UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period to
Commission File Number
(Exact name of registrant as specified in its charter)
|
||
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
||
(Address of principal executive offices) |
|
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|||
|
☒ |
|
Smaller reporting company |
|
||
|
|
|
|
|||
Emerging growth company |
|
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 1, 2022, there were
SCYNEXIS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
TABLE OF CONTENTS
|
|
|
|
Page |
|
|
|
||
|
1 |
|||
|
|
|
|
|
Item 1. |
|
|
1 |
|
|
|
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 |
|
1 |
|
|
|
2 |
|
|
|
|
3 |
|
|
|
Notes to the Condensed Consolidated Financial Statements (unaudited) |
|
4 |
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
19 |
Item 3. |
|
|
28 |
|
Item 4. |
|
|
28 |
|
|
|
|
||
|
28 |
|||
|
|
|
|
|
Item 1A. |
|
|
28 |
|
Item 6. |
|
|
29 |
|
|
|
|
||
|
30 |
|||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
SCYNEXIS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Short-term investments |
|
|
|
|
|
— |
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Inventory, net |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Deferred offering costs |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Operating lease right-of-use asset (See Note 8) |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and stockholders’ equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Other liabilities, current portion (See Note 7) |
|
|
|
|
|
|
||
Operating lease liability, current portion (See Note 8) |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Other liabilities (See Note 7) |
|
|
|
|
|
|
||
Warrant liabilities |
|
|
|
|
|
|
||
Convertible debt and derivative liability (See Note 7) |
|
|
|
|
|
|
||
Loan payable |
|
|
|
|
|
|
||
Operating lease liability (See Note 8) |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of the financial statements.
1
SCYNEXIS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product revenue, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
License agreement revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs and discount |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liabilities fair value adjustment |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Derivative liabilities fair value adjustment |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total other expense (income) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Loss before taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax benefit |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share attributable to common stockholders – basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share – basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share attributable to common stockholders – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share – diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average common shares outstanding – basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The accompanying notes are an integral part of the financial statements.
2
SCYNEXIS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Accretion of short-term investment discount |
|
|
( | ) |
|
|
— |
|
Amortization of debt issuance costs and discount |
|
|
|
|
|
|
||
Change in fair value of warrant liabilities |
|
|
( |
) |
|
|
( |
) |
Change in fair value of derivative liabilities |
|
|
( |
) |
|
|
( |
) |
Noncash operating lease expense for right-of-use asset |
|
|
|
|
|
|
||
Loss on extinguishment of debt |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Prepaid expenses, accounts receivable, inventory, and other |
|
|
( |
) |
|
|
|
|
Accounts payable, accrued expenses, other liabilities, and other |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of intangible assets |
|
|
( |
) |
|
|
( |
) |
Purchase of short-term investments |
|
|
( |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from common stock issued |
|
|
|
|
|
|
||
Payments of offering costs and underwriting discounts and commissions |
|
|
( |
) |
|
|
( |
) |
Proceeds from loan payable |
|
|
|
|
|
|
||
Payments of loan payable issuance costs |
|
|
( |
) |
|
|
( |
) |
Proceeds from employee stock purchase plan issuances |
|
|
|
|
|
|
||
Repurchase of shares to satisfy tax withholdings |
|
|
|
|
|
( |
) |
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
Net (decrease) increase in cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash received for interest |
|
$ |
|
|
$ |
|
||
Noncash financing and investing activities: |
|
|
|
|
|
|
||
Common stock issued for settlement of senior convertible notes |
|
$ |
|
|
$ |
|
||
Purchased intangible assets included in accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
Deferred offering and issuance costs included in accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
Deferred offering costs reclassified to additional-paid-in capital |
|
$ |
|
|
$ |
|
||
Reclass of warrant liability to additional paid in capital |
|
$ |
|
|
$ |
|
||
Reclass of deferred asset associated with issuance of loan payable to debt discount |
|
$ |
|
|
$ |
|
||
Settlement of liability for exercise of warrants |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of the financial statements.
3
SCYNEXIS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business and Basis of Preparation
Organization
SCYNEXIS, Inc. (“SCYNEXIS” or the “Company”) is a Delaware corporation formed on November 4, 1999. SCYNEXIS is a biotechnology company, headquartered in Jersey City, New Jersey, and is pioneering innovative medicines to overcome and prevent difficult-to-treat and drug-resistant infections. The Company is developing its lead product candidate, ibrexafungerp, as a broad-spectrum, intravenous (“IV”)/oral agent for severe, hospital-based indications. In June 2021, the U.S. Food and Drug Administration (“FDA”) approved BREXAFEMME® (ibrexafungerp tablets) for treatment of patients with vulvovaginal candidiasis (“VVC”), also known as vaginal yeast infection. The FDA has accepted the Company's submission of a supplemental New Drug Application to expand the label of BREXAFEMME to include the prevention of recurrent VVC. The FDA granted the submission Priority Review and assigned the Prescription Drug User Fee Act target decision date as November 30, 2022.
In October 2022, the Company announced that it is actively pursuing a U.S. commercialization partner to out-license BREXAFEMME in order to refocus its resources on the clinical development of ibrexafungerp for severe, hospital-based indications. As a result, the Company has begun to wind down its promotional activities associated with BREXAFEMME, while keeping BREXAFEMME on the market and available to patients. Additionally, the Company will conclude the partnership with its contracted commercial sales partner, Amplity Health ("Amplity"), which is expected to conclude on November 30, 2022, and the Company will undertake a workforce reduction.
The Company has incurred significant losses and negative cash flows from operations since its initial public offering in May 2014 and expects to continue to incur losses and negative cash flows for the foreseeable future. As a result, the Company had an accumulated deficit of $
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Intercompany balances and transactions are eliminated in consolidation.
New Jersey Technology Business Tax Certificate Transfer (NOL) Program
The New Jersey Technology Business Tax Certificate Transfer (NOL) program, administered by the New Jersey Economic Development Authority, enables approved biotechnology companies to sell their unused net operating losses (“NOLs”) and research and development tax credits to unaffiliated, profitable corporate taxpayers in the State of New Jersey. For the nine months ended September 30, 2022, the Company recognized a $
Unaudited Condensed Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, and cash flows. The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited condensed consolidated financial statements should be read in conjunction with
4
the financial statements and notes set forth in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and judgements include: revenue recognition including gross to net estimates and the identification of performance obligations in licensing arrangements, determination of the fair value of stock-based compensation grants; the estimate of services and effort expended by third-party research and development service providers used to recognize research and development expense; and the estimates and assumptions utilized in measuring the fair values of the warrant and derivative liabilities each reporting period.
2. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements and notes follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2021, except as described below.
Short-Term Investments
The Company's held-to-maturity short-term investments in U.S. government securities are carried at amortized cost and any premiums or discounts are amortized or accreted through the maturity date of the investment. Any impairment that is not deemed to be temporary is recognized in the period identified.
