UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 001-36365
SCYNEXIS, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
|
56-2181648 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
1 Evertrust Plaza, 13th Floor Jersey City, New Jersey |
|
07302-6548 |
(Address of principal executive offices) |
|
(Zip Code) |
(201)-884-5485
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered |
Common Stock, par value $0.001 per share |
SCYX |
Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☒ |
|
|
|
|
|||
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
☒ |
|
|
|
|
|||
Emerging growth company |
|
☒ |
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 1, 2019, there were 55,708,213 shares of the registrant’s Common Stock outstanding.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019
|
|
|
|
Page |
|
|
|
||
|
1 |
|||
|
|
|
|
|
Item 1. |
|
|
1 |
|
|
|
Unaudited Condensed Balance Sheets as of June 30, 2019, and December 31, 2018 |
|
1 |
|
|
|
2 |
|
|
|
Unaudited Condensed Statements of Cash Flows for the six months ended June 30, 2019 and 2018 |
|
3 |
|
|
|
4 |
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
16 |
Item 3. |
|
|
24 |
|
Item 4. |
|
|
24 |
|
|
|
|
||
|
25 |
|||
|
|
|
|
|
Item 1A. |
|
|
25 |
|
Item 6. |
|
|
25 |
|
|
|
|
||
|
26 |
SCYNEXIS, INC.
UNAUDITED CONDENSED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
19,150 |
|
|
$ |
11,439 |
|
Short-term investments |
|
|
16,080 |
|
|
|
32,718 |
|
Prepaid expenses and other current assets |
|
|
858 |
|
|
|
7,251 |
|
Restricted cash |
|
|
55 |
|
|
|
55 |
|
Total current assets |
|
|
36,143 |
|
|
|
51,463 |
|
Other assets |
|
|
812 |
|
|
|
812 |
|
Deferred offering costs |
|
|
102 |
|
|
|
106 |
|
Restricted cash |
|
|
273 |
|
|
|
273 |
|
Property and equipment, net |
|
|
460 |
|
|
|
516 |
|
Operating lease right-of-use asset (See Note 7) |
|
|
3,284 |
|
|
|
— |
|
Total assets |
|
$ |
41,074 |
|
|
$ |
53,170 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
3,806 |
|
|
$ |
3,653 |
|
Accrued expenses |
|
|
3,414 |
|
|
|
2,103 |
|
Deferred revenue |
|
|
— |
|
|
|
121 |
|
Operating lease liability, current portion (See Note 7) |
|
|
28 |
|
|
|
— |
|
Total current liabilities |
|
|
7,248 |
|
|
|
5,877 |
|
Warrant liabilities |
|
|
5,459 |
|
|
|
986 |
|
Loan payable expected to be refinanced |
|
|
— |
|
|
|
15,082 |
|
Convertible debt and derivative liability (See Note 6) |
|
|
14,592 |
|
|
|
— |
|
Operating lease liability (See Note 7) |
|
|
3,373 |
|
|
|
— |
|
Total liabilities |
|
|
30,672 |
|
|
|
21,945 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, authorized 5,000,000 shares as of June 30, 2019 and December 31, 2018; 0 shares issued and outstanding as of June 30, 2019 and December 31, 2018 |
|
|
— |
|
|
|
— |
|
Common stock, $0.001 par value, 250,000,000 shares authorized as of June 30, 2019, and 125,000,000 shares authorized as of December 31, 2018; 54,520,131 and 47,971,989 shares issued and outstanding as of June 30, 2019, and December 31, 2018, respectively |
|
|
54 |
|
|
|
48 |
|
Additional paid-in capital |
|
|
259,377 |
|
|
|
248,895 |
|
Accumulated deficit |
|
|
(249,029 |
) |
|
|
(217,718 |
) |
Total stockholders’ equity |
|
|
10,402 |
|
|
|
31,225 |
|
Total liabilities and stockholders’ equity |
|
$ |
41,074 |
|
|
$ |
53,170 |
|
The accompanying notes are an integral part of the financial statements.
