Syndax(SNDX) - 2019 Q1 - Quarterly Report

Filing Information Details the company's quarterly report filing, registrant information, and filer status - Syndax Pharmaceuticals, Inc. filed its Quarterly Report on Form 10-Q for the period ended March 31, 2019[1][2] Registrant Information | Field | Value | | :--- | :--- | | Exact Name of Registrant | Syndax Pharmaceuticals, Inc. | | State of Incorporation | Delaware | | Commission File Number | 001-37708 | | Telephone Number | (781) 419-1400 | | Common Stock Trading Symbol | SNDX | | Exchange Registered On | The Nasdaq Stock Market, LLC | | Shares Outstanding (May 7, 2019) | 27,095,779 | | Filer Status | Accelerated filer, Smaller reporting company, Emerging growth company | Forward-Looking Statements Outlines forward-looking statements regarding future events, financial results, and clinical trial outcomes, subject to inherent risks - The report contains forward-looking statements regarding future events, financial results, and clinical trial outcomes, which are subject to known and unknown risks and uncertainties[6][7] - Key forward-looking statements include estimates for expenses and revenues, timing and data from clinical trials for entinostat (Phase 1b/2 with Tecentriq, Phase 3 for breast cancer), SNDX-6352 (Phase 1, Phase 1b for cGVHD), and SNDX-5613 (IND filing, Phase 1 for acute leukemias)[8] - Other forward-looking statements cover the ability to replicate clinical results, potential safety/efficacy of product candidates, regulatory approval, intellectual property, market adoption, and competitive developments[8] PART I. FINANCIAL INFORMATION Presents the company's financial information, including unaudited statements and management's discussion and analysis Item 1. Unaudited Financial Statements This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of comprehensive loss, and cash flows, along with detailed notes explaining the company's accounting policies, revenue recognition, lease accounting, net loss per share, significant agreements, fair value measurements, and changes in stockholders' equity for the periods presented Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and stockholders' equity at period-end Condensed Consolidated Balance Sheets (In thousands) | ASSETS | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $58,116 | $33,769 | | Short-term investments | $34,626 | $47,142 | | Total current assets | $97,633 | $83,346 | | Total assets | $99,392 | $83,938 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $4,350 | $1,439 | | Accrued expenses and other current liabilities | $9,266 | $13,149 | | Current portion of deferred revenue | $1,517 | $1,517 | | Current portion of right-of-use liability | $525 | $— | | Total current liabilities | $15,658 | $16,105 | | Long-term liabilities: | | | | Deferred revenue, less current portion | $14,271 | $14,650 | | Right-of-use liability, less current portion | $830 | $— | | Other long-term liabilities | $7 | $136 | | Total long-term liabilities | $15,108 | $14,786 | | Total liabilities | $30,766 | $30,891 | | Total stockholders' equity | $68,626 | $53,047 | | Total liabilities and stockholders' equity | $99,392 | $83,938 | - Total assets increased by $15.45 million (18.4%) from $83.94 million at December 31, 2018, to $99.39 million at March 31, 2019[13] - Cash and cash equivalents significantly increased by $24.35 million (72.1%) from $33.77 million to $58.12 million, while short-term investments decreased by $12.52 million (26.6%)[13] - Total stockholders' equity increased by $15.58 million (29.4%) from $53.05 million to $68.63 million, primarily due to financing activities[13] Condensed Consolidated Statements of Comprehensive Loss Details the company's revenues, expenses, and net loss for the reporting periods Condensed Consolidated Statements of Comprehensive Loss (In thousands, except per share data) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | License fees | $379 | $379 | $0 | 0% | | Total revenues | $379 | $379 | $0 | 0% | | Research and development | $11,279 | $15,339 | $(4,060) | -26.5% | | General and administrative | $3,911 | $4,791 | $(880) | -18.4% | | Total operating expenses | $15,190 | $20,130 | $(4,940) | -24.5% | | Loss from operations | $(14,811) | $(19,751) | $4,940 | -25.0% | | Interest income, net | $452 | $475 | $(23) | -4.8% | | Other income (expense) | $57 | $(122) | $179 | -146.7% | | Total other income (expense) | $509 | $353 | $156 | 44.2% | | Net loss | $(14,302) | $(19,398) | $5,096 | -26.3% | | Net loss per share (basic and