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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period to

Commission File Number 001-36365

 

SCYNEXIS, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

56-2181648

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1 Evertrust Plaza, 13th Floor

Jersey City, New Jersey

 

07302-6548

(Address of principal executive offices)

 

(Zip Code)

 

(201)-884-5485

(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

Common Stock, par value $0.001 per share

SCYX

Nasdaq Global Market

 

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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

 

 

 

 

 

Non-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 May 1, 2023, there were 36,517,442 shares of the registrant’s Common Stock outstanding.

 


 

 


Table of Contents

 

SCYNEXIS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

PART I FINANCIAL INFORMATION

 

1

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

 

1

 

 

Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022

 

2

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022

 

3

 

 

Notes to the Condensed Consolidated Financial Statements (unaudited)

 

4

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

Item 4.

 

Controls and Procedures

 

26

 

 

 

PART II OTHER INFORMATION

 

26

 

 

 

 

 

Item 1A.

 

Risk Factors

 

26

Item 6.

 

Exhibits

 

27

 

 

 

Signatures

 

28

 

 


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

March 31, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,913

 

 

$

45,814

 

Short-term investments

 

 

27,908

 

 

 

27,689

 

Prepaid expenses and other current assets

 

 

1,726

 

 

 

2,503

 

Accounts receivable, net

 

 

2,060

 

 

 

2,101

 

Inventory, net

 

 

1,105

 

 

 

899

 

Restricted cash

 

 

55

 

 

 

55

 

Total current assets

 

 

59,767

 

 

 

79,061

 

Other assets

 

 

7,444

 

 

 

5,511

 

Deferred offering costs

 

 

73

 

 

 

73

 

Restricted cash

 

 

163

 

 

 

163

 

Intangible assets, net

 

 

309

 

 

 

408

 

Operating lease right-of-use asset (See Note 8)

 

 

2,540

 

 

 

2,594

 

Total assets

 

$

70,296

 

 

$

87,810

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,925

 

 

$

5,937

 

Accrued expenses

 

 

4,775

 

 

 

5,628

 

Other liabilities, current portion (See Note 7)

 

 

 

 

 

5,771

 

Operating lease liability, current portion (See Note 8)

 

 

296

 

 

 

282

 

Loan payable, current portion

 

 

34,648

 

 

 

 

Total current liabilities

 

 

45,644

 

 

 

17,618

 

Warrant liabilities

 

 

40,317

 

 

 

18,644

 

Convertible debt and derivative liability (See Note 7)

 

 

11,407

 

 

 

11,001

 

Loan payable

 

 

 

 

 

34,393

 

Operating lease liability (See Note 8)

 

 

2,842

 

 

 

2,921

 

Total liabilities

 

 

100,210

 

 

 

84,577

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, authorized 5,000,000 shares as of March 31, 2023 and December 31, 2022; 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value, 150,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 33,327,627 and 32,682,342 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

 

 

36

 

 

 

36

 

Additional paid-in capital

 

 

426,214

 

 

 

425,485

 

Accumulated deficit

 

 

(456,164

)

 

 

(422,288

)

Total stockholders’ (deficit) equity

 

 

(29,914

)

 

 

3,233

 

Total liabilities and stockholders’ equity

 

$

70,296

 

 

$

87,810

 

The accompanying notes are an integral part of the financial statements.

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SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

Product revenue, net

 

$

1,130

 

 

$

687

 

Operating expenses:

 

 

 

 

 

 

Cost of product revenue

 

 

137

 

 

 

99

 

Research and development

 

 

6,835

 

 

 

5,735

 

Selling, general and administrative

 

 

4,840

 

 

 

14,591

 

Total operating expenses

 

 

11,812

 

 

 

20,425

 

Loss from operations

 

 

(10,682

)

 

 

(19,738

)

Other expense (income):

 

 

 

 

 

 

Amortization of debt issuance costs and discount

 

 

255

 

 

 

390

 

Interest income

 

 

(587

)

 

 

(13

)

Interest expense

 

 

1,447

 

 

 

1,059

 

Other income

 

 

 

 

 

(13

)

Warrant liabilities fair value adjustment

 

 

21,673

 

 

 

(10,030

)

Derivative liabilities fair value adjustment

 

 

406

 

 

 

(980

)

Total other expense (income)

 

 

23,194

 

 

 

(9,587

)

Loss before taxes

 

 

(33,876

)

 

 

(10,151

)

Income tax benefit

 

 

 

 

 

(4,700

)

Net loss

 

$

(33,876

)

 

$

(5,451

)

Net loss per share attributable to common stockholders – basic

 

 

 

 

 

 

Net loss per share – basic

 

$

(0.71

)

 

$

(0.17

)

Net loss per share attributable to common stockholders – diluted

 

 

 

 

 

 

Net loss per share – diluted

 

$

(0.71

)

 

$

(0.18

)

Weighted average common shares outstanding – basic and diluted

 

 

 

 

 

 

Basic

 

 

47,757,246

 

 

 

32,051,228

 

Diluted

 

 

47,757,246

 

 

 

33,189,428

 

The accompanying notes are an integral part of the financial statements.

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SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(33,876

)

 

$

(5,451

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

151

 

 

 

155

 

Stock-based compensation expense

 

 

707

 

 

 

922

 

Accretion of short-term investment discount

 

 

(219

)

 

 

 

Amortization of debt issuance costs and discount

 

 

255

 

 

 

390

 

Change in fair value of warrant liabilities

 

 

21,673

 

 

 

(10,030

)

Change in fair value of derivative liabilities

 

 

406

 

 

 

(980

)

Noncash operating lease expense for right-of-use asset

 

 

54

 

 

 

52

 

Write off of deferred asset for commitment fees

 

 

514

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses, accounts receivable, inventory, and other

 

 

(1,887

)

 

 

(1,429

)

Accounts payable, accrued expenses, other liabilities, and other

 

 

(6,701

)

 

 

383

 

Net cash used in operating activities

 

 

(18,923

)

 

 

(15,988

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of intangible assets

 

 

 

 

 

(9

)

Net cash used in investing activities

 

 

 

 

 

(9

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from common stock issued

 

 

 

 

 

2,164

 

Payments of offering costs and underwriting discounts and commissions

 

 

 

 

 

(451

)

Proceeds from loan payable

 

 

 

 

 

5,000

 

Proceeds from employee stock purchase plan issuances

 

 

4

 

 

 

10

 

Repurchase of shares to satisfy tax withholdings

 

 

18

 

 

 

 

Net cash provided by financing activities

 

 

22

 

 

 

6,723

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(18,901

)

 

 

(9,274

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

46,032

 

 

 

104,702

 

Cash, cash equivalents, and restricted cash at end of period

 

$

27,131

 

 

$

95,428

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

1,658

 

 

$

1,099

 

Cash received for interest

 

$

373

 

 

$

12

 

Noncash financing and investing activities:

 

 

 

 

 

 

Deferred offering and issuance costs included in accounts payable and accrued expenses

 

$

 

 

$

26

 

Deferred offering costs reclassified to additional paid-in capital

 

$

 

 

$

27

 

Reclass of warrant liability to additional paid-in capital

 

$

 

 

$

71

 

Reclass of deferred asset associated with issuance of loan payable to debt discount

 

$

 

 

$

206

 

 

The accompanying notes are an integral part of the financial statements.

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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. In December 2022, the Company announced that the FDA approved a second indication for BREXAFEMME for the reduction in the incidence of recurrent vulvovaginal candidiasis ("RVVC").

In March 2023, the Company entered into a license agreement (the "License Agreement") with GlaxoSmithKline Intellectual Property (No. 3) Limited ("GSK"), subject to customary closing conditions, in which the Company granted GSK an exclusive (even as to the Company and its affiliates), royalty-bearing, sublicensable license for the development and commercialization of ibrexafungerp, including the approved product BREXAFEMME, for all indications, in all countries other than Greater China and certain other countries already licensed to third parties (See Note 12). The parties expect the transactions contemplated by the License Agreement to close in the second quarter of 2023.

The Company is party to a Loan and Security Agreement, dated May 13, 2021, with Hercules Capital, Inc. ("Hercules Capital") and Silicon Valley Bridge Bank, N.A. (now a division of First Citizens Bank, “SVB”) (the "Loan Agreement"), pursuant to which Hercules Capital, SVB and each of the other lenders from time-to-time party to the Loan Agreement (collectively, the “Lenders”) loaned to the Company $35.0 million as of March 31, 2023.

In connection with the entering into of the License Agreement, the Company entered into a First Amendment and Consent to Loan and Security Agreement with the Lenders pursuant to the Lenders consented to the Company entering into the License Agreement and the Company agreed to pay to the Lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement, (ii) the prepayment fee payable under the Loan Agreement (approximately $0.3 million), (iii) the final payment payable under the Loan Agreement (approximately $1.4 million), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by the Company will become due upon the earliest of (A) one business day following receipt by the Company of the $90 million upfront payment payable to the Company under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement.

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.

Liquidity and Going Concern

The Company has funded its operations primarily through a combination of net proceeds from equity offerings, debt financings, and other non-dilutive third-party funding (e.g., grants), strategic alliances and licensing arrangements. To date, the Company has generated minimal revenue from product sales. The Company does not know if or when the Company will be able to generate significant revenue from product sales. In addition, the Company expects to incur expenses in connection with the Company's ongoing development activities, particularly as the Company continues the research, development and clinical trials of, and seek regulatory approval for, its product candidates. The Company anticipates that it will need substantial additional funding in connection with its continuing future operations.

As of the date the accompanying unaudited condensed consolidated financial statements were issued (the “issuance date”), management evaluated the significance of the following negative financial conditions in accordance with ASC 205-40, Going Concern:

The Company has incurred recurring losses since its inception, including net losses of $33.9 million for the three months ended March 31, 2023, and $62.8 million for the year ended December 31, 2022. In addition, as of March 31, 2023, the Company had an accumulated deficit of $456.2 million. The Company expects to continue to generate operating losses for the foreseeable future.

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As of March 31, 2023, the Company had approximately $54.8 million of unrestricted cash, cash equivalents and short-term investments available to fund the Company’s operations.
The Company expects to incur substantial expenditures to fund its operations and ongoing development activities for the foreseeable future. In order to fund its operations and ongoing development activities, the Company will need to secure additional sources of outside capital. As noted above and as further disclosed in Note 12, the Company entered into a License Agreement with GSK in March 2023, in which the Company granted GSK with an exclusive license for the development and commercialization of ibrexafungerp, including the approved product BREXAFEMME. The closing of the License Agreement is subject to the satisfaction of customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and therefore the related cash flows, including the upfront payment of $90.0 million, were not included in the Company’s ASC 205-40 analysis as of the issuance date. Management expects the License Agreement to close during the second quarter of 2023.
In the event the License Agreement does not close, the Company may be unable to meet its obligations as they become due over the next twelve months beyond the issuance date. In that regard, management will be required to seek other strategic alternatives, which may include, raising additional capital through equity offerings, including utilizing our existing facility, debt financings, or other non-dilutive third-party funding. While the Company has a history of successfully raising capital in this manner, management can provide no assurance that additional capital will be secured or on terms that are acceptable to the Company. In the event the Company is unable to secure additional capital, management will be required to seek other strategic alternatives, which may include, among others, delaying expenditures, reducing the scope of its research and development programs, significant changes to its operating plan, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy.
As disclosed in Note 7, the Company is required to maintain compliance with certain covenants prescribed by the Term Loan. The first covenant pertains to a minimum cash requirement whereby the Company must maintain a minimum amount of unrestricted and unencumbered cash in accounts with the lenders at all times that represents at least 50% of the outstanding principal on the Term Loan (the “minimum cash”). In the event the minimum cash is not maintained, the second covenant requires the Company to maintain compliance with a trailing three-month net product revenue threshold (the “revenue covenant”). As of March 31, 2023 and through the issuance date, the Company met the minimum cash requirement. However, management can provide no assurance that the minimum cash will be maintained for at least twelve months beyond the issuance date. If the Company does not meet the minimum cash requirement and, as such, must maintain compliance with the revenue covenant, management does not expect the Company will be able to comply with the revenue covenant for any period over the next twelve months beyond the issuance date. If the Company is required to comply with, but does not maintain compliance with, the revenue covenant, management may seek a waiver from the lender or refinance the outstanding borrowings under the Term Loan with another lender. However, management can provide no assurance a waiver will be granted by the lender or on terms that are acceptable to the Company. Similarly, management can provide no assurance that the Company will be able to refinance the amounts outstanding on the Term Loan or obtain a new loan on terms that are acceptable to the Company. In the event a waiver is not granted, or the Term Loan is not refinanced, the lender may exercise any and all of its rights and remedies provided for under the borrowing agreement which may include, among others, entering into a forbearance agreement, demanding payment, and/or seizing the underlying assets secured by the Term Loan.
Further, as noted above, the Company entered into an amendment to the Loan Agreement in March 2023, which amends the original terms of the Loan Agreement to require that the outstanding principal and accrued and unpaid interest amounts, the prepayment fee and the final payment will become due and payable at the earliest of (A) one business day following receipt by the Company of the upfront payment payable to the Company under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement. While management expects that the License Agreement will close during the second quarter of 2023, if the License Agreement were unable to close or were to close at a later date than originally expected, the amendment to the Loan agreement would require the Company to repay the amounts due under the Loan Agreement potentially prior to the close of the License Agreement.