Basic and Diluted Net Loss per Share of Common Stock
The Company calculates net loss per common share in accordance with ASC 260, Earnings Per Share. Basic net loss per common share for the three and nine months ended September 30, 2022 and 2021 was determined by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Per ASC 260, Earnings Per Share, the weighted average number of common shares outstanding utilized for determining the basic net loss per common share for the three and nine months ended September 30, 2022 includes the outstanding pre-funded warrants to purchase
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net loss |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Dilutive effect of warrant liability |
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Dilutive effect of convertible debt |
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Net loss allocated to common shares |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of warrant liability |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of convertible debt |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share – diluted |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
5
The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for the three and nine months ended September 30, 2022 and 2021, as the result would be anti-dilutive:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Outstanding stock options |
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants to purchase common stock associated with March 2018 public offering – Series 2 |
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants to purchase common stock associated with December 2019 public offering |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Warrants to purchase common stock associated with December 2020 public offering - Series 1 |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Warrants to purchase common stock associated with December 2020 public offering - Series 2 |
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants to purchase common stock associated with April 2022 Public Offering |
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants to purchase common stock associated with Loan Agreement |
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock associated with March 2019 Notes |
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants to purchase common stock associated with Danforth |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of Prior Year Amounts
Certain prior year amounts have been reclassified for consistency with the current year presentation.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 require a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which revised the effective dates for ASU 2016-13 for public business entities that meet the SEC definition of a smaller reporting company to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. As a smaller reporting company, the Company is currently evaluating the impact ASU 2016-13 will have on its unaudited condensed consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity: Accounting for Convertible Instruments and Contracts in and Entity’s Own Equity (“ASU 2020-06”). The amendments in ASU 2020-06 reduce the number of accounting models for convertible debt instruments and revises certain guidance relating to the derivative scope exception and earnings per share. The amendments in ASU 2020-06 are effective for public business entities that meet the definition of a SEC filer and a smaller reporting company for fiscal years beginning after December 15, 2023, and interim periods within those years. As a smaller reporting company, the Company is currently evaluating the impact ASU 2020-06 will have on its unaudited condensed consolidated financial statements.
3. Short-term Investments |
The following table summarizes the short-term investments at September 30, 2022 (in thousands):
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
||||
As of September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
6
As of September 30, 2022, the Company has $
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
Prepaid research and development services |
|
$ |
|
|
$ |
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Other prepaid expenses |
|
|
|
|
|
|
||
Other current assets |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
5. Inventory
Inventory consisted of the following (in thousands):
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
As of September 30, 2022 and December 31, 2021, the Company’s inventory consisted of $
6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
Accrued research and development expenses |
|
$ |
|
|
$ |
|
||
Accrued employee bonus compensation |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Accrued co-pay rebates |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
7. Borrowings
Loan Agreement
On May 13, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), as administrative agent and collateral agent (in such capacity, the “Agent”) and a lender, and Silicon Valley Bank, as a lender (“SVB,” and collectively with Hercules, the “Lenders”) for an aggregate principal amount of $
Under the terms of the Loan Agreement, the Company received an initial tranche of $
7
spread, risk free rate, and secured yield of
The Term Loan will mature on
The Loan Agreement contains customary closing fees, prepayment fees and provisions, events of default, and representations, warranties and covenants, including a financial covenant requiring the Company to maintain certain levels of trailing three-month net product revenue solely from the sale of ibrexafungerp commencing on September 30, 2022. The financial covenant will be waived at any time in which the Company maintains unrestricted and unencumbered cash in accounts maintained with SVB equal to at least
Future principal debt payments on the currently outstanding loan payable as of September 30, 2022 are as follows (in thousands):
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Total principal payments |
|
|
|
|
Final fee due at maturity |
|
|
|
|
Total principal and final fee payment |
|
|
|
|
Unamortized discount and debt issuance costs |
|
|
( |
) |
Less current portion |
|
|
|
|
Loan payable, long term |
|
$ |
|
April 2020 Note Purchase Agreement
On
In January 2021, Puissance converted the remaining $
March 2019 Note Purchase Agreement
On
As of September 30, 2022 and December 31, 2021, the Company’s March 2019 Notes consists of the convertible debt balance of $
8
recognized a loss of $
The Company estimated the fair value of the convertible debt and derivative liability for the March 2019 Notes using a binomial lattice valuation model and Level 3 inputs. At September 30, 2022 and December 31, 2021, the fair value of the convertible debt and derivative liability for the March 2019 Notes is $
Other Liabilities
In February 2021, the Company partnered with Amplity for the commercial launch of BREXAFEMME for the treatment of VVC. In October 2022, the Company announced that it is actively pursuing a U.S. commercialization partner to out-license BREXAFEMME to in order to refocus its resources on the clinical development of ibrexafungerp for severe, hospital-based indications. As a result, the Company has begun to wind down its promotional activities associated with BREXAFEMME, while keeping BREXAFEMME on the market and available to patients. As a result, the Company will conclude the partnership with Amplity, which is expected to conclude on November 30, 2022.
Under the terms of the 5-year agreement as currently in effect (the "Amplity Agreement"), the Company was to utilize Amplity’s commercial execution and resources for sales force, remote engagement, training, market access and select operations services. The Company maintains full ownership of ibrexafungerp. Amplity deferred a portion of its direct service fees (“Deferred Fees”) in the first two years (2021 and 2022) which the Company is to repay according to the terms of the Amplity Agreement and the Loan Agreement, including related agreements. As of September 30, 2022 and December 31, 2021, Deferred Fees of $
The Deferred Fees accrue interest at an annual rate of
8. Commitments and Contingencies
Leases
On March 1, 2018, the Company entered into a long-term lease agreement for approximately
9
The following table summarizes certain quantitative information associated with the amounts recognized in the unaudited condensed consolidated financial statements for the Lease (dollars in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash paid for amounts included in the measurement of operating lease liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||||
Remaining Lease term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Discount rate |
|
|
|
|
|
|
|
|
% |
|
|
% |
||||
Future minimum lease payments for the Lease as of September 30, 2022 are as follows (in thousands):
|
|
September 30, 2022 |
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
The presentations of the operating lease liability as of September 30, 2022 are as follows (in thousands):
|
|
September 30, 2022 |
|
|
Present value of future minimum lease payments |
|
$ |
|
|
|
|
|
|
|
Operating lease liability, current portion |
|
$ |
|
|
Operating lease liability, long-term portion |
|
|
|
|
Total operating lease liability |
|
$ |
|
|
|
|
|
|
|
Difference between future minimum lease payments and discounted cash flows |
|
$ |
|
|
License Arrangement with Potential Future Expenditures
As of September 30, 2022, the Company had a license arrangement with Merck Sharp & Dohme Corp., or Merck, as amended, that involves potential future expenditures. Under the license arrangement, executed in May 2013, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. In January 2014, Merck assigned the patents related to ibrexafungerp that it had exclusively licensed to the Company. Ibrexafungerp is the Company's lead product candidate. Pursuant to the terms of the license agreement, Merck was originally eligible to receive milestone payments from the Company that could total $
In December 2014, the Company and Merck entered into an amendment to the license agreement that deferred the remittance of a milestone payment due to Merck, such that no amount would be due upon initiation of the first Phase 2 clinical trial of a product containing the ibrexafungerp compound (the “Deferred Milestone”). The amendment also increased, in an amount equal to the Deferred Milestone, the milestone payment that would be due upon initiation of the first Phase 3 clinical trial of a product containing the ibrexafungerp compound. In December 2016 and January 2018, the Company entered into
10
second and third amendments to the license agreement with Merck which clarified what would constitute the initiation of a Phase 3 clinical trial for the purpose of milestone payment. In January 2019, a milestone payment became due to Merck as a result of the initiation of the VANISH Phase 3 VVC program and was paid in March 2019. On December 2, 2020, the Company entered into a fourth amendment to the license agreement with Merck. The amendment eliminates two cash milestone payments that the Company would have paid to Merck upon the first filing of an NDA, triggered by the FDA acceptance for filing of the Company’s NDA for ibrexafungerp for the treatment of VVC, and first marketing approval in the U.S. Such cash milestone payments would have been creditable against future royalties owed to Merck on net sales of ibrexafungerp. With the amendment, these milestones will not be paid in cash and, accordingly, credits will not accrue. Pursuant to the amendment, the Company will also forfeit the credits against future royalties that it had accrued from a prior milestone payment already paid to Merck. All other key terms of the license agreement are unchanged.