diluted) | $(0.53) | $(0.79) | $0.26 | -32.9% | | Weighted-average common shares | 27,023,466 | 24,478,269 | 2,545,197 | 10.4% | - Net loss decreased by $5.1 million (26.3%) to $14.3 million for Q1 2019, compared to $19.4 million for Q1 2018, primarily due to a significant reduction in operating expenses[14] - Research and development expenses decreased by $4.06 million (26.5%) and general and administrative expenses decreased by $0.88 million (18.4%) year-over-year[14] - Revenue remained flat at $0.38 million for both periods, solely from license fees[14] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Change ($) | | :--- | :--- | :--- | :--- | | Net loss | $(14,302) | $(19,398) | $5,096 | | Net cash used in operating activities | $(16,831) | $(19,870) | $3,039 | | Net cash provided by investing activities | $12,752 | $12,644 | $108 | | Net cash provided by financing activities | $28,426 | $33 | $28,393 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $24,347 | $(7,193) | $31,540 | | Cash, cash equivalents and restricted cash—end of period | $58,332 | $28,196 | $30,136 | - Net cash used in operating activities decreased by $3.04 million (15.3%) to $16.83 million in Q1 2019, reflecting a smaller net loss[17] - Net cash provided by financing activities significantly increased to $28.43 million in Q1 2019 from $0.03 million in Q1 2018, driven by proceeds from direct stock offerings and at-the-market offerings[17] - The company reported a net increase of $24.35 million in cash, cash equivalents, and restricted cash for Q1 2019, a substantial improvement from a $7.19 million decrease in Q1 2018[17] Notes to Condensed Consolidated Financial Statements Provides detailed explanations of accounting policies, revenue recognition, leases, and other financial statement components 1. Nature of Business Describes the company's core operations as a clinical-stage biopharmaceutical entity - Syndax Pharmaceuticals, Inc. is a clinical-stage biopharmaceutical company focused on developing innovative cancer therapies, operating as a single segment[20] 2. Basis of Presentation Explains the accounting principles and assumptions used in preparing the financial statements - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP, reflecting all normal recurring adjustments for fair presentation[21] - The Company's results for Q1 2019 are not indicative of future periods and should be read in conjunction with the 2018 Annual Report on Form 10-K[21] 3. Summary of Significant Accounting Policies Outlines the key accounting policies and estimates applied in financial reporting - The Company's significant accounting policies are consistent with those disclosed in its 2018 Annual Report on Form 10-K[23] - Management uses estimates and assumptions in preparing financial statements, which are based on historical experience and various reasonable factors[24] - The Company adopted ASU 2016-02, Leases (ASC 842), effective January 1, 2019, using the prospective method, which did not materially impact its financial statements[25] 4. Revenue from Contracts with Customers Details revenue recognition from licensing agreements and related deferred revenue - Revenue is solely derived from the KHK License Agreement, granting KHK exclusive rights to develop and commercialize entinostat in Japan and Korea[27][31] - An upfront payment of $17.3 million (from a $25.0 million total, including equity investment) is recognized ratably as license fees over the performance period from December 2014 through 2029[28][31] - A $5.0 million development milestone payment received in December 2017 is also recognized over the license term[29][31] - Deferred revenue related to the KHK License Agreement was $15.8 million as of March 31, 2019[32] 5. Leases Explains the impact of new lease accounting standards on the balance sheet - The Company adopted ASC 842 on January 1, 2019, resulting in the recognition of an additional lease asset and liability of approximately $1.3 million, with no material impact on results of operations, equity, or cash flows[33][34] - As of March 31, 2019, the condensed consolidated balance sheet includes a $1.2 million operating lease Right-of-Use (ROU) asset and a $1.4 million ROU liability, primarily for two long-term building leases[36] Remaining Lease Payments (in thousands) as of March 31, 2019 | Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | | $1,465 | $571 | $894 | $- | $- | 6. Net Loss per Share Attributable to Common Stockholders Presents the calculation of net loss per share and potentially