1
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Revenue |
|
$ |
57 |
|
|
$ |
64 |
|
|
$ |
121 |
|
|
$ |
129 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
8,474 |
|
|
|
5,599 |
|
|
|
18,158 |
|
|
|
10,925 |
|
Selling, general and administrative |
|
|
2,779 |
|
|
|
2,123 |
|
|
|
5,021 |
|
|
|
4,094 |
|
Total operating expenses |
|
|
11,253 |
|
|
|
7,722 |
|
|
|
23,179 |
|
|
|
15,019 |
|
Loss from operations: |
|
|
(11,196 |
) |
|
|
(7,658 |
) |
|
|
(23,058 |
) |
|
|
(14,890 |
) |
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
|
231 |
|
|
|
— |
|
|
|
1,045 |
|
|
|
— |
|
Amortization of debt issuance costs and discount |
|
|
373 |
|
|
|
99 |
|
|
|
573 |
|
|
|
212 |
|
Interest income |
|
|
(233 |
) |
|
|
(271 |
) |
|
|
(513 |
) |
|
|
(437 |
) |
Interest expense |
|
|
209 |
|
|
|
397 |
|
|
|
574 |
|
|
|
776 |
|
Warrant liabilities fair value adjustment |
|
|
(2,049 |
) |
|
|
2,874 |
|
|
|
4,473 |
|
|
|
(680 |
) |
Derivative liability fair value adjustment |
|
|
(1,324 |
) |
|
|
— |
|
|
|
2,101 |
|
|
|
— |
|
Total other (income) expense: |
|
|
(2,793 |
) |
|
|
3,099 |
|
|
|
8,253 |
|
|
|
(129 |
) |
Net loss |
|
$ |
(8,403 |
) |
|
$ |
(10,757 |
) |
|
$ |
(31,311 |
) |
|
$ |
(14,761 |
) |
Net loss per share - basic and diluted |
|
$ |
(0.16 |
) |
|
$ |
(0.23 |
) |
|
$ |
(0.61 |
) |
|
$ |
(0.37 |
) |
Weighted average common shares outstanding - basic and diluted |
|
|
53,277,660 |
|
|
|
46,843,524 |
|
|
|
51,308,557 |
|
|
|
40,247,917 |
|
The accompanying notes are an integral part of the financial statements.
2
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(31,311 |
) |
|
$ |
(14,761 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
59 |
|
|
|
2 |
|
Stock-based compensation expense |
|
|
938 |
|
|
|
893 |
|
Accretion of investment discount |
|
|
(89 |
) |
|
|
(122 |
) |
Amortization of debt issuance costs and discount |
|
|
573 |
|
|
|
212 |
|
Change in fair value of warrant liabilities |
|
|
4,473 |
|
|
|
(680 |
) |
Change in fair value of derivative liability |
|
|
2,101 |
|
|
|
— |
|
Amortization of operating lease right-of-use asset |
|
|
81 |
|
|
|
— |
|
Loss on extinguishment of debt |
|
|
1,045 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses, deferred costs, and other |
|
|
6,504 |
|
|
|
(200 |
) |
Accounts payable, accrued expenses, and other |
|
|
1,488 |
|
|
|
(1,332 |
) |
Deferred revenue |
|
|
(121 |
) |
|
|
(129 |
) |
Net cash used in operating activities |
|
|
(14,259 |
) |
|
|
(16,117 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Maturities of investments |
|
|
43,202 |
|
|
|
30,156 |
|
Purchases of property and equipment |
|
|
— |
|
|
|
(410 |
) |
Purchases of investments |
|
|
(26,585 |
) |
|
|
(46,082 |
) |
Net cash provided by (used in) investing activities |
|
|
16,617 |
|
|
|
(16,336 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from common stock issued |
|
|
6,761 |
|
|
|
30,192 |
|
Payments of offering costs and underwriting discounts and commissions |
|
|
(203 |
) |
|
|
(2,131 |
) |
Proceeds from employee stock purchase plan issuance |
|
|
21 |
|
|
|
20 |
|
Proceeds from senior convertible notes |
|
|
16,000 |
|
|
|
— |
|
Payments of senior convertible notes issuance costs |
|
|
(1,253 |
) |
|
|
— |
|
Payment of loan payable expected to be refinanced |
|
|
(15,973 |
) |
|
|
— |
|
Net cash provided by financing activities |
|
|
5,353 |
|
|
|
28,081 |
|
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
|
7,711 |
|
|
|
(4,372 |
) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
11,767 |
|
|
|
11,469 |
|
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
19,478 |
|
|
$ |
7,097 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
411 |
|
|
$ |
901 |
|
Cash received for interest |
|
$ |
540 |
|
|
$ |
359 |
|
Noncash financing and investing activities: |
|
|
|
|
|
|
|
|
Operating lease liabilities arising from obtaining right-of-use assets |
|
$ |
3,365 |
|
|
$ |
— |
|
Deferred offering costs reclassified to additional-paid-in capital |
|
$ |
4 |
|
|
$ |
84 |
|
Common stock issued for settlement of senior convertible notes |
|
$ |
2,984 |
|
|
$ |
— |
|
The accompanying notes are an integral part of the financial statements.
