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 |
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Weighted average common shares outstanding – diluted |
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Net (loss) income per share – diluted |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
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|
$ |
( |
) |
|
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, |
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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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Outstanding stock options |
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Outstanding restricted stock units |
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Warrants to purchase common stock associated with March 2018 public offering – Series 2 |
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Warrants to purchase common stock associated with December 2020 public offering - Series 2 |
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Warrants to purchase common stock associated with April 2022 Public Offering |
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Warrants to purchase common stock associated with Loan Agreement |
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Common stock associated with March 2019 Notes |
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Warrants to purchase common stock associated with Danforth |
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Total |
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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
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Amortized |
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Unrealized |
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Unrealized |
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Fair Value |
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As of September 30, 2023 |
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Maturities < 1 Year |
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U.S. government securities |
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$ |
|
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$ |
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|
$ |
( |
) |
|
$ |
|
|||
Corporate bonds |
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( |
) |
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|||
Agency bonds |
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( |
) |
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|||
Total short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
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Maturities > 1 Year |
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||||
Corporate bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Agency bonds |
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|
|
|
|
|
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|
( |
) |
|
$ |
|
|||
Total investments |
|
$ |
|
|
$ |
|
|
$ |
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