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)
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(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 |
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Emerging growth company |
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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, 2023, there were
SCYNEXIS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
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1 |
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Item 1. |
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1 |
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Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 |
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1 |
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2 |
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3 |
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Notes to the Condensed Consolidated Financial Statements (unaudited) |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 6. |
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34 |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
SCYNEXIS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
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September 30, 2023 |
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December 31, 2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Prepaid expenses and other current assets |
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License agreement receivable |
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License agreement contract asset |
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Accounts receivable, net |
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Inventory, net |
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Restricted cash |
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Total current assets |
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Investments |
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Other assets |
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Deferred offering costs |
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Restricted cash |
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Intangible assets, net |
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Operating lease right-of-use asset (See Note 8) |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Deferred revenue, current portion |
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Other liabilities, current portion (See Note 7) |
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Operating lease liability, current portion (See Note 8) |
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Warrant liabilities |
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Total current liabilities |
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Deferred revenue |
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Warrant liabilities |
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Convertible debt and derivative liability (See Note 7) |
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Loan payable |
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Operating lease liability (See Note 8) |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue: |
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Product (loss) revenue, net |
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$ |
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$ |
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$ |
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$ |
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License agreement revenue |
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Total revenue |
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Operating expenses: |
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Cost of product revenue |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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(Loss) income from operations |
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Other (income) expense: |
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Amortization of debt issuance costs and discount |
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Interest income |
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Interest expense |
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Warrant liabilities fair value adjustment |
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Derivative liabilities fair value adjustment |
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Total other (income) expense |
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(Loss) income before taxes |
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Income tax benefit |
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Net (loss) income |
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$ |
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$ |
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$ |
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$ |
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Net (loss) income per share attributable to common stockholders – basic |
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Net (loss) income per share – basic |
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$ |
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$ |
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$ |
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$ |
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Net (loss) income per share attributable to common stockholders – diluted |
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Net (loss) income per share – diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding – basic and diluted |
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Basic |
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Diluted |
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The accompanying notes are an integral part of the financial statements.
2
SCYNEXIS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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Nine Months Ended September 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Accretion of investments discount |
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Amortization of debt issuance costs and discount |
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Change in fair value of warrant liabilities |
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Change in fair value of derivative liabilities |
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Noncash operating lease expense for right-of-use asset |
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Write off of deferred asset for commitment fees |
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Prepayment fee for loan payable payment |
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Changes in operating assets and liabilities: |
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Prepaid expenses, other assets, deferred costs, and other |
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License agreement contract asset |
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License agreement receivable |
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Accounts receivable |
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Inventory |
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Accounts payable, accrued expenses, deferred revenue, other liabilities, and other |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Purchase of intangible assets |
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Purchase of investments |
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Maturity of investments |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Proceeds from common stock issued |
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Payments of offering costs and underwriting discounts and commissions |
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Proceeds from loan payable |
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Payments of loan payable issuance costs |
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Payments of loan payable |
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Payment of loan payable prepayment fee |
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Proceeds from employee stock purchase plan issuances |
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Repurchase of shares to satisfy tax withholdings |
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Net cash (used in) provided by financing activities |
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Net decrease in cash, cash equivalents, and restricted cash |
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Cash, cash equivalents, and restricted cash at beginning of period |
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Cash, cash equivalents, and restricted cash at end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Cash received for interest |
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$ |
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$ |
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Noncash financing and investing activities: |
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Deferred offering costs reclassified to additional paid-in capital |
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$ |
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$ |
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Reclass of warrant liability to additional paid-in capital |
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$ |
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$ |
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Reclass of deferred asset associated with issuance of loan payable to debt discount |
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$ |
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$ |
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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 proprietary class of enfumafungin-derived antifungal compounds (“fungerps") as broad-spectrum, systemic antifungal agents for multiple fungal indications. Ibrexafungerp is the first representative of this novel class of antifungals with additional assets from the “fungerp” family, including SCY-247, in pre-clinical stages of development. 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") 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 closed the transactions contemplated by the License Agreement in May 2023 and the Company received an upfront payment of $
The Company was 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 $
Following a recent review by GSK of the manufacturing process and equipment at the vendor that manufactures the ibrexafungerp drug substance, the Company became aware that a non-antibacterial beta-lactam drug substance was manufactured using equipment common to the manufacturing process for ibrexafungerp. Current FDA draft guidance recommends segregating the manufacture of non-antibacterial beta-lactam compounds from other compounds since beta-lactam compounds have the potential to act as sensitizing agents that may trigger hypersensitivity or an allergic reaction in some people. In the absence of the recommended segregation, there is a risk of cross contamination. It is not known whether any ibrexafungerp has been contaminated with a beta-lactam compound and the Company has not received reports of any adverse events due to the possible beta-lactam cross contamination. Nonetheless, out of an abundance of caution and in line with GSK’s recommendation, the Company has recalled BREXAFEMME® (ibrexafungerp tablets) from the market and placed a temporary hold on clinical studies of ibrexafungerp, including the Phase 3 MARIO study, until a mitigation strategy is determined.
The patient-level and clinical product recall has been initiated and the Company is working with an experienced vendor to manage the process. The Company has begun engaging with the FDA and during a meeting in September 2023, the FDA concurred with the Company’s voluntary hold and placed a clinical hold on ibrexafungerp. The Company is working to provide additional information to the FDA and discuss potential paths for resolution of this issue. The clinical hold and recall affect the Company's two ongoing clinical studies: the Phase 3 MARIO study and a Phase 1 lactation study. The hold does not impact the recently completed FURI, CARES, VANQUISH and SCYNERGIA clinical studies, for which dosing is complete. The FDA determined that the compassionate use program for ibrexafungerp, which provides ibrexafungerp to patients with limited or no other treatment options, can continue provided the patient’s treating physician concludes a favorable benefit-risk assessment and the patient is made aware of and consents to the risk. This applies to patients currently in the program, as well as for new patients, pending confirmation of available supply. The Company's pre-clinical stage compound, SCY-247, is not affected by these developments.
The clinical hold and recall create uncertainty as to the timing of achieving, and the Company's ability to achieve, the milestones under the License Agreement. Refer to Note 5 and Note 12 for further information regarding the Company's assessment of the potential impact of this uncertainty as it relates to inventory and revenue, respectively.
4
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.