These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for twelve months following the issuance date. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

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Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. 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 period. Actual results could differ from those estimates. Significant estimates and judgments 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.

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 months ended March 31, 2023, 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 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 31, 2023.

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, 2022, except as described below.

Allowance for Credit Losses

The Company reviews its held-to-maturity short-term investments for credit losses on a collective basis by major security type and in line with the Company's investment policy. As of March 31, 2023, the Company's held-to-maturity short-term investments were in securities that are issued by the U.S. government, are highly rated, and have a history of zero credit losses. The Company reviews the credit quality of its accounts receivables by monitoring the aging of its accounts receivable, the history of write offs for uncollectible accounts, and the credit quality of its significant customers, the current economic environment/macroeconomic trends, supportable forecasts, and other relevant factors. The Company's accounts receivable are with customers that do not have a history of uncollectibility nor a history of significantly aged accounts receivables. As of March 31, 2023, the Company did not recognize a credit loss allowance for its short-term investments or accounts receivable.

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 months ended March 31, 2023 and 2022 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 months ended March 31, 2023 includes the outstanding pre-funded warrants to purchase 11,303,667 and 3,200,000 shares of common stock issued in the April 2022 public offering and December 2020 public offering, respectively. The outstanding pre-funded warrants to purchase 3,200,000 shares of common stock issued in the December 2020 public offering were included in the three months ended March 31, 2022. Diluted net loss per common share for the three months ended March 31, 2023 and 2022 was determined as follows (in thousands, except share and per share amounts):

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Net loss

$

(33,876

)

 

$

(5,451

)

Dilutive effect of convertible debt

 

 

 

 

(584

)

Net loss allocated to common shares

$

(33,876

)

 

$

(6,035

)

 

 

 

 

 

Weighted average common shares outstanding – basic

 

47,757,246

 

 

 

32,051,228

 

Dilutive effect of convertible debt

 

 

 

 

1,138,200

 

Weighted average common shares outstanding – diluted

 

47,757,246

 

 

 

33,189,428

 

 

 

 

 

 

Net loss per share – diluted

$

(0.71

)

 

$

(0.18

)

 

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The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for the three months ended March 31, 2023 and 2022, as the result would be anti-dilutive:

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Outstanding stock options

 

1,931,389

 

 

 

2,050,094

 

Outstanding restricted stock units

 

2,214,490

 

 

 

981,841

 

Warrants to purchase common stock associated with March 2018 public offering – Series 2

 

 

 

 

798,810

 

Warrants to purchase common stock associated with December 2020 public offering - Series 2

 

6,800,000

 

 

 

6,800,000

 

Warrants to purchase common stock associated with April 2022 Public Offering

 

15,000,000

 

 

 

 

Warrants to purchase common stock associated with Loan Agreement

 

198,811

 

 

 

198,819

 

Common stock associated with March 2019 Notes

 

1,138,200

 

 

 

 

Warrants to purchase common stock associated with Danforth

 

50,000

 

 

 

50,000

 

Total

 

27,332,890

 

 

 

10,879,564

 

Recently Adopted 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 a 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. The Company adopted ASU 2016-13 during the three months ended March 31, 2023 and the adoption did not materially impact the unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

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 March 31, 2023 (in thousands):

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair Value

 

As of March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

27,908

 

 

$

 

 

$

(64

)

 

$

27,844

 

Total short-term investments

 

$

27,908

 

 

$

 

 

$

(64

)

 

$

27,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

27,689

 

 

$

 

 

$

(160

)

 

$

27,529

 

Total short-term investments

 

$

27,689

 

 

$

 

 

$

(160

)

 

$

27,529

 

As of March 31, 2023, the Company has $27.9 million of held-to-maturity investments with contractual maturities less than one year. The Company carries short-term investments at amortized cost. The fair value of the short-term investments is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company has evaluated the unrealized loss position in the U.S. government securities as of the balance sheet date and did not consider it to be indicative of an other-than-temporary impairment as the securities are highly-rated and the Company expects to realize the full principal amount at maturity.

