UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period to
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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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 |
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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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Accelerated filer |
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Smaller reporting company |
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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
As of May 1, 2022, there were
SCYNEXIS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
TABLE OF CONTENTS
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Item 1. |
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1 |
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Unaudited Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 |
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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 1A. |
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Item 2. |
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Item 6. |
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31 |
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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March 31, 2022 |
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December 31, 2021 |
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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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Prepaid expenses and other current assets |
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Accounts receivable, net |
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Inventory |
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Total current assets |
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Other assets |
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Deferred offering costs |
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Restricted cash |
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Property and equipment, net |
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Intangible assets, net |
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Operating lease right-of-use asset (See Note 7) |
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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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Other liabilities, current portion (See Note 6) |
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Warrant liabilities |
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Operating lease liability, current portion (See Note 7) |
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Total current liabilities |
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Other liabilities (See Note 6) |
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Warrant liabilities |
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Convertible debt and derivative liability (See Note 6) |
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Loan payable |
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Operating lease liability (See Note 6) |
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Total liabilities |
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Commitments and contingencies |
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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 March 31, |
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2022 |
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2021 |
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Revenue: |
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Product revenue, net |
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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 revenues |
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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 from operations |
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Other expense (income): |
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Loss on extinguishment of debt |
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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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Other income |
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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 before taxes |
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Income tax (benefit) expense |
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Net loss |
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$ |
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$ |
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Net loss per share attributable to common stockholders – basic |
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Net loss per share – basic |
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$ |
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$ |
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Net loss per share attributable to common stockholders – diluted |
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Net loss per share – diluted |
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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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Three Months Ended March 31, |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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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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Loss on extinguishment of debt |
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Changes in operating assets and liabilities: |
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Prepaid expenses, accounts receivable, inventory, and other |
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Accounts payable, accrued expenses, other liabilities, and other |
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Net cash 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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Net cash used in by 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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Proceeds from employee stock purchase plan issuances |
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Repurchase of shares to satisfy tax withholdings |
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Net cash provided by (used in) 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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Common stock issued for settlement of senior convertible notes |
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$ |
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$ |
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Purchased intangible assets included in accounts payable and accrued expenses |
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$ |
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$ |
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Deferred offering and issuance costs included in accounts payable and accrued expenses |
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$ |
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$ |
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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 potentially help millions of patients worldwide in need of new options to overcome and prevent difficult-to-treat and drug-resistant infections. The Company is developing its lead product candidate, ibrexafungerp, as a broad-spectrum, intravenous (“IV”)/oral agent for multiple fungal indications in both the community and hospital settings. 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, and the Company has commenced the commercialization of BREXAFEMME in the U.S.
The Company has incurred significant losses and negative cash flows from operations since its initial public offering in May 2014 and expects to continue to incur losses and negative cash flows for the foreseeable future. As a result, the Company had an accumulated deficit of $
The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Intercompany balances and transactions are eliminated in consolidation.
New Jersey Technology Business Tax Certificate Transfer (NOL) Program
The New Jersey Technology Business Tax Certificate Transfer (NOL) program, administered by the New Jersey Economic Development Authority, enables approved biotechnology companies to sell their unused net operating losses (“NOLs”) and research and development tax credits to unaffiliated, profitable corporate taxpayers in the State of New Jersey. For the three months ended March 31, 2022, the Company recognized a $
Unaudited Interim Condensed Consolidated Financial Information
The accompanying unaudited interim condensed consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, and cash flows. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes set forth in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and judgements include: revenue recognition including gross to net estimates and the identification of performance obligations in licensing
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arrangements, determination of the fair value of stock-based compensation grants; the estimate of services and effort expended by third-party research and development service providers used to recognize research and development expense; and the estimates and assumptions utilized in measuring the fair values of the warrant and derivative liabilities each reporting period.
2. |
Summary of Significant Accounting Policies |
The accompanying unaudited condensed consolidated financial statements and notes follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2021, except as described below.