dilutive securities Net Loss per Share Attributable to Common Stockholders (In thousands, except share and per share data) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net loss attributable to common stockholders | $(14,302) | $(19,398) | | Net loss per share (basic and diluted) | $(0.53) | $(0.79) | | Weighted-average common shares | 27,023,466 | 24,478,269 | - Diluted net loss per common share is the same as basic net loss per common share due to reported losses[39] Potentially Dilutive Securities Excluded from Diluted EPS (in common stock equivalent shares) | Security Type | March 31, 2019 | March 31, 2018 | | :--- | :--- | :--- | | Options to purchase common stock | 5,629,120 | 4,206,832 | | Warrants to purchase common stock | 4,595,039 | — | | Employee Stock Purchase Plan | 27,471 | 15,804 | 7. Significant Agreements Summarizes key licensing and collaboration agreements with third parties - The Company has a license agreement with Vitae Pharmaceuticals, Inc. (Allergan) for Menin Assets, involving an upfront payment of $5.0 million and potential milestone payments up to $99.0 million (development/regulatory) and $70.0 million (sales-based), plus low single to low double-digit royalties[41][42] - A license agreement with UCB Biopharma Sprl for SNDX-6352 includes a $5.0 million upfront payment, potential development/regulatory milestones up to $119.5 million, sales-based milestones up to $250.0 million, and low double-digit royalties[43] - The ECOG Agreement with Eastern Cooperative Oncology Group for the Phase 3 entinostat clinical trial involves aggregate payment obligations of approximately $24.5 million, with $8.8 million remaining over three years[44][45] - The Bayer Agreement for entinostat includes a $2.0 million upfront license fee (expensed in 2007), potential future milestone payments up to $150.0 million, and sliding scale royalties on net sales[46][47] 8. Fair Value Measurements Categorizes assets and liabilities based on fair value measurement inputs - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[48][50] Fair Value Measurements of Assets (In thousands) | Asset | March 31, 2019 Total Carrying Value | March 31, 2019 Level 1 | March 31, 2019 Level 2 | December 31, 2018 Total Carrying Value | December 31, 2018 Level 1 | December 31, 2018 Level 2 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $58,116 | $52,604 | $5,512 | $33,769 | $29,270 | $4,499 | | Short-term investments | $34,626 | $— | $34,626 | $47,142 | $— | $47,142 | | Total assets | $92,742 | $52,604 | $40,138 | $80,911 | $29,270 | $51,641 | - Cash and cash equivalents include Level 1 (overnight investments, money market funds) and Level 2 (corporate bonds, commercial paper) assets[51] - Short-term investments are classified as Level 2, consisting of commercial paper, highly rated corporate bonds, and asset-backed securities[51] 9. Prepaid Expenses and Other Current Assets Details the composition and changes in prepaid expenses and other current assets Prepaid Expenses and Other Current Assets (In thousands) | Item | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Short-term deposits | $2,631 | $663 | | Prepaid clinical supplies | $62 | $101 | | Interest receivable on investments | $223 | $253 | | Reimbursable costs | $790 | $797 | | Prepaid insurance | $771 | $188 | | Other | $313 | $332 | | Total | $4,790 | $2,334 | - Total prepaid expenses and other current assets increased by $2.46 million (105.0%) from $2.33 million at December 31, 2018, to $4.79 million at March 31, 2019, primarily due to an increase in short-term deposits and prepaid insurance[53] 10. Accrued Expenses and Other Current Liabilities Breaks down accrued expenses and other current liabilities and their changes Accrued Expenses and Other Current Liabilities (In thousands) | Item | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Accrued professional fees | $880 | $484 | | Accrued compensation and related costs | $1,147 | $2,804 | | Accrued clinical costs | $6,886 | $9,726 | | Other | $353 | $135 | | Total | $9,266 | $13,149 | - Total accrued expenses and other current liabilities decreased by $3.88 million (29.5%) from $13.15 million at December 31, 2018, to $9.27 million at March 31, 2019, mainly due to decreases in accrued compensation and clinical costs[54] 11. Stock-Based Compensation Reports on stock-based compensation expense and outstanding equity awards Stock-Based Compensation Expense (In thousands) | Category | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Research and development | $534 | $451 | | General