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; estimates for the relative standalone selling price and measure of progress under the input method for the License Agreement; the 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 and nine months ended September 30, 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.
Product Recall
The Company establishes reserves for product recalls on a product-specific basis when circumstances giving rise to the recall become known. The Company estimates product returns from consumers and customers across distribution channels, utilizing third-party data and other assumptions, and these are recorded within gross-to-net expenses on the Company’s unaudited condensed, consolidated statement of operations. Additionally, the Company estimates costs for any additional fees, including but not limited to freight and destruction charges for returned products and costs incurred by third party vendors. These expenses are recorded within selling, general, and administrative expenses within the Company’s unaudited condensed, consolidated statement of operations as they are in excess of the initial revenue recognized. These estimates are updated and reevaluated each period and the related reserves are adjusted when these factors indicate that the recall reserves are either insufficient to cover or exceed the estimated product recall expenses. Significant changes in the assumptions used to develop estimates for product recall reserves could affect key financial information, including accounts receivable, inventory, accrued liabilities, net sales, gross profit, operating expenses and net income (loss). During the three and nine-months ended September
5
30, 2023, the Company recorded products recall reserves of $
Allowance for Credit Losses
The Company reviews its held-to-maturity investments for credit losses on a collective basis by major security type and in line with the Company's investment policy. As of September 30, 2023, the Company's held-to-maturity investments were in securities that are issued by the U.S. government and in corporate and agency bonds, 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 September 30, 2023, the Company did
Basic and Diluted Net (Loss) Income per Share of Common Stock
The Company calculates net (loss) income per common share in accordance with ASC 260, Earnings Per Share. Basic net (loss) income per common share for the three and nine months ended September 30, 2023 and 2022 was determined by dividing net (loss) income 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) income per common share for the three and nine months ended September 30, 2023 includes the outstanding pre-funded warrants to purchase
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net (loss) income |
$ |
( |
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$ |
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$ |
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$ |
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Dilutive effect of convertible debt |
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Net (loss) income allocated to common shares |
$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding – basic |
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Dilutive effect of convertible debt |
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|
|
|
|
|
|
|
|
|
||||
Dilutive effect of restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income per share – diluted |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
6
The following potentially dilutive shares of common stock and outstanding restricted stock units that contain certain performance contingencies have not been included in the computation of diluted net (loss) income per share for the three and nine months ended September 30, 2023 and 2022, as the result would be anti-dilutive or the performance contingencies have not been met:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
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 |
|
|
|
|
|
|
|
|
|
|
|
||||
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 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
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. Investments
The following table summarizes the investments at September 30, 2023 (in thousands):
7
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
||||
As of September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maturities < 1 Year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Corporate bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Agency bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maturities > 1 Year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Agency bonds |
|
|
|
|
|
|
|
|
( |
) |
|
$ |
|
|||
Total investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maturities < 1 Year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
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, 2023 |
|
|
December 31, 2022 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
As of September 30, 2023 and December 31, 2022, the Company’s inventory consisted of
In September 2023, the Company announced after becoming aware of a risk of potential cross-contamination during the manufacture of ibrexafungerp, the Company was recalling BREXAFEMME (ibrexafungerp tablets) from the market and placing a temporary hold on clinical studies of ibrexafungerp. In evaluating the recoverability of the Company's raw material inventory on hand as of September 30, 2023, the Company considered the likelihood that revenue will be obtained from the future sale of the related inventory given the contractual arrangement with GSK, discussions with regulatory agencies, and other information currently available to the Company. For the three and nine months ended September 30, 2023, the Company
8
did
6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Accrued research and development expenses |
|
$ |
|
|
$ |
|
||
Accrued employee bonus compensation |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Accrued severance |
|
|
|
|
|
|
||
Accrued co-pay rebates |
|
|
|
|
|
|
||
Accrued other rebates |
|
|
|
|
|
|
||
Accrued product recall |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
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 $
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 $
Under the terms of the Loan Agreement, the Company received an initial tranche of $
March 2019 Note Purchase Agreement
On
As of September 30, 2023 and December 31, 2022, the Company’s March 2019 Notes consist of the convertible debt balance of $
9
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 September 30, 2023 and 2022, the Company recognized a gain 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, 2023 and December 31, 2022, 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. 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
8. Commitments and Contingencies
Leases
On March 1, 2018, the Company entered into a long-term lease agreement for approximately
10
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, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash paid for amounts included in the measurement of operating lease liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||
Remaining Lease term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Discount rate |
|
|
|
|
|
|
|
|
% |
|
|
% |
||||
Future minimum lease payments for the Lease as of September 30, 2023 are as follows (in thousands):
|
|
September 30, 2023 |
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
The presentations of the operating lease liability as of September 30, 2023 are as follows (in thousands):
|
|
September 30, 2023 |
|
|
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, 2023, 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 second and third amendments to the license agreement with Merck which clarified what would constitute the initiation of a
11
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 $
12
The following table summarizes common stock share activity for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):
13
|
|
Three Months Ended September 30, 2023 |
|
|||||||||||||||||
|
|
Shares of |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock issued through employee stock purchase plan |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock issued for vested restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance, September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
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 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Nine Months Ended September 30, 2023 |
|
|||||||||||||||||
|
|
Shares of |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
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, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Nine Months Ended September 30, 2022 |
|
|||||||||||||||||
|
|
Shares of |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, December 31, 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Vested Loan Agreement warrants |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
14
Shares Reserved for Future Issuance
The Company had reserved shares of common stock for future issuance as follows:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
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 with Guggenheim Securities, LLC, as representative of the several underwriters, relating to the offering, issuance and sale (the “April 2022 Public Offering”) of (a)
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, 2023 and 2022.