3
NOTES TO THE FINANCIAL STATEMENTS
(unaudited)
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, committed to positively impacting the lives of patients suffering from difficult-to-treat and often life-threatening infections by delivering innovative therapies. The Company is developing its lead product candidate, ibrexafungerp, as the first representative of a novel oral and intravenous triterpenoid antifungal family for the treatment of several fungal infections, including serious and life-threatening invasive fungal infections.
The Company has incurred losses and negative cash flows from operations since its initial public offering ("IPO") in May 2014 and expects to continue to incur losses. The Company's liquidity over the next 12 months could be materially affected by, among other things: its ability to raise capital through equity offerings, debt financings, other non-dilutive third-party funding (e.g., grants), strategic alliances and licensing or collaboration arrangements, key ibrexafungerp development and regulatory events, costs related to its development of ibrexafungerp, and other factors. The Company believes it is probable that its existing cash, cash equivalents, and short-term investments will provide sufficient funds to enable it to meet its obligations for at least the next 12 months. The Company anticipates it may need to raise additional capital in order to continue to execute its operating plan thereafter. Additional funding may not be available to the Company on favorable terms, or at all. If the Company is not able to secure additional funding when needed, it may have to delay, reduce the scope of or eliminate one or more of its clinical trials or research and development programs or make changes to its operating plan.
Shelf Registration Filing
On August 31, 2018, the Company filed a shelf registration statement on Form S-3 (File No. 333-227167) with the SEC, which was declared effective on September 14, 2018 (the “Shelf Registration”). The Shelf Registration contained three prospectuses:
|
• |
a base prospectus which covers the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $175.0 million of the Company's common stock, preferred stock, debt securities and warrants, including common stock or preferred stock issuable upon conversion of debt securities, common stock issuable upon conversion of preferred stock, or common stock, preferred stock or debt securities issuable upon the exercise of warrants; |
|
• |
a prospectus covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $25.0 million of the Company's common stock that may be issued and sold under a Controlled Equity Offering Sales AgreementSM (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”). Pursuant to the Sales Agreement, the Company may sell from time to time, at its option, up to an aggregate of $25.0 million of the Company’s common stock, through Cantor, as sales agent. Pursuant to the Sales Agreement, sales of the common stock, if any, will be made under the Company’s effective Shelf Registration; and |
|
• |
a warrant prospectus covering the offering, issuance, and sale of the Company’s common stock issuable upon the exercise of warrants, consisting of (i) warrants to purchase 4,218,750 shares of the Company’s common stock at an exercise price of $3.00 per share originally issued by the Company on June 24, 2016, (ii) warrants to purchase 13,198,075 shares of the Company’s common stock at an exercise price of $1.85 per share originally issued by the Company on March 8, 2018, and (iii) warrants to purchase 7,988,175 shares of the Company’s common stock at an exercise price of $2.00 per share originally issued by the Company on March 8, 2018. The warrants to purchase 13,198,075 shares of the Company’s common stock expired on March 14, 2019. Upon full exercise for cash of the warrants outstanding on June 30, 2019, the holders of the warrants would pay the Company an aggregate of approximately $28.6 million. See Note 8 for further details. |
The common stock that may be offered, issued and sold by the Company under the Sales Agreement is included in the $175.0 million of securities that may be offered, issued and sold by the Company under the base prospectus. Upon termination of the Sales Agreement with Cantor, any portion of the $25.0 million included in the Sales Agreement that is not sold pursuant to the Sales Agreement will be available for sale in other offerings pursuant to the base prospectus and a corresponding prospectus supplement. As of June 30, 2019, approximately $167.1 million of securities registered under the base prospectus are available to be offered, issued and sold by the Company.
4
Unaudited Interim Financial Information
The accompanying unaudited financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States, or 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 six months ended June 30, 2019, are not necessarily indicative of the results for the full year or the results for any future periods. These interim 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 14, 2019.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates include: 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; the estimates and assumptions used in determining the Company’s incremental borrowing rate for the discounting of the Company’s operating lease liability, and the estimates and assumptions utilized in measuring the fair values of the warrant and derivative liabilities each reporting period.
The accompanying unaudited 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, 2018, except as described below.
Basic and Diluted Net Loss per Share of Common Stock
The Company calculates net loss per common share in accordance with FASB ASC 260, Earnings Per Share ("Topic 260”). Basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period.
The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for the three and six months ended June 30, 2019 and 2018, as the result would be anti-dilutive:
|
Three and Six Months Ended June, |
|
|||||
|
2019 |
|
|
2018 |
|
||
Warrants to purchase Series C-1 Preferred |
|
— |
|
|
|
14,033 |
|
Warrants to purchase common stock associated with Solar Capital Ltd. loan agreement |
|
122,435 |
|
|
|
122,435 |
|
Warrants to purchase common stock associated with June 2016 public offering |
|
4,218,750 |
|
|
|
4,218,750 |
|
Warrants to purchase common stock associated with March 2018 public offering - Series 1 |
|
— |
|
|
|
13,313,625 |
|
Warrants to purchase common stock associated with March 2018 public offering - Series 2 |
|
7,988,175 |
|
|
|
7,988,175 |
|
Outstanding stock options |
|
5,578,978 |
|
|
|
4,076,415 |
|
Outstanding restricted stock units |
|
967,227 |
|
|
|
101,425 |
|
Common stock associated with 6% convertible senior notes |
|
11,382,000 |
|
|
|
— |
|
Total |
|
30,257,565 |
|
|
|
29,834,858 |
|
Convertible Debt and Derivative Liability
In connection with the Company’s issuance of its 6.0% Convertible Senior Notes due 2025 (the “Notes”), the Company bifurcated the embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, and recorded the embedded conversion option as a long-term derivative liability in the Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging. The convertible debt and the derivative liability associated with the Notes are presented in total on the unaudited balance sheet as the convertible debt and derivative liability. The convertible debt is carried at amortized cost. 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.
5
Amortization of Debt Issuance Costs and Discount
The Company’s convertible debt is recorded net of debt issuance costs which comprised issuance costs and an advisory fee. The portion of the debt issuance costs allocated to the convertible debt, based on the amount of proceeds allocated between the convertible debt and the derivative liability, is being amortized over the term of the convertible debt using the effective interest method in addition to the discount initially recognized for the fair value of the bifurcated derivative liability from the convertible debt. Debt issuance costs allocated to the derivative liability were included in other expense as a component of the fair value adjustment for the six months ended June 30, 2019. The Company's previous term loan with Solar Capital Ltd. (“Solar”), which was paid in full during the three months ended March 31, 2019 (see Note 6), was recorded net of debt discount which comprised issuance costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the term loan. The resulting debt discount was being amortized over the term of the term loan using the straight-line method, which approximates the effective interest method. The amortization of debt issuance costs and discount is included in the accompanying unaudited statements of operations.
Recently Adopted Accounting Pronouncements
The Company adopted the FASB’s ASU No. 2016-02, Leases, or ASU 2016-02, on January 1, 2019, utilizing the modified retrospective basis. ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability, initially measured at the present value of future lease payments, on the balance sheet and expands disclosure requirements regarding leasing arrangements. The Company elected the practical expedients under ASC 842-10-65-1(f) and ASC 842-10-15-37 that allowed the Company to forego the requirement to reassess the lease classification of its existing office lease and to combine the lease and nonlease components associated with its office lease as a single lease component. The consideration in the office lease that is allocated to the single lease component includes the fixed payments for the right to use the office space as well as common area maintenance. The office lease also contains costs associated with certain expense escalation, property taxes, insurance, parking, and utilities which are all considered variable payments and are excluded from the operating lease liability. The adoption of this accounting standard did not materially impact the Company’s results of operations, other than the recognition of the operating lease right-of-use asset and lease liability. See Note 7 for further details.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or 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. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact ASU 2016-13 will have on its financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13. ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820, Fair Value Measurement. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact ASU 2018-13 will have on its financial statements.