 

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4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

March 31, 2023

 

 

December 31, 2022

 

Prepaid research and development services

 

$

569

 

 

$

635

 

Prepaid insurance

 

 

328

 

 

 

622

 

Other prepaid expenses

 

 

538

 

 

 

1,184

 

Other current assets

 

 

291

 

 

 

62

 

Total prepaid expenses and other current assets

 

$

1,726

 

 

$

2,503

 

 

5. Inventory

Inventory consisted of the following (in thousands):

 

 

March 31, 2023

 

 

December 31, 2022

 

Raw materials

 

$

7,724

 

 

$

5,093

 

Work in process

 

 

698

 

 

 

610

 

Finished goods

 

 

11

 

 

 

24

 

Total inventory

 

$

8,433

 

 

$

5,727

 

As of March 31, 2023 and December 31, 2022, the Company’s inventory consisted of $7.3 million and $4.9 million, respectively, of raw material that is not expected to be sold in one year and is classified as long term within other assets on the accompanying unaudited condensed consolidated balance sheet.

6. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

March 31, 2023

 

 

December 31, 2022

 

Accrued research and development expenses

 

$

1,249

 

 

$

786

 

Accrued employee bonus compensation

 

 

498

 

 

 

1,628

 

Other accrued expenses

 

 

1,543

 

 

 

1,313

 

Accrued severance

 

 

28

 

 

 

688

 

Accrued co-pay rebates

 

 

760

 

 

 

595

 

Accrued other rebates

 

 

697

 

 

 

618

 

Total accrued expenses

 

$

4,775

 

 

$

5,628

 

 

7. Borrowings

Loan Agreement

On May 13, 2021 (the “Closing Date”), the Company entered into the Loan Agreement with Hercules and SVB for an aggregate principal amount of $60.0 million (the “Term Loan”). Pursuant to the Loan Agreement, the Term Loan is available to the Company in four tranches, subject to certain terms and conditions.

In connection with the entering into of the License Agreement, the Company entered into a First Amendment and Consent to Loan and Security Agreement with the Lenders pursuant to which the Lenders consented to the Company entering into the License Agreement and the Company agreed to pay to the Lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement (approximately $35.4 million), (ii) the prepayment fee payable under the Loan Agreement ($262,500), (iii) the final payment payable under the Loan Agreement ($1,382,500), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by the Company will become due upon the earliest of (A) one business day following receipt by the Company of the $90 million upfront payment payable to the Company under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement.

Under the terms of the Loan Agreement, the Company received an initial tranche of $20.0 million from the Lenders on the closing date. The second tranche of the Term Loan, consisting of up to an additional $10.0 million, became available to the Company upon receipt of approval from the FDA of ibrexafungerp for the treatment of vaginal yeast infections (the “First Performance Milestone”) and was fully funded in June 2021. The third tranche of the Term Loan, consisting of an additional

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$5.0 million, became available to the Company upon (a) the First Performance Milestone and (b) the achievement of the primary endpoint from the Phase 3 study of ibrexafungerp in patients with recurrent vulvovaginal candidiasis, and was fully funded in March 2022. The fourth tranche of the Term Loan, consisting of up to an additional $25.0 million, will be available to the Company from January 1, 2022 through December 31, 2023 in $5.0 million increments, subject to certain terms and conditions, including in maintaining a ratio of total outstanding Term Loan principal to net product revenues for BREXAFEMME below a certain specified level for a given draw period.

The Company estimated the fair value of the loan payable as of March 31, 2023 using a credit spread valuation model and Level 3 inputs which included an implied secured spread, risk free rate, and secured yield of 9.48%, 4.80%, and 14.28%, respectively. As of December 31, 2022, the implied secured spread, risk free rate, and secured yield were 9.84%, 4.37%, and 14.21%. At March 31, 2023 and December 31, 2022, the fair value of the loan payable is $36.6 million and $34.4 million, respectively.

The Term Loan bears interest at a variable annual rate equal to the greater of (a) 9.05% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 5.80% (the “Interest Rate”). The Company is currently making payments of interest only.

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 and another financial institution equal to at least 50.0% of the total outstanding Term Loan principal amount, subject to certain requirements.