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, 2023, 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
15
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. For the three months ended September 30, 2023 and 2022, the Company recognized a gain of $
10. Stock-based Compensation
Pursuant to the terms of the Company’s 2014 Equity Incentive Plan (“2014 Plan”), on January 1, 2023 and 2022, the Company automatically added
In July 2023, the Company’s board of directors amended the 2014 Employee Stock Purchase Plan (“ESPP Plan”), which was subsequently ratified by the Company’s stockholders and became effective on June 14, 2023. Common stock that may be issued under the ESPP Plan will not exceed
2015 Inducement Award Plan
As of September 30, 2023, there were
The activity for the Company’s 2014 Plan and 2015 Plan, for the nine months ended September 30, 2023, is summarized as follows:
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Number of |
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Weighted- |
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Weighted- |
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Aggregate |
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Outstanding — December 31, 2022 |
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$ |
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$ |
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Granted |
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$ |
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Forfeited/Cancelled |
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( |
) |
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$ |
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Outstanding — September 30, 2023 |
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$ |
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$ |
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Exercisable — September 30, 2023 |
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$ |
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$ |
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Vested or expected to vest — September 30, 2023 |
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$ |
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$ |
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Restricted stock unit (“RSU”) activity under the 2014 Plan and 2015 Plan for the nine months ended September 30, 2023, is summarized as follows:
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Number of |
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Weighted |
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Non-vested at December 31, 2022 |
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$ |
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Granted |
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$ |
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||
Vested |
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( |
) |
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$ |
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Forfeited |
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( |
) |
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$ |
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Non-vested at September 30, 2023 |
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$ |
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16
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 $
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):
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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Selling, general and administrative |
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Total |
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$ |
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$ |
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$ |
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$ |
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17
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.
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Fair Value Hierarchy Classification |
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Balance |
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Quoted |
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Significant |
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Significant |
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September 30, 2023 |
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Cash |
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$ |
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$ |
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Restricted cash |
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Money market funds |
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Total assets |
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$ |
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$ |
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Warrant liabilities |
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$ |
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$ |
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Derivative liability |
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Total liabilities |
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$ |
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$ |
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December 31, 2022 |
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Cash |
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$ |
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$ |
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Restricted cash |
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Money market funds |
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Total assets |
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$ |
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$ |
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Warrant liabilities |
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$ |
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$ |
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Derivative liability |
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Total liabilities |
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$ |
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$ |
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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. As of September 30, 2023, the cash and cash equivalents of $
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, 2023, 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
18
estimated yield. As of September 30, 2023, these inputs were
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):
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Warrant Liabilities |
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Balance – December 31, 2022 |
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$ |
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Loss adjustment to fair value |
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Balance – September 30, 2023 |
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$ |
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Derivative Liability |
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Balance – December 31, 2022 |
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$ |
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Loss adjustment to fair value |
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Balance – September 30, 2023 |
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$ |
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12. Revenue
Product (Loss) Revenue, Net
Net product (loss) revenue was $(
The following table summarizes activity in each of the Company’s product revenue provision and allowance categories as of September 30, 2023 and 2022 (in thousands):
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Discounts and Chargebacks (1) |
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Product Returns (2) |
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Rebates and Incentives (3) |
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Product Recall (4) |
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Total |
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Balance as of December 31, 2022 |
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$ |
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|
$ |
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$ |
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$ |
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$ |
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Provision related to current period revenue |
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Changes in estimate related to prior period revenue |
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( |
) |
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( |
) |
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( |
) |
||
Credit/payments |
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( |
) |
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( |
) |
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|
( |
) |
|
|
|
|
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( |
) |
|
Balance as of September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
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|||||
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Discounts and Chargebacks (1) |
|
|
Product Returns (2) |
|
|
Rebates and Incentives (3) |
|
|
Product Recall (4) |
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|
Total |
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|||||
Balance as of December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
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|
$ |
|
|||||
Provision related to current period revenue |
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Changes in estimate related to prior period revenue |
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( |
) |
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||||
Credit/payments |
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|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Balance as of September 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
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(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 |
19
|
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. |
(4) |
Provisions for product recall are deducted from gross revenues to the extent of revenue recorded related to the recalled product and are included in accrued expenses on the Company’s unaudited condensed consolidated balance sheet. |
License Agreement with GSK
On March 30, 2023, the Company entered into a License Agreement with GSK. Pursuant to the terms of the License Agreement, the Company granted GSK an exclusive (even as to the Company and its affiliates), royalty-bearing, sublicensable license for the development, manufacture, 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 (the “GSK Territory”). If the existing licenses granted to or agreements with third parties are terminated with respect to any country, GSK will have an exclusive first right to negotiate with the Company to add those additional countries to the GSK Territory. The parties closed the transactions contemplated by the License Agreement in May 2023.
The Company retains rights to all other assets, with GSK receiving a right of first negotiation (“ROFN”) to any other enfumafungin-derived compounds or products that the Company may control.
Under the terms of the License Agreement, the Company was entitled to a nonrefundable upfront payment of $
The Company is responsible for the execution and costs of the ongoing clinical studies of ibrexafungerp but has the potential to receive up to $
In the case of each of the above milestones, such milestone events are defined in the License Agreement. GSK will also pay royalties based on cumulative annual sales to the Company in the mid-single digit to mid-teen range. These royalty rates are subject to reduction, including in the event of third-party licenses, entry of a generic product, or the expiration of licensed patents. A joint development committee was established between GSK and the Company to coordinate and review ongoing development activities of ibrexafungerp. Unless earlier terminated, the License Agreement will expire on a product-by-product and country-by-country basis at the end of the royalty term for such product in such country. The Company has the right to terminate the License Agreement upon an uncured material breach by, or bankruptcy of, GSK. GSK has the right to terminate the License Agreement at any time for convenience in its entirety or on a product-by-product and country-by-country basis, upon an uncured material breach by, or bankruptcy of, the Company, or for safety reasons.
The Company evaluated the License Agreement in accordance with ASC 606 as it includes a customer-vendor relationship as defined under ASC 606 and meets the criteria to be considered a contract. The Company assessed the terms of the License Agreement and identified the following performance obligations which include: (1) the license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, in the GSK Territory, (2) the research and development activities for the MARIO study, and (3) performance obligations for the remaining research and development activities for the ongoing clinical and preclinical studies of ibrexafungerp. For the three and nine months ended September 30, 2023, the Company's product revenue, net comprised of sales of BREXAFEMME that the Company sold as principal given it maintains control of BREXAFEMME product until delivery to its wholesalers at which point control is transferred.
20
The Company considers the future potential development, regulatory, and commercial milestone payments as well as sales-based milestone and royalties to be variable consideration. The Company constrains variable consideration to the extent that it is probable that it will not result in a significant revenue reversal when the uncertainty associated with the variable consideration is subsequently resolved. The Company will recognize consideration related to sales-based milestone and royalties when the subsequent sales occur pursuant to the royalty exception under ASC 606 because the license is the predominant item to which the royalties or sales-based milestone relate.