Basic and Diluted Net Loss per Share of Common Stock
The Company calculates net loss per common share in accordance with ASC 260, Earnings Per Share. Basic net loss per common share for the three months ended March 31, 2022 and 2021 was determined by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Per ASC 260, Earnings Per Share, the weighted average number of common shares outstanding utilized for determining the basic net loss per common share for the three months ended March 31, 2022 includes the outstanding pre-funded warrants to purchase
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Three Months Ended March 31, |
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2022 |
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2021 |
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Net loss |
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$ |
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$ |
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Dilutive effect of warrant liability |
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Dilutive effect of convertible debt |
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Net loss allocated to common shares |
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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 warrant liability |
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Dilutive effect of convertible debt |
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Weighted average common shares outstanding – diluted |
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Net loss per share – diluted |
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$ |
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$ |
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The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for the three months ended March 31, 2022 and 2021, as the result would be anti-dilutive:
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Three Months Ended March 31, |
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2022 |
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2021 |
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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 June 2016 public offering |
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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 2019 Public Offering |
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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 Loan Agreement |
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Warrants to purchase common stock associated with Solar 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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Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 require a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In November
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2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which revised the effective dates for ASU 2016-13 for public business entities that meet the SEC definition of a smaller reporting company to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. As a smaller reporting company, the Company is currently evaluating the impact ASU 2016-13 will have on its unaudited interim condensed consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity: Accounting for Convertible Instruments and Contracts in and Entity’s Own Equity (“ASU 2020-06”). The amendments in ASU 2020-06 reduce the number of accounting models for convertible debt instruments and revises certain guidance relating to the derivative scope exception and earnings per share. The amendments in ASU 2020-06 are effective for public business entities that meet the definition of a SEC filer and a smaller reporting company for fiscal years beginning after December 15, 2023, and interim periods within those years. As a smaller reporting company, the Company is currently evaluating the impact ASU 2020-06 will have on its unaudited interim condensed consolidated financial statements.
3. |
Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets consisted of the following (in thousands):
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March 31, 2022 |
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December 31, 2021 |
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Prepaid research and development services |
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$ |
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$ |
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Prepaid insurance |
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Other prepaid expenses |
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Other current assets |
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Total prepaid expenses and other current assets |
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$ |
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$ |
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4. |
Inventory |
Inventory consisted of the following (in thousands):
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March 31, 2022 |
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December 31, 2021 |
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Raw materials |
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$ |
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$ |
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Work in process |
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Finished goods |
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Total inventory |
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$ |
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$ |
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As of March 31, 2022 and December 31, 2021, the Company’s inventory consisted of $
5. |
Accrued Expenses |
Accrued expenses consisted of the following (in thousands):
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March 31, 2022 |
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December 31, 2021 |
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Accrued research and development expenses |
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$ |