6
The following table summarizes the held-to-maturity securities held at June 30, 2019 and December 31, 2018 (in thousands):
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
||||
As of December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government securities |
|
$ |
14,946 |
|
|
$ |
14 |
|
|
$ |
(15 |
) |
|
$ |
14,945 |
|
Commercial paper |
|
|
8,772 |
|
|
|
— |
|
|
|
— |
|
|
|
8,772 |
|
Overnight repurchase agreement |
|
|
9,000 |
|
|
|
— |
|
|
|
— |
|
|
|
9,000 |
|
Total short-term investments |
|
$ |
32,718 |
|
|
$ |
14 |
|
|
$ |
(15 |
) |
|
$ |
32,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
||||
As of June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government securities |
|
$ |
10,486 |
|
|
$ |
10 |
|
|
$ |
(6 |
) |
|
$ |
10,490 |
|
Commercial paper |
|
|
2,094 |
|
|
|
— |
|
|
|
— |
|
|
|
2,094 |
|
Overnight repurchase agreement |
|
|
3,500 |
|
|
|
— |
|
|
|
— |
|
|
|
3,500 |
|
Total short-term investments |
|
$ |
16,080 |
|
|
$ |
10 |
|
|
$ |
(6 |
) |
|
$ |
16,084 |
|
All held-to-maturity short-term investments at June 30, 2019 and December 31, 2018 will mature in less than one year. The gross unrealized gains and losses for the Company's commercial paper and overnight repurchase agreement are not significant. The Company carries short-term investments at amortized cost. The fair value of the short-term investments is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.
4. |
Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
Prepaid research and development services |
|
$ |
236 |
|
|
$ |
245 |
|
Prepaid insurance |
|
|
470 |
|
|
|
200 |
|
Other prepaid expenses |
|
|
97 |
|
|
|
20 |
|
NOL sale receivable |
|
|
— |
|
|
|
6,732 |
|
Other current assets |
|
|
55 |
|
|
|
54 |
|
Total prepaid expenses and other current assets |
|
$ |
858 |
|
|
$ |
7,251 |
|
5. |
Accrued Expenses |
Accrued expenses consisted of the following (in thousands):
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
Accrued research and development expenses |
|
$ |
2,097 |
|
|
$ |
587 |
|
Accrued employee bonus compensation |
|
|
684 |
|
|
|
1,197 |
|
Employee withholdings |
|
|
22 |
|
|
|
21 |
|
Other accrued expenses |
|
|
611 |
|
|
|
298 |
|
Total accrued expenses |
|
$ |
3,414 |
|
|
$ |
2,103 |
|
6. |
Borrowings |
On September 30, 2016, the Company entered into a loan agreement with Solar, in its capacity as administrative and collateral agent and as lender. Pursuant to the loan agreement, Solar was providing the Company with a 48-month secured term loan in the amount of $15.0 million. The term loan bore interest at a floating rate equal to the LIBOR rate in effect plus 8.49%.
On March 7, 2019, the Company entered into a Senior Convertible Note Purchase Agreement (the “Note Purchase Agreement”) with Puissance Life Science Opportunities Fund VI (“Puissance”). Pursuant to the Note Purchase Agreement, on March 7, 2019, the Company issued and sold to Puissance $16.0 million aggregate principal amount of its Notes, resulting in $14.7 million in net proceeds after deducting $1.3 million for an advisory fee and other issuance costs. The Company used the net proceeds to pay the remaining outstanding Solar term loan in full and recorded a loss on debt extinguishment of $0.8
7
million during the three months ended March 31, 2019. The loss on debt extinguishment of $0.8 million for the three months ended March 31, 2019 was recognized as the difference between the reacquisition price of the outstanding Solar debt of $15.9 million and the $15.1 million net carrying value of the Solar debt obligation prior to repayment. In accordance with ASC 470-10-45-14(a), the Company reclassified the short-term portion of the Solar term loan on the balance sheet as of December 31, 2018 to long-term given the Company had the intent and ability to refinance the short-term obligation on a long-term basis.