The total transaction price was $
The Company allocated the $
As of June 30, 2023, the Company provided all necessary information to GSK for it to benefit from the license under the license term. Accordingly, the Company recognized $
The Company recognized the revenue associated with the MARIO study and the remaining ongoing clinical and preclinical studies of ibrexafungerp over time using an input method. The input method is based on the actual costs incurred as a percentage of total budgeted costs towards satisfying the performance obligation as this method provides the most faithful depiction of the Company’s performance in transferring control of the services promised to GSK and represents the Company’s best estimate of the period of the obligation. For the three and nine months ended September 30, 2023, the Company recognized $
License Agreement with Hansoh
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, “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, 2023 and 2022, there was
21
agreement revenue recognized associated with the Agreement given the variable consideration was fully constrained as of September 30, 2023 and 2022, respectively.
13. Subsequent Event
On November 7, 2023, a securities class action was filed by Brian Feldman against the Company and certain executives in the United States District Court, District of New Jersey, alleging that, during the period from March 31, 2023 to September 22, 2023, the Company made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects, alleging specifically that the Company failed to disclose to investors: (1) that the equipment used to manufacture ibrexafungerp was also used to manufacture a non-antibacterial beta-lactam drug substance, presenting a risk of cross-contamination; (2) that the Company did not have effective internal controls and procedures, as well as adequate internal oversight policies to ensure that its vendor complied with current Good Manufacturing Practices (cGMP); (3) that, due to the substantial risk of cross-contamination, the Company was reasonably likely to recall its ibrexafungerp tablets and halt its clinical studies; and (4) as a result of the foregoing, the Company’s statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The complaint seeks unspecified damages, interest, fees and costs on behalf of all persons and entities who purchased and/or acquired shares of the Company’s common stock between March 31, 2023 to September 22, 2023. ASC Topic 450, Contingencies, requires a loss contingency to be accrued by a charge to operating results if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of September 30, 2023, the Company has not recognized a liability associated with the class action lawsuit contingency.
22
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, 2023, 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 31, 2023, 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. Ibrexafungerp is the first representative of this novel class of antifungals with additional assets from the “fungerp” family, including SCY-247, in pre-clinical stages of development. In June 2021 and December 2022, we announced that 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, and for the reduction in the incidence of recurrent vulvovaginal candidiasis (RVVC), respectively.
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.
On March 30, 2023, we entered into a license agreement (the License Agreement) with GlaxoSmithKline Intellectual Property (No. 3) Limited (GSK). Pursuant to the terms of the License Agreement, we granted GSK an exclusive (even as to us and our affiliates), royalty-bearing, sublicensable license for the development, manufacture, 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 (the GSK Territory). The parties closed the transactions contemplated by the License Agreement in May 2023 and we received an upfront payment of $90.0 million. In June 2023, we announced the achievement of a $25.0 million performance-based development milestone under the License Agreement. This milestone payment follows a development goal for the Phase 3 MARIO study for ibrexafungerp in IC as we continue executing ongoing ibrexafungerp trials. See further details of the License Agreement, including financial terms, as described in Note 12 of Item 1 on this Quarterly Report.
We, Hercules Capital, Inc. (Hercules Capital) and Silicon Valley Bridge Bank, N.A. (now a division of First Citizens Bank, SVB) are party to a Loan and Security Agreement dated as of May 13, 2021 (the Loan Agreement), pursuant to which Hercules Capital, SVB and each of the other lenders from time-to-time party to the Loan and Security Agreement (collectively, the Lenders) loaned to us $35 million. In connection with the entering into of the License Agreement, we entered into a First Amendment and Consent to Loan and Security Agreement with the Lenders pursuant to which the Lenders consented to us entering into the License Agreement and we 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 Loan Agreement ($262,500), (iii) the final payment payable under Loan Agreement ($1,382,500), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances
23
under the Loan Agreement. These payments became due upon the earliest of (A) one business day following receipt by us of the $90 million upfront payment payable to us under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement.
Following the closing of the transactions under the License Agreement, in May 2023, we received the upfront payment pursuant to the terms of the License Agreement, which triggered the obligation of us to repay the amounts due under the terms of the First Amendment. In connection with the repayment of those amounts due, in May 2023, we and the Lenders executed a payoff letter confirming the amounts due under the First Amendment, and our confirmation that the Loan Agreement, as amended by the First Amendment, was terminated.
Following a recent review by GSK of the manufacturing process and equipment at the vendor that manufactures the ibrexafungerp drug substance, we became aware that a non-antibacterial beta-lactam drug substance was manufactured using equipment common to the manufacturing process for ibrexafungerp. Current FDA draft guidance recommends segregating the manufacture of non-antibacterial beta-lactam compounds from other compounds since beta-lactam compounds have the potential to act as sensitizing agents that may trigger hypersensitivity or an allergic reaction in some people. In the absence of the recommended segregation, there is a risk of cross contamination. It is not known whether any ibrexafungerp has been contaminated with a beta-lactam compound and we have not received any reports of adverse events due to the possible beta-lactam cross contamination. Nonetheless, out of an abundance of caution and in line with GSK’s recommendation, we have recalled BREXAFEMME® (ibrexafungerp tablets) from the market and placed a temporary hold on clinical studies of ibrexafungerp, including the Phase 3 MARIO study, until a mitigation strategy is determined.
The patient-level and clinical product recall has been initiated and we are working with an experienced vendor to manage the process. We have begun engaging with the FDA and during a meeting in September 2023, the FDA concurred with our voluntary hold and placed a clinical hold. We are working to provide additional information to the FDA and discuss potential paths for resolution of this issue. The clinical hold and recall affect our two ongoing clinical studies: the Phase 3 MARIO study and a Phase 1 lactation study. The hold does not impact the recently completed FURI, CARES, VANQUISH and SCYNERGIA clinical studies, for which dosing is complete. The FDA determined that the compassionate use program for ibrexafungerp, which provides ibrexafungerp to patients with limited or no other treatment options, can continue provided the patient’s treating physician concludes a favorable benefit-risk assessment and the patient is made aware of and consents to the risk. This applies to patients currently in the program as well as for new patients, pending confirmation of available supply. Our pre-clinical stage compound, SCY-247, is not affected by these developments.