Future principal debt payments on the currently outstanding loan payable as of March 31, 2023 are as follows (in thousands):

2023

 

$

35,000

 

Total principal payments

 

 

35,000

 

Final fee due at maturity

 

 

1,383

 

Total principal and final fee payment

 

 

36,383

 

Unamortized discount and debt issuance costs

 

 

(1,735

)

Loan payable, current portion

 

$

34,648

 

March 2019 Note Purchase Agreement

On March 7, 2019, the Company entered into a Senior Convertible Note Purchase Agreement (the “March 2019 Note Purchase Agreement”) with Puissance. Pursuant to the March 2019 Note Purchase Agreement, on March 7, 2019, the Company issued and sold to Puissance $16.0 million aggregate principal amount of its 6.0% Senior Convertible Notes due 2025 (“March 2019 Notes”), resulting in $14.7 million in net proceeds after deducting $1.3 million for an advisory fee and other issuance costs.

As of March 31, 2023 and December 31, 2022, the Company’s March 2019 Notes consists of the convertible debt balance of $11.0 million and the bifurcated embedded conversion option derivative liability of $0.4 million and $42,000, respectively. In connection with the Company’s issuance of its March 2019 Notes, the Company bifurcated the embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, and recorded the embedded conversion option as a long-term derivative liability in the Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging, at its initial fair value of $7.0 million as the interest make-whole provision is settled in shares of common stock. The convertible debt and derivative liability associated with the March 2019 Notes are presented in total on the accompanying unaudited condensed consolidated balance sheets as the convertible debt and derivative liability. The derivative liability will be remeasured at each reporting period using the binomial lattice model with changes in fair value recorded in the statements of operations in other (income) expense. For the three months ended March 31, 2023 and 2022, the Company recognized a loss of $0.4 million and a gain of $1.0 million, respectively, on the fair value adjustment for the derivative liability. For the three months ended March 31, 2023 and 2022, the Company recognized zero and $0.2 million in amortization of debt issuance costs and discount related to the March 2019 Notes.

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 March 31, 2023 and December 31, 2022, the fair value of the convertible debt and derivative liability for the March 2019 Notes is $11.7 million and $10.8 million, respectively.

The March 2019 Notes bear interest at a rate of 6.0% per annum payable semiannually in arrears on March 15 and September 15 of each year, beginning September 15, 2019. The March 2019 Notes will mature on March 15, 2025, unless earlier converted, redeemed or repurchased. The March 2019 Notes constitute general, senior unsecured obligations of the Company.

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Other Liabilities

In February 2021, the Company partnered with Amplity for the commercial launch of BREXAFEMME for the treatment of VVC. Under the terms of the agreement with Amplity, the Company was to utilize Amplity’s commercial execution and resources for sales force, remote engagement, training, market access and select operations services. In October 2022, the Company announced that it was actively pursuing a U.S. commercialization partner to out-license BREXAFEMME in order to refocus the Company's resources on the further clinical development of ibrexafungerp for severe, hospital-based indications. As a result, the Company wound down its promotional activities associated with BREXAFEMME, while keeping BREXAFEMME on the market and available to patients. On November 30, 2022, the Company terminated the agreement with Amplity. Under the terms of the original agreement, Amplity deferred a portion of its direct service fees in the first two years (2021 and 2022) that accrued interest at an annual rate of 12.75% (“Deferred Fees”). The Deferred Fees of $5.8 million as of December 31, 2022 were fully paid as of February 2023.

8. Commitments and Contingencies

Leases

On March 1, 2018, the Company entered into a long-term lease agreement for approximately 19,275 square feet of office space in Jersey City, New Jersey, that the Company identified as an operating lease under ASC 842 (the “Lease”). The lease term is eleven years from August 1, 2018, the commencement date, with total lease payments of $7.3 million over the lease term. The Company has the option to renew for two consecutive five-year periods from the end of the first term and the Company is not reasonably certain that the option to renew the Lease will be exercised. Under the Lease, the Company furnished a security deposit in the form of a standby letter of credit in the amount of $0.3 million, which was reduced by fifty-five thousand dollars on the first anniversary of the commencement date. The security deposit will continue to be reduced by fifty-five thousand dollars every two years on the commencement date anniversary for eight years. The security deposit is classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets.

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 March 31,

 

 

 

2023

 

 

2022

 

Operating lease cost

 

$

166

 

 

$

166

 

Variable lease cost