As of June 30, 2019, the Company's $14.6 million in convertible debt and derivative liability consists of the convertible debt balance of $7.7 million presented net of the unamortized debt issuance costs allocated to the convertible debt of $0.6 million and the bifurcated embedded conversion option derivative liability of $6.9 million. In connection with the Company’s issuance of its Notes, the Company bifurcated the embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, and recorded the embedded conversion option as a long-term derivative liability in the Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging, at its initial fair value of $7.0 million as the interest make-whole provision is settled in shares of common stock. Debt issuance costs of $0.6 million initially allocated to the derivative liability were written off upon issuance of the Notes and were recognized in the loss on the fair value adjustment for the derivative liability for the three months ended March 31, 2019. For the three and six months ended June 30, 2019, the Company recognized a $1.3 million gain and a $2.1 million loss on the fair value adjustments for the derivative liability, respectively, and recognized $0.4 million and $0.5 million in amortization of debt issuance costs and discount for the three and six months ended June 30, 2019, respectively, related to the Notes.
In April 2019, Puissance converted $2.0 million of the Notes for 1,626,000 shares of common stock. Upon conversion of the $2.0 million of the Notes, the Company recognized a $0.2 million extinguishment loss which represents the difference between the total net carrying amount of the convertible debt and derivative liabilities of $2.8 million and the fair value of the consideration issued of $3.0 million.
The Company estimated the fair value of the convertible debt and derivative liability using a binomial lattice valuation model and Level 3 inputs. At June 30, 2019, the fair value of the senior convertible notes is $15.0 million.
The Notes were issued and sold for cash at a purchase price equal to 100% of their principal amount, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), due to the Notes being issued to one financially sophisticated investor. The Notes bear interest at a rate of 6.0% per annum payable semiannually in arrears on March 15 and September 15 of each year, beginning September 15, 2019. The Notes will mature on March 15, 2025, unless earlier converted, redeemed or repurchased. The Notes constitute general, senior unsecured obligations of the Company.
The holder of the Notes may convert their Notes at their option at any time prior to the close of business on the business day immediately preceding March 15, 2025 into shares of the Company’s common stock. The initial conversion rate is 739.0983 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $1.35, and is subject to adjustment in certain events described in the Note Purchase Agreement. The Holder upon conversion may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in shares of common stock. In addition, following certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate if the holder elects to convert its Notes in connection with such a corporate event. Subject to adjustment in the conversion rate, the number of shares that the Company may deliver in connection with a conversion of the Notes, including those delivered in connection with an interest make-whole payment, will not exceed a cap of 813 shares of common stock per $1,000 principal amount of the Notes.
On or after March 15, 2022, the Company has the right, at its election, to redeem all or any portion of the Notes not previously converted if the last reported sale price per share of common stock exceeds 130% of the conversion price on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. The redemption price will be 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If a “fundamental change” (as defined in the Note Purchase Agreement) occurs, then, subject to certain exceptions, the Company must offer to repurchase the Notes for cash at a repurchase price of 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
7. |
Commitments and Contingencies |
Leases
On March 1, 2018, the Company entered into a long-term lease agreement for approximately 19,275 square feet of office space in Jersey City, New Jersey, that the Company identified as an operating lease under ASC 840 (the “Lease”). The lease term is eleven years from August 1, 2018, the commencement date, with total lease payments of $7.3 million over the lease term. The Company has the option to renew for two consecutive five-year periods from the end of the first term and the
8
Company is not reasonably certain that the option to renew the Lease will be exercised. Under the Lease, the Company must furnish a security deposit in the form of a standby letter of credit in the amount of $0.3 million, which will be reduced by fifty-five thousand dollars every two years for ten years after the commencement of the lease. The security deposit is classified as restricted cash in the accompanying balance sheets.