The clinical hold and recall create uncertainty as to the timing of achieving, and our ability to achieve, the milestones under the License Agreement.
On November 7, 2023, a securities class action was filed by Brian Feldman against us and certain of our executives in the United States District Court, District of New Jersey, alleging that, during the period from March 31, 2023 to September 22, 2023, we made materially false and/or misleading statements, as well as failed to disclose material adverse facts about our business, operations, and prospects, alleging specifically that we failed to disclose to investors: (1) that the equipment used to manufacture ibrexafungerp was also used to manufacture a non-antibacterial beta-lactam drug substance, presenting a risk of cross-contamination; (2) that we did not have effective internal controls and procedures, as well as adequate internal oversight policies to ensure that its vendor complied with current Good Manufacturing Practices (cGMP); (3) that, due to the substantial risk of cross-contamination, we were reasonably likely to recall its ibrexafungerp tablets and halt its clinical studies; and (4) as a result of the foregoing, our statements about our business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The complaint seeks unspecified damages, interest, fees and costs on behalf of all persons and entities who purchased and/or acquired shares of our common stock between March 31, 2023 to September 22, 2023.
Preclinical Developments – SCY 247
We continue progressing the IND-enabling development activities for SCY-247. SCY-247 is a broad spectrum antifungal with a potential oral and IV systemic therapeutic option for multiple drug-resistant pathogens. Some of these activities, including assessing the activity of the compound against Candida auris and Mucorales are being supported by NIH grants. We anticipate opening an IND for this compound in the second half of 2024.
Liquidity
We have operated as a public entity since we completed our initial public offering in May 2014, which we refer to as our IPO. 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. Our principal source of liquidity is cash, cash equivalents, and investments which totaled $105.2 million as of September 30, 2023 and we have the availability to issue up to $46.2 million of our common stock under our at-the-market facility with Cantor Fitzgerald & Co. (Cantor) and Ladenburg Thalmann & Co. Inc. (Ladenburg). See “Liquidity and Capital Resources” below for amounts sold
24
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.
As of September 30, 2023, our accumulated deficit was $335.7 million. 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 have ceased the active promotional activities associated with BREXAFEMME. 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 (e.g., grants), 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) GSK, a pharmaceutical company, which we exclusively (even as to us and our affiliates) provide a, royalty-bearing, sublicensable license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, for all indications, in the GSK Territory; (2) 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); (3) 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 (4) 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 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); (5) 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 (6) 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 consists of license agreement revenue associated with GSK and product sales of BREXAFEMME. For the three and nine months ended September 30, 2023, our product revenue, net comprised of sales of BREXAFEMME that we sold as principal given we control BREXAFEMME product until delivery to our wholesalers at which point control is transferred.
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:
25
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, 2023 and 2022, consists of amortization of debt issuance costs and discount, interest income, interest expense, other income, the warrant liabilities fair value adjustment, and the derivative liabilities fair value adjustment.
Income Tax Benefit
All of our income tax benefit recognized in the nine months ended September 30, 2022 consists of an income tax benefit associated with the sale of our NOLs and research and development credits.
Results of Operations for the Three Months Ended September 30, 2023 and 2022
The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022, together with the changes in those items in dollars and percentage (dollars in thousands):
|
|
Three Months Ended September 30, |
|
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Period-to-Period Change |
|
|
|||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product (loss) revenue, net |
|
$ |
(614 |
) |
|
$ |
1,557 |
|
|
$ |
(2,171 |
) |
|
|
(139.4 |
) |
% |
License agreement revenue |
|
|
2,375 |
|
|
|
— |
|
|
|
2,375 |
|
|
|
— |
|
% |
Total revenue |
|
|
1,761 |
|
|
|
1,557 |
|
|
|
204 |
|
|
|
13.1 |
|
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product revenue |
|
|
379 |
|
|
|
189 |
|
|
|
190 |
|
|
|
100.5 |
|
% |
Research and development |
|
|
6,466 |
|
|
|
6,430 |
|
|
|
36 |
|
|
|
0.6 |
|
% |
Selling, general and administrative |
|
|
5,014 |
|
|
|
16,739 |
|
|
|
(11,725 |
) |
|
|
(70.0 |
) |
% |
Total operating expenses |
|
|
11,859 |
|
|
|
23,358 |
|
|
|
(11,499 |
) |
|
|
(49.2 |
) |
% |
Loss from operations |
|
|
(10,098 |
) |
|
|
(21,801 |
) |
|
|
11,703 |
|
|
|
(53.7 |
) |
% |
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs and discount |
|
|
360 |
|
|
|
396 |
|
|
|
(36 |
) |
|
|
(9.1 |
) |
% |
Interest income |
|
|
(1,263 |
) |
|
|
(531 |
) |
|
|
(732 |
) |
|
|
137.9 |
|
% |
Interest expense |
|
|
212 |
|
|
|
1,379 |
|
|
|
(1,167 |
) |
|
|
(84.6 |
) |
% |
Warrant liabilities fair value adjustment |
|
|
(7,468 |
) |
|
|
6,497 |
|
|
|
(13,965 |
) |
|
|
(214.9 |
) |
% |
Derivative liabilities fair value adjustment |
|
|
(182 |
) |
|
|
42 |
|
|
|
(224 |
) |
|
|
(533.3 |
) |
% |
Total other income (expense) |
|
|
(8,341 |
) |
|
|
7,783 |
|
|
|
(16,124 |
) |
|
|
(207.2 |
) |
% |
Net loss |
|
$ |
(1,757 |
) |
|
$ |
(29,584 |
) |
|
$ |
27,827 |
|
|
|
(94.1 |
) |
% |
26
Revenue. For the three months ended September 30, 2023, revenue primarily consists of the $2.4 million in license agreement revenue associated the License Agreement with GSK and a product (loss) of $0.6 million as a result of the recall for BREXAFEMME. For the three months ended September 30, 2022, revenues consists of product sales of BREXAFEMME.
Cost of Product Revenue. Cost of product revenue in the three months ended September 30, 2023 and 2022 consists primarily of distribution, freight, and royalty costs associated with BREXAFEMME.