and administrative | $1,058 | $970 | | Total | $1,592 | $1,421 | - Total stock-based compensation expense increased by $0.17 million (12.0%) to $1.59 million in Q1 2019[55] - In Q1 2019, the Company granted 828,825 service-based stock options with a fair value of $3.6 million and 583,000 performance-based stock options, recognizing $0.03 million in expense for probable milestones[56][57][58] - As of March 31, 2019, $10.7 million of unrecognized compensation cost related to unvested stock options remains, to be recognized over a weighted-average remaining service period of 2.4 years[59] 12. Employee Stock Purchase Plan Provides details on the Employee Stock Purchase Plan and shares issued - The number of shares available under the ESPP increased by 248,359 shares in January 2019, totaling 875,842 shares available as of March 31, 2019[60] - The Company issued 23,970 shares during Q1 2019, with related compensation expense of approximately $0.03 million[60][61] 13. Stockholders' Equity Explains changes in stockholders' equity, including financing activities and net loss Changes in Stockholders' Equity (Three Months Ended March 31, 2019, In thousands, except share data) | Item | Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income / (Loss) | Accumulated Deficit | Total Stockholders' Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as of Dec 31, 2018 | 24,835,951 | $2 | $492,493 | $(25) | $(439,423) | $53,047 | | Stock purchase under ESPP | 23,970 | — | — | — | — | — | | Proceeds from 'at-the-market' offering, net | 140,819 | — | $830 | — | — | $830 | | Stock-based compensation expense | — | — | $1,592 | — | — | $1,592 | | Proceeds from direct offering, net | 2,095,039 | $1 | $10,921 | — | — | $10,922 | | Proceeds from pre-funded common stock warrant from direct offering, net | — | — | $13,032 | — | — | $13,032 | | Issuance of common stock warrant with direct offering | — | — | $3,446 | — | — | $3,446 | | Unrealized gains on short-term investments | — | — | — | $33 | — | $33 | | Employee withholdings ESPP | — | — | $26 | — | — | $26 | | Net loss | — | — | — | — | $(14,302) | $(14,302) | | Balance as of Mar 31, 2019 | 27,095,779 | $3 | $522,340 | $8 | $(453,725) | $68,626 | - Total stockholders' equity increased by $15.58 million to $68.63 million as of March 31, 2019, primarily due to $27.6 million in gross proceeds from a registered direct offering of common stock and pre-funded warrants, and $0.8 million from at-the-market offerings[63][64][65] - The direct offering included 2,095,039 shares of common stock and pre-funded warrants to purchase 2,500,000 shares, along with Series 1 and Series 2 warrants to purchase an aggregate of 4,595,039 shares[64][65] - Series Warrants were valued at $3.4 million using the Black Scholes model and classified as permanent equity[68] 14. Related-Party Transactions Discloses transactions and relationships with related parties - The Company's chief executive officer and member of the board of directors is also a managing director at MPM Asset Management, LLC, which holds an investment in the Company's common stock[69] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2019, compared to the prior year. It covers an overview of the business, clinical development updates for its product candidates, detailed analysis of revenue and expenses, liquidity, capital resources, and critical accounting policies Overview Provides a high-level summary of the company's business, product candidates, and financial performance - Syndax Pharmaceuticals is a clinical-stage biopharmaceutical company developing cancer therapies, with lead product candidate entinostat (Class I HDAC inhibitor) in Phase 3 for HR+, HER2- breast cancer (Breakthrough Therapy designation)[72] - Other product candidates include SNDX-5613 (menin inhibitor for acute leukemias, IND filing expected Q2 2019) and SNDX-6352 (anti-CSF-1R monoclonal antibody for cGVHD, Phase 1 trial ongoing)[73] - The company has no commercial products, has incurred significant losses since inception ($453.7 million accumulated deficit as of March 31, 2019), and reported a net loss of $14.3 million for Q1 2019[74] - As of March 31, 2019, cash, cash equivalents, and short-term investments totaled $92.7 million[74] Clinical Developments Updates on the progress and timelines of key clinical trials for product candidates - The E2112 Phase 3 trial for entinostat in HR+, HER2- breast cancer will continue as planned, with the next interim overall survival (OS) analysis scheduled for Q4 2019 and final OS assessment in Q2 2020[75] - Data from the ENCORE 601 trial (entinostat + KEYTRUDA) in NSCLC and melanoma cohorts showed potential to overcome immunotherapy resistance; further registration trials are contingent on positive E2112 OS results[76] - An Investigational New Drug (IND) application for SNDX-5613 (menin inhibitor) is expected to be filed in Q2 2019, followed by a Phase 1 clinical trial in acute leukemia patients[77] - Initial results from the Phase 1 dose escalation trial of SNDX-6352 (anti-CSF-1R antibody) in cGVHD patients are anticipated in the second half of 2019[78] Financial Overview Summarizes key financial results, including revenue, expenses, and liquidity - Revenue for Q1 2019 and Q1 2018 was $0.4 million, solely from the KHK license agreement, recognized ratably over the expected performance period through 2029[79][80] - Research and development expenses decreased by $4.0 million (26%) to $11.3 million in Q1 2019, primarily due to reduced manufacturing activities for SNDX-6352 and professional expenses, partially offset by increased Menin manufacturing and employee compensation[81][92] - General and administrative expenses decreased by $0.9 million (18%) to $3.9 million in Q1 2019, mainly due to decreased pre-commercialization activities and professional fees[85][94] - The company expects R&D expenses to fluctuate and remain significant as product candidates advance, with external spending growing faster than internal spending[83] Critical Accounting Policies and Use of Estimates Discusses significant accounting policies and the role of management estimates - Management's discussion is based on financial statements prepared in accordance with U.S. GAAP, requiring estimates and judgments[87][88] - No material changes to critical accounting policies were reported from the Annual Report on Form 10-K[89] Results of Operations (Comparison of the three months ended March 31, 2019 and 2018) Compares financial performance metrics between the current and prior year periods Key Financial Results (Three Months Ended March 31, In thousands) | Metric | 2019 | 2018 | Increase (Decrease) ($) | Increase (Decrease) (%) | | :--- | :--- | :--- | :--- | :--- | | License fees | $379 | $379 | $0 | 0% | | Research and development | $11,279 | $15,339 | $(4,060) | -26% | | General and administrative | $3,911 | $4,791 | $(880) | -18% | | Total operating expenses | $15,190 | $20,130 | $(4,940) | -25% | | Loss from operations | $(14,811) | $(19,751) | $4,940 | -25% | | Net loss | $(14,302) | $(19,398) | $5,096 | -26% | Research and Development Expenses Breakdown (Three Months Ended March 31, In thousands) | Category | 2019 | 2018 | Increase (Decrease) ($) | Increase (Decrease) (%) | | :--- | :--- | :--- | :--- | :--- | | External R&D expenses | $7,273 | $11,713 | $(4,440) | -38% | | Internal R&D expenses | $4,006 | $3,626 | $380 | 10% | | Total R&D expenses | $11,279 | $15,339 | $(4,060) | -26% | - The decrease in R&D expenses was primarily driven by a $3.0 million reduction in SNDX-6352 manufacturing activities and $1.8 million in professional expenses, partially offset by a $0.7 million increase in Menin manufacturing[92] Liquidity and Capital Resources Assesses the company's cash position, funding sources, and ability to meet future obligations - As of March 31, 2019, the company had $92.7 million in cash, cash equivalents, and short-term investments, expected to fund operations for at least the next 12 months[96] - Financing has primarily come from IPO, follow-on offerings, ATM program, convertible preferred stock/debt, and license agreements[96] - In March 2019, the company raised $27.6 million (gross) from a registered direct offering of common stock and pre-funded warrants, and $0.8 million (net) from its ATM program[97][98] - As of March 31, 2019, $31.2 million of common stock remained available for sale under the ATM program[98] Future Funding Requirements Outlines anticipated capital needs for operations and product development - The company anticipates significant future losses and will require additional capital to fund operations, product development, and potential commercialization[101][201] - Future funding may come from equity offerings, debt financings, or collaborations, which could dilute existing stockholders or involve relinquishing rights[100][101][202] - Key factors influencing future capital requirements include clinical trial progress, regulatory approvals, intellectual property costs, market acceptance, manufacturing, and commercialization expenses[99][203] Cash Flows Analyzes cash movements from operating, investing, and financing activities Summary of Cash Flows (Three Months Ended March 31, In thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(16,831) | $(19,870) | | Net cash provided by investing activities | $12,752 | $12,644 | | Net cash provided by financing activities | $28,426 | $33 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $24,347 | $(7,193) | - Net cash used in operating activities decreased by $3.04 million in Q1 2019, primarily due to a lower net loss and changes in operating assets and liabilities[103][104] - Net cash provided by investing activities remained stable at approximately $12.7 million, driven by proceeds from maturities of short-term investments offsetting new purchases[106][107] - Net cash provided by financing activities significantly increased to $28.4 million in Q1 2019, mainly from proceeds of common stock and pre-funded warrant sales[108] Contractual Obligations and Commitments Reports on the company's material contractual obligations - No material changes to contractual obligations were reported from the Annual Report on Form 10-K[110] Off-Balance Sheet Arrangements Confirms the absence of any off-balance sheet arrangements - The Company did not have any off-balance sheet arrangements during the periods presented[111] JOBS Act States the company's election regarding the extended transition period under the JOBS Act - The Company has irrevocably elected not to use the extended transition period for complying with new or revised accounting standards provided by the JOBS Act[112] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate sensitivity, and its strategies for managing these risks through investment activities - The primary market risk exposure is interest rate sensitivity, affecting cash, cash equivalents ($58.1 million), and short-term investments ($34.6 million)[113] - Investment objectives prioritize liquidity and principal preservation, with a focus on short-term maturities and low-risk profiles[113][114] - An immediate 100 basis point change in interest rates is not expected to materially affect the fair market value of cash equivalents and short-term investments[114] Item 4. Controls and Procedures This section details the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2019, and concluded they were effective at a reasonable assurance level[115][116] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[117] PART II. OTHER INFORMATION Contains additional information not covered in the financial statements, including legal, risk factors, and exhibits Item 1. Legal Proceedings This section reports on the company's involvement in legal proceedings, claims, and investigations - As of March 31, 2019, the company was not a party to any material legal or arbitration proceedings[120] - No governmental proceedings are pending or contemplated against the company[120] Item 1A. Risk Factors This section outlines significant risks that could materially and adversely affect the company's business, financial condition, results of operations, and future growth prospects, categorized into business and industry, financial position and capital needs, intellectual property, and common stock ownership Risks Related to Our Business and Industry Highlights operational, clinical, regulatory, and competitive risks inherent in the biopharmaceutical sector - Failure of the Phase 3 clinical trial for entinostat in HR+, HER2- breast cancer to demonstrate safety and efficacy could lead to increased costs, delays, or inability to commercialize[123][124] - Reliance on ECOG-ACRIN and NCI for the Phase 3 trial poses risks if they fail to adequately perform obligations or meet deadlines, potentially delaying regulatory approval[127] - Breakthrough therapy designation for entinostat does not guarantee faster development, review, or approval, and could be rescinded if Phase 3 OS results do not confirm prior improvements[133] - The company lacks sales, marketing, and distribution infrastructure, requiring significant investment or reliance on third parties, which carries risks of limited control and potential non-compliance[134][135] - Product candidates (entinostat, SNDX-6352, SNDX-5613) may not achieve adequate market acceptance due to efficacy/safety profiles, competition, pricing, or reimbursement issues[136][154] - Dependence on third-party suppliers for manufacturing and distribution of clinical and commercial drug supplies exposes the company to risks of capacity, quality control, and regulatory compliance