On January 1, 2019, a right-of-use asset and a corresponding operating lease liability of $3.4 million was recognized for the Lease. The consideration in the Lease allocated to the single lease component includes the fixed payments for the right to use the office space as well as common area maintenance. The Lease also contains costs associated with certain expense escalation, property taxes, insurance, parking, and utilities which are all considered variable payments and are excluded from the operating lease liability. In determining the operating lease liability at January 1, 2019, the Company utilized its incremental borrowing rate. The incremental borrowing rate approximated the prevailing market interest rate the Company would incur to borrow a similar amount equal to the total Lease payments on a collateralized basis over the term of the Lease. The following table summarizes certain quantitative information associated with the amounts recognized in the financial statements for the Lease (dollars in thousands):
|
|
Three Months Ended June 30, 2019 |
|
|
Six Months Ended June 30, 2019 |
|
||
Operating lease cost |
|
$ |
166 |
|
|
$ |
332 |
|
Variable lease cost |
|
|
8 |
|
|
|
17 |
|
Total operating lease expense |
|
$ |
174 |
|
|
$ |
349 |
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liability |
|
$ |
55 |
|
|
$ |
219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
Remaining Lease term (years) |
|
|
|
|
|
|
10.08 |
|
Discount rate |
|
|
|
|
|
|
15 |
% |
Rent expense was approximately $0.1 million for both the three and six months ended June 30, 2018. Future minimum lease payments for the Lease as of June 30, 2019 and December 31, 2018 are as follows (in thousands):
|
|
|
|
December 31, 2018 |
|
|
2019 |
|
|
|
$ |
498 |
|
2020 |
|
|
|
|
508 |
|
2021 |
|
|
|
|
518 |
|
2022 |
|
|
|
|
529 |
|
2023 |
|
|
|
|
716 |
|
Thereafter |
|
|
|
|
4,203 |
|
Total |
|
|
|
$ |
6,972 |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
2019 |
|
|
|
$ |
279 |
|
2020 |
|
|
|
|
507 |
|
2021 |
|
|
|
|
517 |
|
2022 |
|
|
|
|
527 |
|
2023 |
|
|
|
|
715 |
|
Thereafter |
|
|
|
|
4,263 |
|
Total |
|
|
|
$ |
6,808 |
|
9
The presentation of the operating lease liability and right-of-use asset as of June 30, 2019 and January 1, 2019 are as follows (in thousands):
|
|
June 30, 2019 |
|
|
January 1, 2019 |
|
||
Present value of future minimum lease payments |
|
$ |
3,401 |
|
|
$ |
3,368 |
|
|
|
|
|
|
|
|
|
|
Operating lease liability, current portion |
|
$ |
28 |
|
|
$ |
23 |
|
Operating lease liability, long-term portion |
|
|
3,373 |
|
|
|
3,345 |
|
Total operating lease liability |
|
$ |
3,401 |
|
|
$ |
3,368 |
|
|
|
|
|
|
|
|
|
|
Difference between future minimum lease payments and discounted cash flows |
|
$ |
3,407 |
|
|
$ |
3,604 |
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use asset |
|
$ |
3,284 |
|
|
$ |
3,365 |
|
License Arrangement with Potential Future Expenditures
As of June 30, 2019, the Company had a license arrangement with Merck Sharp & Dohme Corp., or Merck, that involves potential future expenditures. Under the license arrangement, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. Ibrexafungerp is the Company's lead product candidate. Pursuant to the terms of the license agreement, Merck is eligible to receive milestone payments from the Company that could total $19.0 million upon occurrence of specific events, including initiation of a Phase 3 clinical study, new drug application, and marketing approvals in each of the U.S., major European markets and Japan. In addition, Merck is eligible to receive tiered royalties from the Company based on a percentage of worldwide net sales of ibrexafungerp. The aggregate royalty percentages are mid- to high-single digits.
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, respectively, to the license agreement with Merck which clarified what would constitute the initiation of a Phase 3 clinical trial for the purpose of milestone payment. Except as described above, all other terms and provisions of the license agreement remain in full force and effect. 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. The milestone payment was recognized in the unaudited statement of operations in research and development expense for the six months ended June 30, 2019 and is included in cash used in operating activities on the statement of cash flows.
Clinical Development Arrangements
The Company has entered into, and expects to continue to enter into, contracts in the normal course of business with various third parties who support its clinical trials, preclinical research studies, and other services related to its development activities. The scope of the services under these agreements can generally be modified at any time, and the agreement can be terminated by either party after a period of notice and receipt of written notice.