Research and Development. For the three months ended September 30, 2023, research and development expenses increased to $6.5 million compared to $6.4 million for the three months ended September 30, 2022. The increase of $36,000, or 1%, for the three months ended September 30, 2023, was primarily driven by an increase of $0.5 million in clinical expense, and an increase of $0.1 million in salaries primarily associated with medical affairs, offset in part by a $0.5 million decrease in CMC expense.
The $0.5 million increase in clinical development expense for the three months ended September 30, 2023, was primarily driven by an increase of $1.0 million in clinical expense for the MARIO study, offset in part by a decrease of $0.2 million associated with a Phase 1 study of oral ibrexafungerp that was substantially complete in the second quarter of 2023 and is intended to support the potential NDA filing for the treatment of IC, and a decrease of $0.3 million in expense associated with the VANQUISH study.
Selling, General & Administrative. For the three months ended September 30, 2023, selling, general and administrative expenses decreased to $5.0 million from $16.7 million for the three months ended September 30, 2022. The decrease of $11.7 million, or 70%, for the three months ended September 30, 2023, was primarily driven by a decrease of $8.9 million in commercial expense due to the costs incurred in the prior comparable period associated with the active promotion of BREXAFEMME which ceased in the fourth quarter of 2022, a decrease of $1.6 million in salary related expense primarily driven by the workforce reduction in the fourth quarter of 2022 concentrated in the commercial and medical affairs functions, a decrease of $0.7 million in other medical affairs related expense, and a net decrease in other selling, general and administrative expense of $0.5 million.
Amortization of Debt Issuance Costs and Discount. For both the three months ended September 30, 2023 and 2022, we recognized $0.4 million in amortization of debt issuance costs and discount. The 2023 and 2022 debt issuance costs and discount for our March 2019 convertible notes primarily consisted of an allocated portion of advisory fees and other issuance costs and the initial fair value of the derivative liability.
Interest Income. For the three months ended September 30, 2023 and 2022, we recognized $1.3 million and $0.5 million, respectively, in interest income; the increase was primarily due to the increase in the interest rate on our money market funds.
Interest Expense. For the three months ended September 30, 2023 and 2022, we recognized $0.2 million and $1.4 million, respectively. The decrease in interest expense was primarily due to the repayment of the Loan Agreement in May 2023.
Warrant Liabilities Fair Value Adjustment. For the three months ended September 30, 2023 and 2022, we recognized a gain of $7.5 million and a loss of $6.5 million, respectively, in the fair value adjustment related to the warrant liabilities primarily due to the decrease and increase in our stock price during the periods, respectively.
Derivative Liabilities Fair Value Adjustment. For the three months ended September 30, 2023 and 2022, we recognized a gain of $0.2 million and a loss $42,000, respectively, in the fair value adjustment related to the derivative liabilities primarily due to the decrease and increase in our stock price during the respective periods, respectively.
27
Results of Operations for the Nine Months Ended September 30, 2023 and 2022
The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022, together with the changes in those items in dollars and percentage (dollars in thousands):
|
|
Nine Months Ended September 30, |
|
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Period-to-Period Change |
|
|
|||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product revenue, net |
|
$ |
984 |
|
|
$ |
3,567 |
|
|
$ |
(2,583 |
) |
|
|
(72.4 |
) |
% |
License agreement revenue |
|
|
133,360 |
|
|
|
— |
|
|
|
133,360 |
|
|
|
— |
|
% |
Total revenue |
|
|
134,344 |
|
|
|
3,567 |
|
|
|
130,777 |
|
|
|
3,666.3 |
|
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product revenue |
|
|
940 |
|
|
|
432 |
|
|
|
508 |
|
|
|
117.6 |
|
% |
Research and development |
|
|
20,342 |
|
|
|
19,410 |
|
|
|
932 |
|
|
|
4.8 |
|
% |
Selling, general and administrative |
|
|
17,328 |
|
|
|
47,001 |
|
|
|
(29,673 |
) |
|
|
(63.1 |
) |
% |
Total operating expenses |
|
|
38,610 |
|
|
|
66,843 |
|
|
|
(28,233 |
) |
|
|
(42.2 |
) |
% |
Income (loss) from operations |
|
|
95,734 |
|
|
|
(63,276 |
) |
|
|
159,010 |
|
|
|
(251.3 |
) |
% |
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs and discount |
|
|
2,616 |
|
|
|
1,194 |
|
|
|
1,422 |
|
|
|
119.1 |
|
% |
Interest income |
|
|
(2,590 |
) |
|
|
(724 |
) |
|
|
(1,866 |
) |
|
|
257.7 |
|
% |
Interest expense |
|
|
2,908 |
|
|
|
3,669 |
|
|
|
(761 |
) |
|
|
(20.7 |
) |
% |
Warrant liabilities fair value adjustment |
|
|
5,991 |
|
|
|
(13,215 |
) |
|
|
19,206 |
|
|
|
(145.3 |
) |
% |
Derivative liabilities fair value adjustment |
|
|
182 |
|
|
|
(1,120 |
) |
|
|
1,302 |
|
|
|
(116.3 |
) |
% |
Total other expense (income) |
|
|
9,107 |
|
|
|
(10,196 |
) |
|
|
19,303 |
|
|
|
(189.3 |
) |
% |
Income (loss) before taxes |
|
|
86,627 |
|
|
|
(53,080 |
) |
|
|
139,707 |
|
|
|
(263.2 |
) |
% |
Income tax benefit |
|
|
— |
|
|
|
(4,700 |
) |
|
|
4,700 |
|
|
|
(100.0 |
) |
% |
Net income (loss) |
|
$ |
86,627 |
|
|
$ |
(48,380 |
) |
|
$ |
135,007 |
|
|
|
(279.1 |
) |
% |
Revenue. For the nine months ended September, 2023, revenue primarily consists of the $130.1 million recognized upon the transfer of the license associated with the License Agreement with GSK in May 2023. For the nine months ended September 30, 2022, revenues consists of product sales of BREXAFEMME.
Cost of Product Revenue. Cost of product revenue in the nine months ended September 30, 2023 and 2022 consists primarily of distribution, freight, and royalty costs associated with BREXAFEMME.
Research and Development. For the nine months ended September 30, 2023, research and development expenses increased to $20.3 million compared to $19.4 million for the nine months ended September 30, 2022. The increase of $0.9 million , or 5% , for the nine months ended September 30, 2023, was primarily driven by an increase of $0.6 million in salaries primarily associated with medical affairs and a $1.2 million increase in clinical development expense, offset in part by a decrease of $0.3 million in regulatory expense given the costs incurred in the prior period for the submission of the supplemental NDA in RVVC in the third quarter of 2022, a decrease of $0.4 million in CMC expense, and a decrease in preclinical expense of $0.2 million.
The $1.2 million increase in clinical development expense for the nine months ended September 30, 2023, was primarily driven by an increase of $0.8 million in clinical development expense associated with the MARIO study, an increase of $0.6 million associated with a Phase 1 study of oral ibrexafungerp which was substantially complete in the second quarter of 2023 and is intended to support the potential NDA filing for the treatment of IC, an increase of $0.5 million in the FURI and CARES studies, an increase of $0.2 million in expense associated with the VANQUISH study, and an increase of $0.3 million in other clinical expense, offset in part by a $1.2 million decrease in expense associated with the CANDLE Phase 3 study which was substantially complete in the first quarter of 2022.
Selling, General & Administrative. For the nine months ended September 30, 2023, selling, general and administrative expenses decreased to $17.3 million from $47.0 million for the nine months ended September 30, 2022. The decrease of $29.7 million, or 63%, for the nine months ended September 30, 2023, was primarily driven by a decrease of $25.1 million in commercial expense due to the costs incurred in the prior comparable period associated with the active promotion of BREXAFEMME which ceased in the fourth quarter of 2022, a decrease of $4.3 million in salary related expense primarily driven by the workforce reduction in the fourth quarter of 2022 concentrated in the commercial and medical affairs functions, a $2.0 million decrease associated with other medical affairs related expense, a $0.7 million decrease in information technology expense, and a net decrease in other selling, general, and administrative costs of $0.4 million, offset in part by an increase in professional fees of $2.8 million. The $2.8 million increase in professional fees is primarily due to a $3.1 million expense incurred during the current period for business development associated with the License Agreement.
28
Amortization of Debt Issuance Costs and Discount. For the nine months ended September 30, 2023 and 2022, we recognized $2.6 million and $1.2 million in amortization of debt issuance costs and discount, respectively. The increase of $1.4 million, or 119%, was primarily driven by the recognition of $1.9 million in amortization during the nine months ended September 30, 2023 for the remaining debt issuance costs and discount associated with the loan payable with Hercules and SVB which was fully paid in May 2023. The 2023 and 2022 debt issuance costs and discount for our March 2019 convertible notes primarily consisted of an allocated portion of advisory fees and other issuance costs and the initial fair value of the derivative liability.
Interest Income. For the nine months ended September 30, 2023 and 2022, we recognized $2.6 million and $0.7 million, respectively, in interest income; the increase was primarily due to the increase in the interest rate on our money market fund.
Interest Expense. For the nine months ended September 30, 2023 and 2022, we recognized $2.9 million and $3.7 million, respectively. The decrease in interest expense was primarily due to the repayment of the Loan Agreement in May 2023.
Warrant Liabilities Fair Value Adjustment. For the nine months ended September 30, 2023 and 2022, we recognized a loss of $6.0 million and a gain $13.2 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 nine months ended September 30, 2023 and 2022, we recognized a loss of $0.2 million and a gain of $1.1 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 nine months ended September 30, 2022 consists of $4.7 million associated with the sale of a portion of our NOLs and research and development credits.
Liquidity and Capital Resources
Sources of Liquidity
Through September 30, 2023, we have primarily funded our operations from net proceeds from equity and debt issuances and through revenue from development services. As of September 30, 2023, we had cash and cash equivalents and investments of $105.2 million, compared to cash and cash equivalents and short-term investments of $73.5 million as of December 31, 2022. We believe our capital resources are sufficient to fund our on-going operations for a period of at least 12 months subsequent to the issuance of the accompanying unaudited condensed consolidated financial statements. The increase in our cash and cash equivalents and investments was primarily due to the $90.0 upfront receipt from the closing of the License Agreement, offset by the $37.0 million repayment in full of our Loan Agreement, the continued development costs associated with ibrexafungerp, and the payment of the deferred fees associated with Amplity. We have incurred annual net losses since our inception, although we anticipate net income for the current annual period given amounts received under the License Agreement with GSK. As of September 30, 2023, our accumulated deficit was $335.7 million.
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 have ceased the active promotion of BREXAFEMME. 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. Upon closing of our License Agreement with GSK in May 2023, we received an upfront payment of $90.0 million, of which approximately $37.0 million was used to pay all amounts payable under the Loan Agreement with Hercules Capital and SVB.
Cash Flows
The following table sets forth the significant sources and uses of cash for the nine months ended September 30, 2023 and 2022 (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash, cash equivalents, and restricted cash, January 1 |
|
$ |
46,032 |
|
|
$ |
104,702 |
|
Net cash provided by (used in) operating activities |
|
|
67,894 |
|
|
|
(57,077 |
) |
Net cash used in investing activities |
|
|
(32,725 |
) |
|
|
(27,389 |
) |
Net cash (used in) provided by financing activities |
|
|
(36,586 |
) |
|
|
48,602 |
|
Net decrease in cash, cash equivalents, and restricted cash |
|
|
(1,417 |
) |
|
|
(35,864 |
) |
Cash, cash equivalents, and restricted cash, September 30 |
|
$ |
44,615 |
|
|
$ |
68,838 |
|
29
Operating Activities
The $125.0 million increase in net cash provided by operating activities for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to the $90.0 million upfront receipt upon the closing of the License Agreement with GSK offset by the continued development costs associated with ibrexafungerp. Consistent with our operating plan, we expect to incur significant research and development expenses; however, we expect our selling, general and administrative expenses to decrease as we have ceased actively promoting BREXAFEMME.
Net cash provided by operating activities of $67.9 million for the nine months ended September 30, 2023, primarily consisted of the $86.6 million net income adjusted for non-cash charges that included the loss on change in fair value of the warrant liabilities of $6.0 million, stock-based compensation expense of $2.1 million, and amortization of debt issuance costs and discount of $2.6 million, partially offset by a net unfavorable change in operating assets and liabilities of $30.3 million. The net unfavorable change in operating assets and liabilities was due to a net decrease in operating liabilities of $0.4 million and by a net increase of $30.0 million in operating assets. The net $30.0 million increase in operating assets is primarily due to a $19.3 million increase in license agreement contract asset associated with the License Agreement with GSK, a $7.4 million increase in inventory for raw material purchased in the current period, and an increase in accounts receivable and license agreement receivable of $2.5 million. The $0.4 million decrease in accounts payable, accrued expenses, deferred revenue, other liabilities, and other was primarily due to the decrease of $5.8 million in other liabilities associated with the deferred fees due to Amplity that were fully paid as of February 2023 and a decrease of $2.5 million in accounts payable, offset primarily by a $4.1 million increase in deferred revenue associated with the License Agreement with GSK and a $3.9 million increase in accrued expenses due to the $3.5 million increase in expense for product recall.