9. Stockholders’ Equity
Authorized, Issued, and Outstanding Common Stock
The Company’s authorized common stock has a par value of $
T
|
|
Three Months Ended September 30, 2022 |
|
|||||||||||||||||
|
|
Shares of |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, June 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Common stock issued through employee stock purchase plan |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Common stock issued, net of expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock issued for vested restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance, September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Three Months Ended September 30, 2021 |
|
|||||||||||||||||
|
|
Shares of |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, June 30, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock issued through employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock issued, net of expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock issued for vested restricted stock units |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Balance, September 30, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Nine Months Ended September 30, 2022 |
|
|||||||||||||||||
|
|
Shares of |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, December 31, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
11
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Common stock issued through employee stock purchase plan |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Common stock issued, net of expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock issued for vested restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Vested Loan Agreement warrants |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Nine Months Ended September 30, 2021 |
|
|||||||||||||||||
|
|
Shares of |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, December 31, 2020 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock issued through employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock issued, net of expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock issued for conversion of April 2020 Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock issued for vested restricted stock units |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Vested Loan Agreement warrants |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, September 30, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Shares Reserved for Future Issuance
The Company had reserved shares of common stock for future issuance as follows:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
Outstanding stock options |
|
|
|
|
|
|
||
Outstanding restricted stock units |
|
|
|
|
|
|
||
Warrants to purchase common stock associated with March 2018 public offering – Series 2 |
|
|
|
|
|
|
||
Warrants to purchase common stock associated with December 2020 public offering - Series 2 |
|
|
|
|
|
|
||
Prefunded warrants to purchase common stock associated with December 2020 public offering |
|
|
|
|
|
|
||
Warrants to purchase common stock associated with April 2022 Public Offering |
|
|
|
|
|
|
||
Prefunded warrants to purchase common stock associated with April 2022 Public Offering |
|
|
|
|
|
|
||
Warrants to purchase common stock associated with Loan Agreement |
|
|
|
|
|
|
||
Warrant to purchase common stock associated with Danforth |
|
|
|
|
|
|
||
For possible future issuance for the conversion of the March 2019 Notes |
|
|
|
|
|
|
||
For possible future issuance under 2014 Plan (Note 10) |
|
|
|
|
|
|
||
For possible future issuance under employee stock purchase plan |
|
|
|
|
|
|
||
For possible future issuance under 2015 Plan (Note 10) |
|
|
|
|
|
|
||
Total common shares reserved for future issuance |
|
|
|
|
|
|
||
April 2022 Public Offering
On April 22, 2022, the Company entered into an Equity Underwriting Agreement (the “Underwriting Agreement”) with Guggenheim Securities, LLC, as representative of the several underwriters (the “Underwriters”), relating to the offering, issuance and sale (the “April 2022 Public Offering”) of (a)
12
up to
The prefunded warrants are classified as equity in accordance with ASC 815, Derivatives and Hedging given the prefunded warrants are indexed to the Company’s own shares of common stock and meet the requirements to be classified in equity. The prefunded warrants were recorded at their relative fair value at issuance in the stockholders’ equity section of the balance sheet and the prefunded warrants are considered outstanding shares in the basic earnings per share calculation for the three and nine months ended September 30, 2022 given their nominal exercise price.
Common Stock Purchase Agreement and Sales Agreements
On April 10, 2020, the Company entered into the Common Stock Purchase Agreement with Aspire Capital (the “Common Stock Purchase Agreement”) pursuant to which the Company had the right to sell to Aspire Capital from time to time in its sole discretion up to $
During the three and nine months ended September 30, 2022, the Company sold
Warrants Associated with the March 2018, December 2020 and April 2022 Public Offerings
The outstanding warrants associated with the March 2018 and December 2020 public offerings contain a provision where the warrant holder has the option to receive cash, equal to the Black-Scholes fair value of the remaining unexercised portion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually defined to include various merger, acquisition or stock transfer activities). Due to this provision, ASC 480, Distinguishing Liabilities from Equity, requires that these warrants be classified as liabilities. The fair values of these warrants have been determined using the Black-Scholes valuation model, and the changes in the fair value are recorded in the accompanying unaudited condensed consolidated statements of operations. The outstanding warrants associated with the April 2022 public offering meet the definition of a derivative pursuant to ASC 815, Derivatives and Hedging, and do not meet the derivative scope exception given the warrants do not qualify under the indexation guidance. As a result, the April 2022 public offering warrants were initially recognized as liabilities and measured at fair value using the Black-Scholes valuation model. Issuance costs of $
Warrants Associated with Loan Agreement
In connection with the entry into the Loan Agreement, the Company issued to each of Hercules and SVB a warrant (collectively, the “Warrants”) to purchase shares of the Company’s common stock, par value $
13
2022,
10. Stock-based Compensation
Pursuant to the terms of the Company’s 2014 Equity Incentive Plan (“2014 Plan”), on January 1, 2022 and 2021, the Company automatically added
As of September 30, 2022, there were
The activity for the Company’s 2009 Stock Option Plan, 2014 Plan, and 2015 Plan, for the nine months ended September 30, 2022, is summarized as follows:
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding — December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Forfeited/Cancelled |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding — September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable — September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested or expected to vest — September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Restricted stock unit (“RSU”) activity under the 2014 Plan and 2015 Plan for the nine months ended September 30, 2022, is summarized as follows:
|
|
Number of |
|
|
Weighted |
|
||
Non-vested at December 31, 2021 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Non-vested at September 30, 2022 |
|
|
|
|
$ |
|
||
The fair value of RSUs is based on the market price of the Company’s common stock on the date of grant. RSUs generally vest
Compensation Cost
The compensation cost that has been charged against income for stock awards under the 2014 Plan and the 2015 Plan was $
14
Stock-based compensation expense related to stock options is included in the following line items in the accompanying unaudited condensed consolidated statements of operations (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
11. Fair Value Measurements
The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their respective fair values due to the short-term nature of such instruments.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made.
|
|
|
|
|
Fair Value Hierarchy Classification |
|
||||||||||
|
|
Balance |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liabilities |
|
$ |
|
|
|
|
|
|
|
|
$ |
|
||||
Derivative liability |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total liabilities |
|
$ |
|
|
|
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liabilities |
|
$ |
|
|
|
|
|
|
|
|
$ |
|
||||
Derivative liability |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total liabilities |
|
$ |
|
|
|
|
|
|
|
|
$ |
|
||||
The Company measures cash equivalents at fair value on a recurring basis. The fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.
Level 3 financial liabilities consist of the warrant liabilities for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company uses the Black-Scholes option valuation model to value the Level 3 warrant liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. The unobservable input for all of the Level 3 warrant liabilities includes volatility. The historical and implied volatility of the Company, using its closing common stock prices and market data, is utilized to reflect future volatility over the expected term of the warrants. At September 30, 2022, the range and weighted average of the Level 3 volatilities utilized in the Black-Scholes model to fair value the warrant liabilities were
The Company uses the binomial lattice valuation model to value the Level 3 derivative liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, dividend yield, risk-free rate, adjusted equity volatility, credit rating, market credit spread, and estimated effective yield. The unobservable inputs associated with the Level 3 derivative liabilities are adjusted equity volatility, market credit spread, and estimated yield. As of September 30, 2022, these inputs were
16
convertible notes are initially fair valued using the binomial lattice model and with the straight debt fair value calculated using the discounted cash flow method. The residual difference represents the fair value of the embedded derivative liabilities and the fair value of the embedded derivative liabilities are reassessed using the binomial lattice valuation model on a quarterly basis.
A reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):
|
|
|
Warrant Liabilities |
|
|
Balance – December 31, 2021 |
|
|
$ |
|
|
April 2022 Public Offering warrant issuance |
|
|
|
|
|
Loan Agreement warrants |
|
|
|
( |
) |
Gain adjustment to fair value |
|
|
|
( |
) |
Balance – September 30, 2022 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability |
|
|
Balance – December 31, 2021 |
|
|
$ |
|
|
Gain adjustment to fair value |
|
|
|
( |
) |
Balance – September 30, 2022 |
|
|
$ |
|
|
12. Revenue
Product Revenue, Net
Net product revenue was $
The following table summarizes activity in each of the Company’s product revenue provision and allowance categories as of September 30, 2022 (in thousands):
|
|
Discounts and Chargebacks (1) |
|
|
Product Returns (2) |
|
|
Rebates and Incentives (3) |
|
|
Total |
|
||||
Balance as of December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision related to current period revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Changes in estimate related to prior period revenue |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Credit/payments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1) |
Discounts and chargebacks include fees for wholesaler fees, prompt pay and other discounts, and chargebacks. Discounts and chargebacks are deducted from gross revenue at the time revenues are recognized and are included as a reduction in accounts receivable or as an accrued expense based on their nature on the Company’s unaudited condensed consolidated balance sheet. |
(2) |
Provisions for product returns are deducted from gross revenues at the time revenues are recognized and are included in accrued expenses on the Company’s unaudited condensed consolidated balance sheet. |
(3) |
Rebates and incentives include rebates and co-pay program incentives. Provisions for rebates and incentives are deducted from gross revenues at the time revenues are recognized and are included in accrued expenses on the Company’s unaudited condensed consolidated balance sheets. |
License Agreement Revenue
In February 2021, the Company entered into an Exclusive License and Collaboration Agreement (the “Agreement”) with Hansoh (Shanghai) Health Technology Co., Ltd., and Jiangsu Hansoh Pharmaceutical Group Company Limited (collectively,
17
“Hansoh”), pursuant to which the Company granted to Hansoh an exclusive license to research, develop and commercialize ibrexafungerp in the Greater China region, including mainland China, Hong Kong, Macau, and Taiwan (the “Territory”). The Company also granted to Hansoh a non-exclusive license to manufacture ibrexafungerp solely for development and commercialization in the Territory. For the three and nine months ended September 30, 2022, there was no license agreement revenue recognized associated with the Agreement given the variable consideration was fully constrained as of September 30, 2022. For the nine months ended September 30, 2021, the Company recognized license agreement revenue of $
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Operating results for the three and nine months ended September 30, 2022, are not necessarily indicative of results that may occur in future interim periods or future fiscal years. Some of the statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to our management and involve significant elements of subjective judgment and analysis. Words such as “expects,” “will,” “anticipate,” “target,” “goal,” “intend,” “plan,” “seek,” “estimate,” “potential,” “should,” “could,” variations of such words, and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2022, and in Part II, Item 1A of this Quarterly Report on Form 10-Q. These and many other factors could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this Quarterly Report on Form 10-Q. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements.
Overview
SCYNEXIS, Inc. is pioneering innovative medicines to overcome and prevent difficult-to-treat and drug-resistant infections. We are developing our lead product candidate, ibrexafungerp, as a broad-spectrum, intravenous (IV)/oral agent for severe, hospital-based indications. In June 2021, the U.S. Food and Drug Administration (FDA) approved BREXAFEMME (ibrexafungerp tablets) for treatment of patients with vulvovaginal candidiasis (VVC), also known as vaginal yeast infection. In October 2022, we announced that we are actively pursuing a U.S. commercialization partner to out-license BREXAFEMME in order to refocus our resources on the clinical development of ibrexafungerp for severe, hospital-based indications. As a result, we have begun to wind down our promotional activities associated with BREXAFEMME, while keeping BREXAFEMME on the market and available to patients.
Ibrexafungerp, the first representative of a novel class of antifungal agents called triterpenoids, is a structurally distinct glucan synthase inhibitor and has shown in vitro and in vivo activity against a broad range of human fungal pathogens such as Candida and Aspergillus genera, including multidrug-resistant strains, as well as Pneumocystis, Coccidioides, Histoplasma and Blastomyces genera. Candida and Aspergillus genera are the fungi responsible for approximately 85% of all invasive fungal infections in the United States (U.S.) and Europe. To date, we have characterized the antifungal activity, pharmacokinetics, and safety profile of the oral and IV formulations of ibrexafungerp in multiple in vitro, in vivo, and clinical studies. The FDA has granted Qualified Infectious Disease Product (QIDP) and Fast Track designations to ibrexafungerp for the indications of VVC (including the prevention of recurrent VVC), invasive candidiasis (IC) (including candidemia), and invasive aspergillosis (IA), and has granted Orphan Drug designations for the IC and IA indications. The European Medicines Agency has granted Orphan Medicinal Product designation to ibrexafungerp for IC. These designations may provide us with additional market exclusivity and expedited regulatory paths.
Corporate Strategy Update
In October 2022, we announced a new corporate strategic direction by refocusing our resources on the clinical development of ibrexafungerp for severe, hospital-based indications with both the oral and liposomal IV formulations, as multiple ongoing Phase 3 studies are progressing for a potential first approval in hospital indications in 2024 and a Phase 2 study of the IV formulation is planned for 2023. We intend to out-license BREXAFEMME® (ibrexafungerp tablets) for VVC and we are actively pursuing a U.S. commercialization partner. BREXAFEMME has seen continued growth in prescriptions and expansion of access, including recent new coverage with an additional national pharmacy benefit manager for an additional 21 million commercially insured lives. Additionally, we will conclude the partnership with our contracted commercial sales partner, Amplity Health (Amplity), which we expect to conclude on November 30, 2022, and we will undertake a workforce reduction.
In October 2022, Dr. Marco Taglietti informed us that that he plans to retire and will leave his position as President and Chief Executive Officer, and will step down from the Board of Directors, on December 31, 2022. David Angulo, M.D., who has served as Chief Medical Officer for the past seven years, will become President and Chief Executive Officer and join the Board of Directors, effective January 1, 2023. Additionally, Ivor Macleod joined as Chief Financial Officer on October 24, 2022. Mr. Macleod has more than thirty years of experience in the life sciences industry, including most recently as Chief
19
Financial Officer of Athersys, Inc. The role of Chief Commercial Officer will be eliminated, and Christine Coyne, who has served in this leadership role since May 2021, will transition from us to pursue other opportunities.
BREXAFEMME Update
In June 2021, the FDA approved BREXAFEMME for use in women with VVC. This approval was based on positive results from two Phase 3, randomized, double-blind, placebo-controlled, multi-center studies (VANISH-303 and VANISH-306), in which oral ibrexafungerp demonstrated statistically superior efficacy compared to placebo and a favorable tolerability profile in women with VVC. The FDA granted BREXAFEMME five years of exclusivity extension under the Generating Antibiotic Incentives Now (GAIN) Act, which will be added to any other applicable exclusivity periods, such as the five years of new chemical entity (NCE) exclusivity, for a combined ten-year period of regulatory exclusivity. BREXAFEMME also is protected by multiple patents, including a composition-of-matter patent covering the ibrexafungerp molecule. With patent term extension, this patent is expected to expire in 2035, providing an expected 13 years of protection from generic competitors in the U.S. We intend to out-license BREXAFEMME® (ibrexafungerp tablets) for VVC and we are actively pursuing a U.S. commercialization partner.
Treatments for VVC have historically included several topical azole antifungals and oral fluconazole. Approximately 80% of VVC sufferers will have more than one yeast infection and over a third of women may have six yeast infections or more in a lifetime. There are over 17 million prescriptions written for VVC in the U.S. annually, all of which belonged to a single drug class, the azoles, before the approval of BREXAFEMME. BREXAFEMME has seen continued growth in prescriptions and expansion of access, including recent additional coverage with a national pharmacy benefit manager for an additional 21 million commercially insured lives bringing total coverage to 130 million, or 70% of commercially insured lives. According to IQVIA data, there were approximately 5,785 prescriptions for BREXAFEMME written in the third quarter of 2022, an increase of 13% over the second quarter of 2022. BREXAFEMME was prescribed by approximately 2,500 individual healthcare professionals in the third quarter of 2022, an increase of 11% over the second quarter of 2022. We anticipate FDA approval for a second indication in 2022 for prevention of recurrent VVC, with the potential for peak U.S. sales combined for the treatment of VVC and recurrent VVC estimated over $400 million.
Ibrexafungerp Update
The CANDLE study, a Phase 3, multi-center, randomized, double-blind, placebo-controlled trial designed to evaluate the efficacy and safety of oral ibrexafungerp for the prevention of recurrent VVC, defined as three or more infections in a 12-month period, was completed in April 2022. In August 2022, we announced that the FDA has accepted our submission of a supplemental New Drug Application (sNDA) to expand the label of BREXAFEMME (ibrexafungerp tablets) to include the prevention of RVVC. The FDA granted the submission Priority Review and assigned the Prescription Drug User Fee Act (PDUFA) target decision date as November 30, 2022. If approved for this second indication, BREXAFEMME, an oral non-azole therapy, would be the first and only product approved in the U.S. for both the treatment of VVC and the prevention of recurrent VVC.
In the second quarter of 2022, enrollment began in a new Phase 3b, open-label, multicenter study (VANQUISH) to evaluate the efficacy, safety and tolerability of oral ibrexafungerp as a treatment for complicated VVC in patients who have failed treatment with fluconazole, based on mycological and clinical outcomes. The VANQUISH study will enroll approximately 150 complicated VVC patients who will receive 600 mg of oral ibrexafungerp for one, three or seven consecutive days determined by their underlying complicating condition, including immunocompromised state. Complicated patients include patients with recurrent VVC, those with VVC caused by non-albicans Candida species and those with diabetes, immunocompromising conditions (e.g., HIV), or immunosuppressive therapy (e.g., corticosteroids). The VANQUISH study will be conducted in approximately 25 centers in the U.S. and we are targeting to have data from this study in the first half of 2024.
Enrollment is continuing in our prospective, randomized, double-blind, global Phase 3 study to evaluate the efficacy, safety and tolerability of oral ibrexafungerp as a step-down therapy for patients with IC including candidemia following IV echinocandin therapy in the hospital compared to currently available therapies (the MARIO study). Eligible patients with IC will receive treatment with IV echinocandin and will then be switched to either oral ibrexafungerp or a standard of care option, either oral fluconazole or best available therapy (BAT) for subjects with infections caused by fluconazole non-susceptible strains, once step-down criteria are met. Approximately 220 patients will be enrolled and randomized in the study, and we expect topline results in the first half of 2024 and a potential approval by the end of 2024.
The primary objective of the study is to determine whether treatment of IC with IV echinocandins followed by oral ibrexafungerp is as effective as treatment with IV echinocandins followed by oral fluconazole (or BAT), the current standard of care. The primary end point of the study will be all-cause mortality at 30 days after initiation of antifungal therapy.
20
Approximately 35,000 cases of IC in the U.S. per year are caused by the Candida isolates that are resistant to azoles, a population for which ibrexafungerp could provide a much-needed oral alternative.
We completed our Phase 1 randomized, double-blind, placebo-controlled single and multiple ascending dose study evaluating the safety, tolerability, and pharmacokinetics of the liposomal IV formulation of ibrexafungerp in 64 healthy subjects with treatment durations of up to seven days. The liposomal IV formulation of ibrexafungerp was designed to optimize tolerability and address dose-limiting infusion site irritation adverse events observed with previous formulations. The liposomal IV formulation of ibrexafungerp was generally well tolerated with no serious adverse events reported. The most common adverse events were mostly mild (few moderate) reactions at the infusion site. The dosing was successfully progressed until the target exposure was achieved (i.e., exposure associated with efficacy from animal models). We are planning to begin a Phase 2 study of the liposomal IV formulation in 2023.
We achieved a target enrollment of 200 patients in our Phase 3 FURI study investigating the potential of ibrexafungerp as a treatment for fungal infections that are refractory or intolerant to other antifungals, including infections caused by Candida auris (C. auris), and anticipate study completion activities in the first half of 2023 with a Data Review Committee review and topline data in early 2024. We are also on track with our Phase 3 CARES study which will follow similar completion and reporting timing to the Phase 3 FURI study and we expect enrollment for the Phase 3 CARES study to be completed by the end of 2022. The data from the MARIO study along with data from FURI and CARES studies are intended to be supportive of an NDA submission in 2024 with an anticipated first approval for an indication in the hospital setting later in 2024.
Enrollment is ongoing in our Phase 2 SCYNERGIA study for patients with invasive aspergillosis and will continue in 2022 to enable investigators impacted by the COVID-19 pandemic additional time to secure patients for this important trial. We anticipate the completion of enrollment by the end of 2022, although the number of patients may be smaller than initially projected.
Liquidity
We have operated as a public entity since we completed our initial public offering (IPO) of our common stock in May 2014. We also completed a follow-on public offering of our common stock in April 2015 and public offerings of our common stock and warrants in June 2016, March 2018, December 2019, December 2020, and April 2022. We had received an aggregate of $295.1 million in net proceeds from the issuance of our common stock and warrants in these seven offerings. Our principal source of liquidity is cash and cash equivalents and short-term investments, which totaled $96.1 million as of September 30, 2022, and availability to issue up to $46.2 million of our common stock under our at-the-market facility (ATM) with Cantor Fitzgerald & Co. (Cantor) and Ladenburg Thalmann & Co. Inc. (Ladenburg). We have received $35.0 million under our Term Loan and could potentially be eligible to receive up to an additional $25.0 million, subject to certain terms and conditions. See “Liquidity and Capital Resources” below for amounts sold under the ATM with Cantor and Ladenburg, and the amounts sold under our common stock purchase agreement with Aspire Capital which expired in October 2022.
We have incurred annual net losses since our inception, including the year ended December 31, 2021, and net losses in the three and nine months ended September 30, 2022. As of September 30, 2022, our accumulated deficit was $407.9 million. We anticipate that we will continue to incur losses for at least the next several years. We expect we will continue to incur significant research and development expense as we continue to execute our research and drug development strategy. Consistent with our operating plan, we also expect that we will continue to incur significant selling, general and administrative expenses to support our public reporting company operations and ongoing operations, but that our selling, general and administrative expenses will decrease as we begin to wind down the promotional activities associated with BREXAFEMME for the VVC indication. As a result, we will need additional capital to fund our operations, which we may obtain through one or more of equity offerings, debt financings, other non-dilutive third-party funding, strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our effective shelf registration statements, including under our ATM.
Collaborations and Licensing Agreements
We are party to a number of licensing and collaboration agreements with partners in human health, including: (1) Merck, a pharmaceutical company, under which we exclusively licensed the rights to ibrexafungerp in the field of human health, and agreed to pay Merck milestones upon the occurrence of specified events as well as tiered royalties based on worldwide sales of ibrexafungerp when and if it is approved (in 2014, Merck assigned to us the patents related to ibrexafungerp that it had exclusively licensed to us and, as contemplated by the agreement, we will continue to pay milestones and royalties); (2) Hansoh, a pharmaceutical company, which we exclusively provide a license from us to research, develop and commercialize ibrexafungerp in the Greater China region, including mainland China, Hong Kong, Macau, and Taiwan, under which we are entitled to receive development and commercial milestones and royalties (3) R-Pharm, CJSC, or "R-Pharm," a leading supplier of hospital drugs in Russia, granting it exclusive rights in the field of human health to develop and commercialize
21
ibrexafungerp in Russia and several non-core markets, under which we are entitled to receive potential milestones and royalties and reimbursement for certain development costs incurred by us (this agreement is not material to our unaudited condensed consolidated balance sheets, statements of operations, or statements of cash flows); (4) Waterstone, an international pharmaceutical business, granting Waterstone exclusive worldwide rights to development and commercialization of SCY-635 for the treatment of viral diseases in humans, under which we are entitled to receive potential milestones and royalties; and (5) Cypralis Limited, or "Cypralis," a life sciences company, transferring to it certain cyclophilin inhibitor assets of ours, under which we are eligible to receive milestone payments upon the successful progression of certain Cypralis clinical candidates into later stage clinical studies and royalties payable upon product commercialization.
Components of Operating Results
Revenue
Revenue primarily consists of a non-refundable upfront payment received under our license agreement with Hansoh and product sales of BREXAFEMME.
Cost of Product Revenue
Cost of product revenue consists primarily of distribution, freight expenses, royalties due to Merck, and other manufacturing costs associated with BREXAFEMME. Prior to the regulatory approval of BREXAFEMME on June 1, 2021, we expensed as research and development the costs associated with the third-party manufacture of BREXAFEMME.
Research and Development Expense
Research and development expense consists of expenses incurred while performing research and development activities to discover, develop, or improve potential product candidates we seek to develop. This includes conducting preclinical studies and clinical trials, manufacturing and other development efforts, and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Our research and development expense primarily consists of:
Ibrexafungerp was the only key research and development project during the periods presented. We expect to continue to incur significant research and development expense for the foreseeable future as we continue our effort to develop ibrexafungerp, and to potentially develop our other product candidates, subject to the availability of additional funding.
The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of any product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates.
Selling, General and Administrative Expense
Selling, general and administrative expense consists primarily of salaries and personnel-related costs, including employee benefits and any stock-based compensation. This includes personnel in executive, finance, human resources, business development, medical affairs, marketing and commercial, and administrative support functions. Other expenses include facility-related costs not otherwise allocated to research and development expense, professional fees for accounting, auditing, tax and legal services, consulting costs for general and administrative purposes, information systems and marketing efforts.
Other Expense (Income)
All of our other income recognized in the three and nine months ended September 30, 2022 and 2021, consists of amortization of debt issuance costs and discount, interest income, interest expense, the warrant liabilities fair value adjustment, the derivative liabilities fair value adjustment, and the loss recognized for the extinguishment of debt.
22
Income Tax Benefit
All of our income tax benefit recognized in the three and nine months ended September 30, 2022 and 2021 consists of an income tax benefit associated with the sale of our NOLs and research and development credits and tax withholding expense associated with the upfront payment received from Hansoh.
Results of Operations for the Three Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021, together with the changes in those items in dollars and percentage (dollars in thousands):
|
|
Three Months Ended September 30, |
|
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Period-to-Period Change |
|
|
|||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product revenue, net |
|
$ |
1,557 |
|
|
$ |
516 |
|
|
$ |
1,041 |
|
|
|
201.7 |
|
% |
License agreement revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
% |
Total revenue |
|
|
1,557 |
|
|
|
516 |
|
|
|
1,041 |
|
|
|
— |
|
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product revenue |
|
|
189 |
|
|
|
145 |
|
|
|
44 |
|
|
|
30.3 |
|
% |
Research and development |
|
|
6,430 |
|
|
|
4,401 |
|
|
|
2,029 |
|
|
|
46.1 |
|
% |
Selling, general and administrative |
|
|
16,739 |
|
|
|
15,411 |
|
|
|
1,328 |
|
|
|
8.6 |
|
% |
Total operating expenses |
|
|
23,358 |
|
|
|
19,957 |
|
|
|
3,401 |
|
|
|
17.0 |
|
% |
Loss from operations |
|
|
(21,801 |
) |
|
|
(19,441 |
) |
|
|
(2,360 |
) |
|
|
12.1 |
|
% |
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs and discount |
|
|
396 |
|
|
|
413 |
|
|
|
(17 |
) |
|
|
(4.1 |
) |
% |
Interest income |
|
|
(531 |
) |
|
|
(8 |
) |
|
|
(523 |
) |
|
|
6,537.5 |
|
% |
Interest expense |
|
|
1,379 |
|
|
|
1,019 |
|
|
|
360 |
|
|
|
35.3 |
|
% |
Warrant liabilities fair value adjustment |
|
|
6,497 |
|
|
|
(18,810 |
) |
|
|
25,307 |
|
|
|
(134.5 |
) |
% |
Derivative liabilities fair value adjustment |
|
|
42 |
|
|
|
(1,400 |
) |
|
|
1,442 |
|
|
|
(103.0 |
) |
% |
Total other expense (income) |
|
|
7,783 |
|
|
|
(18,786 |
) |
|
|
26,569 |
|
|
|
(141.4 |
) |
% |
Loss before taxes |
|
|
(29,584 |
) |
|
|
(655 |
) |
|
|
(28,929 |
) |
|
|
4,416.6 |
|
% |
Income tax benefit |
|
|
— |
|
|
|
(50 |
) |
|
|
50 |
|
|
|
(100.0 |
) |
% |
Net loss |
|
$ |
(29,584 |
) |
|
$ |
(605 |
) |
|
$ |
(28,979 |
) |
|
|
4,789.9 |
|
% |
Revenue. Revenue in the three months ended September 30, 2022 consists solely of product sales of BREXAFEMME, for which we began commercialization in the second half of 2021.
Cost of Product Revenue. Cost of product revenue in the three months ended September 30, 2022 consists primarily of distribution, freight, and royalty costs associated with BREXAFEMME.
Research and Development. For the three months ended September 30, 2022, research and development expenses increased to $6.4 million compared to $4.4 million for the three months ended September 30, 2021. The increase of $2.0 million, or 46%, for the three months ended September 30, 2022, was primarily driven by an increase of $1.0 million in clinical development expense, an increase of $0.5 million in preclinical expense, an increase of $0.2 million in both salary related costs and stock compensation expense, and a net increase of $0.1 million in other research and development expense.
The $1.0 million increase in clinical development expense for the three months ended September 30, 2022, was primarily driven by an increase of $1.1 million in expense associated with the ongoing costs for the MARIO study which was initiated in the fourth quarter of 2021, an increase of $0.6 million in expense associated with the VANQUISH study, offset in part by a $0.7 million decrease in expense associated with the CANDLE Phase 3 study which was substantially complete in the first quarter of 2022. The $0.5 million increase in preclinical expense was primarily associated with the expense recognized for certain preclinical studies associated with the IV liposomal formulation conducted in the current period. The $0.2 million increase in both salary related costs and stock compensation expense is primarily driven by the increase in employees in comparison to the prior period and by the increase in restricted stock unit grants made in the first quarter of 2022, respectively.
Selling, General & Administrative. For the three months ended September 30, 2022, selling, general and administrative expenses increased to $16.7 million from $15.4 million for the three months ended September 30, 2021. The increase of $1.3 million, or 9%, for the three months ended September 30, 2022, was primarily driven by an increase of $0.5 million in professional fees, an increase of $0.3 million increase in commercial related expense due to the costs recognized to support the commercialization of BREXAFEMME, an increase of $0.3 million in stock compensation expense, and a net increase in other selling, general, and administrative expenses of $0.2 million.
23
Amortization of Debt Issuance Costs and Discount. For each of the three months ended September 30, 2022 and 2021, we recognized $0.4 million in amortization of debt issuance costs and discount. The 2022 and 2021 debt issuance costs and discount for our March 2019 convertible notes primarily consisted of an allocated portion of advisory fees and other issuance costs. The 2022 and 2021 debt issuance costs and discount for our Loan and Security Agreement with Hercules Capital, Inc. and Silicon Valley Bank (the Loan Agreement) comprised issuance and commitment costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the Loan Agreement.
Interest Income. For the three months ended September 30, 2022 and 2021, we recognized $0.5 million and $8,000, respectively, in interest income primarily due to the increase in the interest rate on our money market fund.
Interest Expense. For the three months ended September 30, 2022 and 2021, we recognized $1.4 million and $1.0 million in interest expense. The $0.4 million increase in interest expense for the three months ended September 30, 2022, was primarily driven by the increase in the interest rate associated with the Loan Agreement entered into in May 2021.
Warrant Liabilities Fair Value Adjustment. For the three months ended September 30, 2022 and 2021, we recognized a loss of $6.5 million and a gain $18.8 million, respectively, in the fair value adjustment related to the warrant liabilities primarily due to the increase and decrease in our stock price during the periods, respectively.
