial results, enrollment, and development milestones matched the stated expectations, and whether the optimized IV formulation improved tolerability.
- Actual cash burn and updated runway assumptions, including whether additional financing was needed and any dilution from the Cantor ATM facility.
- Whether R-Pharm reimbursements and other receivables were collected as expected, and how Accuratus service costs and remaining retention or severance payments affected cash.
- The status and potential timing or amount of Merck milestone and royalty obligations, and the consequences of Dechra’s planned termination of its SCY-641 license.