8. |
Stockholder's Equity |
Authorized, Issued, and Outstanding Common Stock
The Company’s authorized common stock has a par value of $0.001 per share and consists of 250,000,000 shares as of June 30, 2019, and 125,000,000 as of December 31, 2018; 54,520,131 and 47,971,989 shares were issued and outstanding at June 30, 2019, and December 31, 2018, respectively. On June 18, 2019, the Company's stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of common stock from 125,000,000 to 250,000,000. The following table summarizes common stock share activity for the three and six months ended June 30, 2019 and 2018 (dollars in thousands):
10
|
|
Three Months Ended June 30, 2018 |
|
|||||||||||||||||
|
|
Shares of Common Stock |
|
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Equity |
|
|||||
Balance, March 31, 2018 |
|
|
46,843,441 |
|
|
$ |
47 |
|
|
$ |
246,049 |
|
|
$ |
(209,252 |
) |
|
$ |
36,844 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,757 |
) |
|
|
(10,757 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
468 |
|
|
|
— |
|
|
|
468 |
|
Common stock issued for vested restricted stock units |
|
|
631 |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
Balance, June 30, 2018 |
|
|
46,844,072 |
|
|
$ |
47 |
|
|
$ |
246,517 |
|
|
$ |
(220,011 |
) |
|
$ |
26,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018 |
|
|||||||||||||||||
|
|
Shares of Common Stock |
|
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Equity |
|
|||||
Balance, December 31, 2017 |
|
|
28,971,651 |
|
|
$ |
29 |
|
|
$ |
226,631 |
|
|
$ |
(205,250 |
) |
|
$ |
21,410 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(14,761 |
) |
|
|
(14,761 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
893 |
|
|
|
— |
|
|
|
893 |
|
Common stock issued through employee stock purchase plan |
|
|
13,591 |
|
|
|
— |
|
|
|
20 |
|
|
|
— |
|
|
|
20 |
|
Common stock issued, net of expenses |
|
|
17,852,193 |
|
|
|
18 |
|
|
|
18,980 |
|
|
|
— |
|
|
|
18,998 |
|
Common stock issued for vested restricted stock units |
|
|
6,637 |
|
|
|
— |
|
|
|
(7 |
) |
|
|
— |
|
|
|
(7 |
) |
Balance, June 30, 2018 |
|
|
46,844,072 |
|
|
$ |
47 |
|
|
$ |
246,517 |
|
|
$ |
(220,011 |
) |
|
$ |
26,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019 |
|
|||||||||||||||||
|
|
Shares of Common Stock |
|
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Equity |
|
|||||
Balance, March 31, 2019 |
|
|
50,232,429 |
|
|
$ |
50 |
|
|
$ |
251,906 |
|
|
$ |
(240,626 |
) |
|
$ |
11,330 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,403 |
) |
|
|
(8,403 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
446 |
|
|
|
— |
|
|
|
446 |
|
Common stock issued, net of expenses |
|
|
2,660,909 |
|
|
|
2 |
|
|
|
4,044 |
|
|
|
— |
|
|
|
4,046 |
|
Common stock issued for April 2019 conversion of Notes |
|
|
1,626,000 |
|
|
|
2 |
|
|
|
2,982 |
|
|
|
— |
|
|
|
2,984 |
|
Common stock issued for vested restricted stock units |
|
|
793 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Balance, June 30, 2019 |
|
|
54,520,131 |
|
|
$ |
54 |
|
|
$ |
259,377 |
|
|
$ |
(249,029 |
) |
|
$ |
10,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019 |
|
|||||||||||||||||
|
|
Shares of Common Stock |
|
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Equity |
|
|||||
Balance, December 31, 2018 |
|
|
47,971,989 |
|
|
$ |
48 |
|
|
$ |
248,895 |
|
|
$ |
(217,718 |
) |
|
$ |
31,225 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(31,311 |
) |
|
|
(31,311 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
938 |
|
|
|
— |
|
|
|
938 |
|
Common stock issued through employee stock purchase plan |
|
|
19,259 |
|
|
|
— |
|
|
|
21 |
|
|
|
— |
|
|
|
21 |
|
Common stock issued, net of expenses |
|
|
4,887,478 |
|
|
|
6 |
|
|
|
6,550 |
|
|
|
— |
|
|
|
6,556 |
|
Common stock issued for April 2019 conversion of Notes |
|
|
1,626,000 |
|