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.
Investing Activities
Net cash used in investing activities of $32.7 million for the nine months ended September 30, 2023 consisted of purchases and maturities of short-term investments of $73.3 million and $40.6 million, respectively.
Net cash used in investing activities of $27.4 million for the nine months ended September 30, 2022, consisted primarily of purchases of short-term investments.
Financing Activities
Net cash used in financing activities of $36.6 million for the nine months ended September 30, 2023, consisted primarily of the full repayment of the Loan Agreement with Hercules and SVB in May 2023.
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 in part by payments of offering costs and underwriting discounts and commissions of $3.6 million.
Future Funding Requirements
We have generated limited revenue from the product sales for BREXAFEMME and we expect our product sales to decrease as we have ceased actively promoting BREXAFEMME. 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. We anticipate that we will need substantial additional funding in connection with our continuing future operations.
Our future capital requirements will depend on many factors, including:
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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 (e.g., grants), strategic alliances and licensing arrangements, in particular the License Agreement with GSK. To the extent that we raise additional capital through the sale of equity or convertible debt securities, 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, similar to our Loan Agreement or the convertible senior notes we sold in March 2019 and April 2020, 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 Judgments
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 judgments are described within Item 7 to our Annual Report on Form 10-K for the year ended December 31, 2022.
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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, 2023, 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, 2023, 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, 2023, 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 1. Legal Proceedings.
On November 7, 2023, a securities class action was filed by Brian Feldman against us and certain of our executives in the United States District Court, District of New Jersey, alleging that, during the period from March 31, 2023 to September 22, 2023, we made materially false and/or misleading statements, as well as failed to disclose material adverse facts about our business, operations, and prospects, alleging specifically that we failed to disclose to investors: (1) that the equipment used to manufacture ibrexafungerp was also used to manufacture a non-antibacterial beta-lactam drug substance, presenting a risk of cross-contamination; (2) that we did not have effective internal controls and procedures, as well as adequate internal oversight policies to ensure that its vendor complied with current Good Manufacturing Practices (cGMP); (3) that, due to the substantial risk of cross-contamination, we were reasonably likely to recall its ibrexafungerp tablets and halt its clinical studies; and (4) as a result of the foregoing, our statements about our business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The complaint seeks unspecified damages, interest, fees and costs on behalf of all persons and entities who purchased and/or acquired shares of our common stock between March 31, 2023 to September 22, 2023.
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, 2022, except as follows:
There is uncertainty as to the timing of achieving, and our ability to achieve, the milestones under our License Agreement with GSK as a result of the clinical hold and recall resulting from the discovery of a non-antibacterial beta-lactam drug substance was manufactured using equipment common to the manufacturing process for ibrexafungerp.
Following a recent review by GSK of the manufacturing process and equipment at the vendor that manufactures the ibrexafungerp drug substance, we became aware that a non-antibacterial beta-lactam drug substance was manufactured using equipment common to the manufacturing process for ibrexafungerp. Current FDA draft guidance recommends segregating the manufacture of non-antibacterial beta-lactam compounds from other compounds since beta-lactam compounds have the potential to act as sensitizing agents that may trigger hypersensitivity or an allergic reaction in some people. In the absence of the recommended segregation, there is a risk of cross contamination. It is not known whether any ibrexafungerp has been contaminated with a beta-lactam compound and we have not received any reports of adverse events due to the possible beta-lactam cross contamination. Nonetheless, out of an abundance of caution and in line with GSK’s recommendation, we have recalled BREXAFEMME® (ibrexafungerp tablets) from the market and placed a temporary hold on clinical studies of ibrexafungerp, including the Phase 3 MARIO study, until a mitigation strategy is determined.
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The patient-level and clinical product recall has been initiated and we are working with an experienced vendor to manage the process. We have begun engaging with the FDA and during a meeting in September 2023, the FDA concurred with our voluntary hold and placed a clinical hold. We are working to provide additional information to the FDA and discuss potential paths for resolution of this issue. The clinical hold and recall affect our two ongoing clinical studies: the Phase 3 MARIO study and a Phase 1 lactation study. The hold does not impact the recently completed FURI, CARES, VANQUISH and SCYNERGIA clinical studies, for which dosing is complete. The FDA determined that the compassionate use program for ibrexafungerp, which provides ibrexafungerp to patients with limited or no other treatment options, can continue provided the patient’s treating physician concludes a favorable benefit-risk assessment and the patient is made aware of and consents to the risk. This applies to patients currently in the program as well as for new patients, pending confirmation of available supply. Our pre-clinical stage compound, SCY-247, is not affected by these developments.
The clinical hold and recall create uncertainty as to the timing of achieving, and our ability to achieve, the milestones under the License Agreement.
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Item 6. Exhibits.
Exhibit Number |
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Description of Document |
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3.1 |
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3.2 |
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3.3 |
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3.4 |
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3.5 |
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4.1 |
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10.1* |
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10.2* |
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Second Amendment to Termination and License Agreement" b/w the Company and Merck Sharp & Dohme. |
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10.3* |
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31.1 |
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31.2 |
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32.1 |
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101.INS |
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Inline XBRL Instance Document |
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101.SCH |
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Inline XBRL Taxonomy Schema Linkbase Document |
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101.CAL |
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Inline XBRL Taxonomy Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Labels Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Certain information in this document has been excluded as such information is not material and is the type of information that the Company treats as private or confidential.
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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. |
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By: |
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/s/ David Angulo, M.D. |
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David Angulo, M.D. |
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Chief Executive Officer (Principal Executive Officer) |
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Date: |
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November 12, 2023 |
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By: |
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/s/ Ivor Macleod |
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Ivor Macleod |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
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Date: |
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November 12, 2023 |
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