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$ |
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Accrued employee bonus compensation |
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Other accrued expenses |
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Accrued co-pay rebates |
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Total accrued expenses |
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$ |
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$ |
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6. |
Borrowings |
Loan Agreement
On May 13, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), as administrative agent and collateral agent (in such capacity, the “Agent”) and a lender, and Silicon Valley Bank, as a lender (“SVB,” and collectively with Hercules, the “Lenders”) for an aggregate principal amount of $
6
Under the terms of the Loan Agreement, the Company received an initial tranche of $
The Term Loan will mature on
The Loan Agreement contains customary closing fees, prepayment fees and provisions, events of default, and representations, warranties and covenants, including a financial covenant requiring the Company to maintain certain levels of trailing three-month net product revenue solely from the sale of ibrexafungerp commencing on June 30, 2022. The financial covenant will be waived at any time in which the Company maintains unrestricted and unencumbered cash in accounts maintained with SVB equal to at least
Future principal debt payments on the currently outstanding loan payable as of March 31, 2022 are as follows (in thousands):
2021 |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Total principal payments |
|
|
|
|
Final fee due at maturity |
|
|
|
|
Total principal and final fee payment |
|
|
|
|
Unamortized discount and debt issuance costs |
|
|
( |
) |
Less current portion |
|
|
|
|
Loan payable, long term |
|
$ |
|
|
April 2020 Note Purchase Agreement
On
In January 2021, Puissance converted the remaining $
March 2019 Note Purchase Agreement
On
7
2025 (“March 2019 Notes”), resulting in $
As of March 31, 2022 and December 31, 2021, the Company’s March 2019 Notes consists of the convertible debt balance 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 March 31, 2022 and December 31, 2021, the fair value of the convertible debt and derivative liability for the March 2019 Notes is $
The March 2019 Notes were issued and sold for cash at a purchase price equal to
The
8
On or after
Other Liabilities
In February 2021, the Company partnered with Amplity Inc. (“Amplity”) for the commercial launch of ibrexafungerp for the treatment of VVC. Under the terms of the 5-year agreement, the Company will utilize Amplity’s commercial execution expertise and resources for sales force, remote engagement, training, market access and select operations services. The Company will maintain full ownership of ibrexafungerp and control of all strategic aspects of the launch. Amplity is deferring a portion of its direct service fees (“Deferred Fees”) in the first two years (2021 and 2022), up to a cap, which the Company will repay over three years starting in 2023. As of March 31, 2022 and December 31, 2021, Deferred Fees of $
The Deferred Fees will accrue until the earlier of (i) the cap is reached or (ii) December 31, 2022. The Deferred Fees will accrue interest at annual rate of
Amplity has the potential to earn a performance-based success fee (“Success Premium”) in the 2023-2025 time frame by exceeding certain revenue targets. The Company identified the Success Premium as a derivative under ASC 815 that qualified for a scope exception given the revenue targets are considered the predominant underlying of the Success Premium. For the three months ended March 31, 2022 and 2021, there was
7. |
Commitments and Contingencies |
Leases
On March 1, 2018, the Company entered into a long-term lease agreement for approximately
9
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. The incremental borrowing rate utilized 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.
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
Operating lease cost |
|
|
$ |
|
|
|
$ |
|
|
Variable lease cost |
|
|
|
( |
) |
|
|
( |
) |
Total operating lease expense |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liability |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Remaining Lease term (years) |
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
|
|
% |
|
|
|
% |
|
|
March 31, 2022 |
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
The presentations of the operating lease liability as of March 31, 2022 are as follows (in thousands):
|
|
March 31, 2022 |
|
|
Present value of future minimum lease payments |
|
$ |
|
|
|
|
|
|
|
Operating lease liability, current portion |
|
$ |
|
|
Operating lease liability, long-term portion |
|
|
|
|
Total operating lease liability |
|
$ |
|
|
|
|
|
|
|
Difference between future minimum lease payments and discounted cash flows |
|
$ |
|
|
License Arrangement with Potential Future Expenditures
As of March 31, 2022, the Company had a license arrangement with Merck Sharp & Dohme Corp., or Merck, as amended, that involves potential future expenditures. Under the license arrangement, executed in May 2013, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. In January 2014, Merck assigned the patents related to ibrexafungerp that it had exclusively licensed to the Company. Ibrexafungerp is the Company's lead product candidate. Pursuant to the terms of the license agreement, Merck was originally eligible to receive milestone payments from the Company that could total $
10
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 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.
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. |
Stockholders’ Equity |
Authorized, Issued, and Outstanding Common Stock
The Company’s authorized common stock has a par value of $
11
The following table summarizes common stock share activity for the three months ended March 31, 2022 and 2021 (dollars in thousands):
|
|
Three Months Ended March 31, 2022 |
|
|||||||||||||||||
|
|
Shares of Common Stock |
|
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders’ Equity |
|
|||||
Balance, December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |