SCYNEXIS, Inc. — FY 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; this is an annual report, not a standalone Q4 report. The filing was signed March 7, 2016.
Business context
SCYNEXIS is a clinical-stage pharmaceutical company focused on developing SCY-078, an oral and intravenous antifungal candidate. At year-end, oral SCY-078 was in two Phase 2 studies and the IV formulation was in Phase 1. The company sold its contract research and development Services Business to Accuratus in July 2015 and is concentrating resources on SCY-078. It had no approved products and no product-sales revenue.
Key financial metrics
| Metric | 2015 | 2014 |
|---|---|---|
| Continuing-operations revenue | $0.257 million | $1.256 million |
| Research and development expense | $16.440 million | $8.287 million |
| Selling, general and administrative expense | $12.166 million | $7.616 million |
| Loss from continuing operations | $28.338 million | $5.603 million |
| Income (loss) from discontinued operations, net | $(4.285) million | $1.369 million |
| Net loss | $32.623 million | $4.234 million |
| Net loss per share, basic | $2.68 | $1.04 |
| Net cash used in operating activities | $24.545 million | $9.472 million |
| Cash and cash equivalents at year-end | $46.985 million | $32.243 million |
| Debt at year-end | None | None |
2015 revenue from continuing operations was primarily the scheduled recognition of the R-Pharm upfront payment. The disposed Services Business reported $7.408 million of revenue in discontinued operations in 2015, compared with $17.768 million in 2014. Consolidated gross margin is not clearly presented as a continuing-operations metric; the company’s continuing business had minimal revenue and significant development costs.
At December 31, 2015, total assets were $49.273 million, total liabilities were $7.324 million, and stockholders’ equity was $41.949 million. Operating cash use included $2.3 million from Services Business operations that the company did not expect to continue after the sale. Cash increased largely due to the 2015 equity offering, not operating performance.
Material changes versus 2014
- Continuing revenue declined 79.5%, mainly because the $1.0 million Waterstone upfront payment was recognized in 2014; 2015 continuing revenue was principally R-Pharm upfront-fee amortization.
- R&D expense nearly doubled, primarily due to SCY-078 clinical, IV-formulation and manufacturing-development activities. SG&A rose 59.7%, including higher compensation, severance, stock-based compensation and public-company costs.
- Net loss increased substantially. The 2014 comparison included a $10.080 million noncash derivative fair-value gain, a $1.389 million debt-extinguishment loss, and income from discontinued operations; these items did not recur in 2015.
- The Services Business sale generated approximately $2.5 million of cash at closing, with $0.5 million held in escrow. The sale also resulted in a $1.350 million impairment charge, a $0.073 million loss on disposal and other exit-related costs.
- The April 2015 follow-on offering raised approximately $38.0 million net and increased year-end shares outstanding to 13,905,599 from 8,512,103. The company also had a shelf registration for up to $150 million of securities, including a $40 million at-the-market facility.
Outlook, risks and unusual items
- Management estimated existing cash would fund operations into the second quarter of 2017, but said the estimate depended on assumptions and changing circumstances could accelerate cash use. The company expected continued losses and said it would need additional capital to complete development and potentially commercialize SCY-078.
- Management expected top-line results from the two oral Phase 2 studies and results from the IV Phase 1 study by the end of Q2 2016. It planned to start a Phase 3 invasive-candidiasis study in the first half of 2017, subject to study results and regulatory discussions.
- SCY-078 had FDA Fast Track and Qualified Infectious Disease Product designations for specified indications. These designations do not ensure approval or a materially shorter review process. The candidate remained investigational.
- Key risks include clinical-trial failure or delay, patient-enrollment challenges, adverse effects, regulatory uncertainty, reliance on third-party manufacturers and service providers, competition and reimbursement uncertainty, and the need to raise capital. Phase 1 experience included gastrointestinal adverse events and two reported liver-enzyme elevations; both subjects recovered without intervention.
- Following the sale of the Services Business, SCYNEXIS committed to purchase at least $3.3 million of Accuratus development services over an 18-month initial term; $1.602 million was expensed in 2015. It also recorded $2.639 million of accrued severance and retention costs at year-end, with most expected to be paid in the first half of 2016.
- The company reported no outstanding debt, no material legal proceedings, and no off-balance-sheet arrangements. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Whether the scheduled SCY-078 Phase 1 and Phase 2 results were reported as expected, and what the complete safety and efficacy data showed.
- Whether management’s cash runway estimate and development spending assumptions remain current, and what additional financing may be required.
- Whether the Services Business escrow was collected and whether any further sale-related or retention obligations arose.
- How the Accuratus services commitment, R-Pharm reimbursements and contingent licensing milestones affect future cash needs and revenue.
- Whether clinical progress, regulatory feedback, manufacturing readiness or financing plans changed after the filing date.