Derivative Liabilities Fair Value Adjustment. For the three months ended September 30, 2022 and 2021, we recognized a loss of $42,000 and a gain of $1.4 million, respectively, in the fair value adjustment related to the derivative liabilities primarily due to the increase and decrease in our stock price during the respective periods.
Income Tax Benefit. Income tax benefit in the three months ended September 30, 2021 consists of $0.1 million in income tax benefit associated with an upfront payment received from Hansoh.
Results of Operations for the Nine Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021, together with the changes in those items in dollars and percentage (dollars in thousands):
|
|
Nine Months Ended September 30, |
|
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Period-to-Period Change |
|
|
|||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product revenue, net |
|
$ |
3,567 |
|
|
$ |
516 |
|
|
$ |
3,051 |
|
|
|
591.3 |
|
% |
License agreement revenue |
|
|
— |
|
|
|
12,050 |
|
|
|
(12,050 |
) |
|
|
(100.0 |
) |
% |
Total revenue |
|
|
3,567 |
|
|
|
12,566 |
|
|
|
(8,999 |
) |
|
|
(71.6 |
) |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product revenue |
|
|
432 |
|
|
|
145 |
|
|
|
287 |
|
|
|
197.9 |
|
% |
Research and development |
|
|
19,410 |
|
|
|
16,083 |
|
|
|
3,327 |
|
|
|
20.7 |
|
% |
Selling, general and administrative |
|
|
47,001 |
|
|
|
34,879 |
|
|
|
12,122 |
|
|
|
34.8 |
|
% |
Total operating expenses |
|
|
66,843 |
|
|
|
51,107 |
|
|
|
15,736 |
|
|
|
30.8 |
|
% |
Loss from operations |
|
|
(63,276 |
) |
|
|
(38,541 |
) |
|
|
(24,735 |
) |
|
|
64.2 |
|
% |
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
— |
|
|
|
2,725 |
|
|
|
(2,725 |
) |
|
|
(100.0 |
) |
% |
Amortization of debt issuance costs and discount |
|
|
1,194 |
|
|
|
937 |
|
|
|
257 |
|
|
|
27.4 |
|
% |
Interest income |
|
|
(724 |
) |
|
|
(20 |
) |
|
|
(704 |
) |
|
|
3,520.0 |
|
% |
Interest expense |
|
|
3,669 |
|
|
|
1,678 |
|
|
|
1,991 |
|
|
|
118.7 |
|
% |
Warrant liabilities fair value adjustment |
|
|
(13,215 |
) |
|
|
(35,378 |
) |
|
|
22,163 |
|
|
|
(62.6 |
) |
% |
Derivative liabilities fair value adjustment |
|
|
(1,120 |
) |
|
|
(1,772 |
) |
|
|
652 |
|
|
|
(36.8 |
) |
% |
Total other income |
|
|
(10,196 |
) |
|
|
(31,830 |
) |
|
|
21,634 |
|
|
|
(68.0 |
) |
% |
Loss before taxes |
|
|
(53,080 |
) |
|
|
(6,711 |
) |
|
|
(46,369 |
) |
|
|
690.9 |
|
% |
Income tax benefit |
|
|
(4,700 |
) |
|
|
(3,088 |
) |
|
|
(1,612 |
) |
|
|
52.2 |
|
% |
Net loss |
|
$ |
(48,380 |
) |
|
$ |
(3,623 |
) |
|
$ |
(44,757 |
) |
|
|
1,235.4 |
|
% |
Revenue. Revenue in the nine months ended September 30, 2022 consists solely of product sales of BREXAFEMME, for which we began commercialization in the second half of 2021. Revenue in the nine months ended September 30, 2021, consists primarily of a non-refundable upfront payment received under our license agreement with Hansoh.
Cost of Product Revenue. Cost of product revenue in the nine months ended September 30, 2022 consists primarily of distribution, freight, and royalty costs associated with BREXAFEMME.
Research and Development. For the nine months ended September 30, 2022, research and development expenses increased to $19.4 million compared to $16.1 million for the nine months ended September 30, 2021. The increase of $3.3
24
million, or 21%, for the nine months ended September 30, 2022, was primarily driven by an increase of $2.3 million in clinical development expense, an increase of $0.8 million in preclinical expense, an increase of $0.5 million in both salary related costs and stock compensation expense, offset in part by a decrease of $0.7 million in chemistry, manufacturing, and controls (CMC) expense, and a net decrease of $0.1 million in other research and development expense.
The $2.3 million increase in clinical development expense for the nine months ended September 30, 2022, was primarily driven by an increase of $4.0 million in expense associated with the startup and ongoing costs for the MARIO study which was initiated in the fourth quarter of 2021, and an increase of $0.7 million in expense associated with the VANQUISH study, offset in part by a $2.0 million decrease in expense associated with the CANDLE Phase 3 study which was substantially complete in the first quarter of 2022. The $0.8 million increase in preclinical expense was primarily associated with the expense recognized for pharmacokinetic modeling studies and certain preclinical studies associated with the IV liposomal formulation conducted in the period. The $0.7 million decrease in CMC for the nine months ended September 30, 2022, was primarily driven by a $0.7 million decrease in expense for third-party drug product manufacturing in the current period.
Selling, General & Administrative. For the nine months ended September 30, 2022, selling, general and administrative expenses increased to $47.0 million from $34.9 million for the nine months ended September 30, 2021. The increase of $12.1 million, or 35%, for the nine months ended September 30, 2022, was primarily driven by a $9.2 million increase in commercial related expense, an increase of $1.8 million in salary and payroll related costs, and an increase of $1.1 million in professional fees, all primarily due to the costs recognized to support the commercialization of BREXAFEMME, an increase of $1.0 million in stock compensation expense, and an increase in other selling, general, and administrative expense of $0.5 million, offset in part by a decrease of $0.6 million in medical affairs expense and a $0.8 million decrease in business development expense due to the Hansoh license agreement entered into in 2021.
Loss on Extinguishment of Debt. For the nine months ended September 30, 2021, we recognized $2.7 million in loss on extinguishment of debt associated with the January 2021 conversation of our remaining April 2020 convertible notes.
Amortization of Debt Issuance Costs and Discount. For the nine months ended September 30, 2022 and 2021, we recognized $1.2 million and $0.9 million in amortization of debt issuance costs and discount. The 2022 and 2021 debt issuance costs and discount for our March 2019 convertible notes primarily consisted of an allocated portion of advisory fees and other issuance costs. The 2022 and 2021 debt issuance costs and discount for the Loan Agreement comprised issuance and commitment costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the Loan Agreement.
Interest Income. For the nine months ended September 30, 2022 and 2021, we recognized $0.7 million and $20,000, respectively, in interest income primarily due to the increase in the interest rate on our money market fund.
Interest Expense. For the nine months ended September 30, 2022 and 2021, we recognized $3.7 million and $1.7 million in interest expense. The $2.0 million increase in interest expense for the nine months ended September 30, 2022, was primarily driven by the increase in the interest rate associated with the Loan Agreement entered into in May 2021.
Warrant Liabilities Fair Value Adjustment. For the nine months ended September 30, 2022 and 2021, we recognized gains of $13.2 million and $35.4 million, respectively, in the fair value adjustment related to the warrant liabilities primarily due to the decrease in our stock price during the period.
Derivative Liabilities Fair Value Adjustment. For the nine months ended September 30, 2022 and 2021, we recognized gains of $1.1 million and $1.8 million, respectively, in the fair value adjustment related to the derivative liabilities primarily due to the decrease in our stock price during the period.
Income Tax Benefit. For the nine months ended September 30, 2022, we recognized a $4.7 million income tax benefit associated with the sale of a portion of our NOLs and research and development credits. For the nine months ended September 30, 2021, we recognized a $4.1 million income tax benefit associated with the sale of a portion of our NOLs and research and development credits and $1.1 million of tax withholding expense primarily associated with the upfront payment received from Hansoh.
Liquidity and Capital Resources
Sources of Liquidity
Through September 30, 2022, we have primarily funded our operations from net proceeds from equity and debt issuances and through revenue from development services. As of September 30, 2022, we had cash and cash equivalents and short-term investments of $96.1 million, compared to cash and cash equivalents and short-term investments of $104.5 million as of December 31, 2021. The decrease in our cash and cash equivalents and short-term investments was primarily due to the selling, general and administrative expenses in part to support the commercial launch of BREXAFEMME and the continued
25
development costs associated with ibrexafungerp, offset in part due to the $41.8 million in net proceeds we raised from our public offering of our common stock and warrants in April 2022. We have incurred annual net losses since our inception, and we incurred a net loss during the three and nine months ended September 30, 2022. As of September 30, 2022, our accumulated deficit was $407.9 million.
We expect that we will continue to incur losses for at least the foreseeable future. Consistent with our operating plan, we expect to incur significant research and development expenses and selling, general and administrative expenses; however, we expect our selling, general, and administrative expenses will decrease as we begin to wind down the promotional activities associated with BREXAFEMME for the VVC indication. As a result of our continued significant expenses, we may need additional capital to fund our operations, which we may obtain through one or more of equity offerings, debt financings, or other non-dilutive third-party funding, strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our shelf registrations, including the related at-the-market facility entered into on May 17, 2021 with Cantor and Ladenburg. During the nine months ended September 30, 2022, we sold 137,610 and 425,000 shares of our common stock, and received net proceeds of $0.7 million and $1.6 million, under our at-the-market facility and common stock purchase agreement with Aspire Capital, respectively. Our common stock purchase agreement with Aspire Capital expired in October 2022.
Cash Flows
The following table sets forth the significant sources and uses of cash for the nine months ended September 30, 2022 and 2021 (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash, cash equivalents, and restricted cash, January 1 |
|
$ |
104,702 |
|
|
$ |
93,314 |
|
Net cash used in operating activities |
|
|
(57,077 |
) |
|
|
(29,040 |
) |
Net cash used in investing activities |
|
|
(27,389 |
) |
|
|
(589 |
) |
Net cash provided by financing activities |
|
|
48,602 |
|
|
|
36,642 |
|
Net (decrease) increase in cash, cash equivalents, and restricted cash |
|
|
(35,864 |
) |
|
|
7,013 |
|
Cash, cash equivalents, and restricted cash, September 30 |
|
$ |
68,838 |
|
|
$ |
100,327 |
|
Operating Activities
The $28.0 million increase in net cash used in operating activities for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, was primarily due to the increase in selling, general and administrative expenses to support the commercial launch of BREXAFEMME and the continued development costs associated with ibrexafungerp. In the prior comparable period, we received a cash receipt of $10.0 million from Hansoh, as consideration for the licenses under our agreement with Hansoh in February 2021, that offset selling, general and administrative expenses to support the commercial launch of BREXAFEMME and the continued development costs associated with ibrexafungerp and ongoing operations. Consistent with our operating plan, we expect to incur significant research and development expenses and we expect our selling, general and administrative expenses to decrease as we begin to wind down the promotional activities associated with BREXAFEMME for the VVC indication.
Net cash used in operating activities of $57.1 million for the nine months ended September 30, 2022, primarily consisted of the $48.4 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $13.2 million, the gain on change in fair value of the derivative liabilities of $1.1 million, stock-based compensation expense of $3.2 million, and amortization of debt issuance costs and discount of $1.2 million, partially offset by a net favorable change in operating assets and liabilities of $0.7 million. The net favorable change in operating assets and liabilities was due to an increase in accounts payable, accrued expenses, other liabilities and other of $2.4 million partially offset by an increase in prepaid expenses, accounts receivable, inventory, and other of $1.7 million. The $2.4 million increase in accounts payable, accrued expenses, other liabilities, and other was primarily due to the increase of $2.3 million in other liabilities associated with the deferred fees due to Amplity. The increase in prepaid expenses, accounts receivable, inventory, and other of $1.7 million was primarily due to the increase in accounts receivable of $1.6 million in accounts receivable.
Net cash used in operating activities of $29.0 million for the nine months ended September 30, 2021, primarily consisted of the $3.6 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $35.4 million, the gain on change in fair value of the derivative liabilities of $1.8 million, stock-based compensation expense of $1.5 million, amortization of debt issuance costs and discount of $0.9 million, and the loss on extinguishment of debt of $2.7 million, plus a net favorable change in operating assets and liabilities of $6.3 million. The net favorable change in operating assets and liabilities was due to an increase in accounts payable, accrued expenses, and other of $5.0 million and a decrease in prepaid expenses, deferred costs, and other of $1.3 million. The $5.0 million increase in accounts payable, accrued expenses, and other was primarily due to the increase in accounts payable of $2.3 million, an increase in accrued expenses of $0.6
26
million, and an increase of $2.1 million in other liabilities associated with the long term deferred fees due to Amplity, The decrease in prepaid expense, deferred cost, and other of $1.3 million was primarily due to the collection of a $2.9 million receivable in February 2021 and a $0.7 million decrease in prepaid research and development services, primarily offset by an increase of $0.6 million in inventory and $0.4 million in prepaid insurance.
Investing Activities
Net cash used in investing activities of $27.4 million for the nine months ended September 30, 2022, consisted of purchases of short-term investments.
Net cash used in investing activities of $0.6 million for the nine months ended September 30, 2021, consisted solely of purchases of intangible assets.
Financing Activities
Net cash provided by financing activities of $48.6 million for the nine months ended September 30, 2022, consisted primarily of the gross proceeds of $45.0 million from the April 2022 Public Offering, the $2.2 million in gross proceeds from common stock issued under our at-the-market and common stock purchase agreements, and the $5.0 million received from the Loan Agreement, offset by payments of offering costs and underwriting discounts and commissions of $3.6 million.
Net cash provided by financing activities of $36.6 million for the nine months ended September 30, 2021, consisted primarily of the net proceeds of $28.7 million received from the Loan Agreement and $8.0 million in proceeds from common stock issued.
Future Funding Requirements
We have generated limited revenue from the product sales for BREXAFEMME and we expect our product sales for BREXAFEMME to decrease as a result of the wind down of our promotional activities. We expect to incur expenses in connection with our efforts to further development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, product candidates. We anticipate that we will need substantial additional funding in connection with our continuing future operations.
Based upon our operating plan, we believe that our existing cash and cash equivalents and short-term investments will enable us to fund our operating requirements into the second quarter of 2024. However, we are continually evaluating our operating plan and assessing the optimal cash utilization for our ibrexafungerp development strategy. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses necessary to complete the development of product candidates.
Our future capital requirements will depend on many factors, including:
27
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of net proceeds from equity offerings, debt financings or other non-dilutive third-party funding, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities as we did in April 2015, June 2016, March 2018, December 2019, December 2020, and April 2022, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through sales of assets, other third-party funding, strategic alliances and licensing or collaboration arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
Significant Estimates and Judgements
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our critical estimates and judgements are described within Item 7 to our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
This item is not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
As of September 30, 2022, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of September 30, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2022, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1A. Risk Factors.
Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.
28
Item 6. Exhibits.
Exhibit Number |
|
Description of Document |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
|
|
|
3.4 |
|
Certificate of Amendment of Amended and Restated Certificate of Incorporation of SCYNEXIS, Inc. |
|
|
|
3.5 |
|
|
|
|
|
4.1 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
10.3 |
|
|
|
|
|
10.4 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Schema Linkbase Document |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Calculation Linkbase Document |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Definition Linkbase Document |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Labels Linkbase Document |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Presentation Linkbase Document |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SCYNEXIS, INC. |
||
|
|
|
By: |
|
/s/ Marco Taglietti, M.D. |
|
|
Marco Taglietti, M.D. |
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
Date: |
|
November 8, 2022 |
|
|
|
By: |
|
/s/ Ivor Macleod |
|
|
Ivor Macleod |
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
|
|
|
Date: |
|
November 8, 2022 |
30