failures[156] - Post-approval, product candidates remain subject to ongoing regulatory requirements, and new safety information could lead to labeling changes, restrictions, or withdrawal from the market[157][158] - Significant competition from larger pharmaceutical companies with greater resources and experience could limit market share and pricing power[169][170] - Relationships with customers and third-party payors are subject to complex healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act), privacy laws (HIPAA), and transparency requirements, risking criminal sanctions, civil penalties, and reputational harm[191][192][193] Risks Related to Our Financial Position and Capital Needs Addresses financial sustainability, funding requirements, and tax-related risks - The company has incurred substantial net losses since inception ($453.7 million accumulated deficit as of March 31, 2019) and expects to continue incurring losses for the foreseeable future[195][196] - Profitability depends on successful commercialization of product candidates, which is uncertain and will require significant additional capital[197][198][200][201] - Future funding requirements are substantial and may not be available on acceptable terms, potentially leading to delays, scaling back operations, or relinquishing rights to product candidates[201][202] - The ability to use net operating loss carryforwards (NOLs) and other tax attributes may be limited due to past or future ownership changes, potentially increasing future tax liability[205] - Comprehensive tax reform legislation, such as the Tax Cuts and Jobs Act of 2017, could adversely affect the business and financial condition[206] Risks Related to Intellectual Property Covers challenges in protecting intellectual property, patent expirations, and litigation risks - Inability to obtain or protect intellectual property rights (patents, trade secrets) could impair competitive position, as patent prosecution is expensive, time-consuming, and uncertain[208][210][211] - Expiration of key patents (e.g., entinostat composition of matter patent expired in September 2017) or challenges to validity (e.g., RE45,499 reissue patent for crystalline polymorph B) could allow generic competition[212][213][214] - Breach or termination of license agreements (Bayer for entinostat, UCB for SNDX-6352, Allergan for SNDX-5613) would result in loss of development and commercialization rights[221][224][225][228][229][232] - Changes in patent law (e.g., America Invents Act) could diminish patent value, increasing uncertainties and costs for prosecution and enforcement[233][234] - Involvement in intellectual property lawsuits (infringement, misappropriation, validity challenges) could be expensive, time-consuming, and divert management attention, potentially leading to loss of rights or substantial liabilities[236][237][239][240][241][243] - Failure to protect confidential information and trade secrets, despite non-disclosure agreements, could harm business and competitive position[244] - Significant disruptions of IT systems or data security incidents could lead to financial, legal, regulatory, business, and reputational harm, including loss of clinical trial data[245][247][248] Risks Related to Ownership of Our Common Stock Discusses factors affecting stock price, dilution, and corporate governance - The market price of common stock is highly volatile due to various factors, including clinical trial results, regulatory actions, competition, financing efforts, and general market conditions, potentially leading to loss of investment[250][251] - Future sales of equity or debt securities to fund operations may result in dilution to stockholders and impose restrictions on the business[252] - Lack of research coverage or adverse opinions from securities analysts could negatively impact stock price and trading volume[253] - Principal stockholders and management own a significant percentage (approx. 60%) of voting stock, allowing them to exert significant control over stockholder approval matters, potentially conflicting with other stockholders' interests[254][255] - As an 'emerging growth company' under the JOBS Act, the company may avail itself of reduced disclosure requirements, which could make its common stock less attractive to investors and affect market price[256][258] - Failure to maintain an effective system of internal control over financial reporting could adversely affect investor confidence and stock value, and lead to sanctions[263] - Provisions in charter documents and Delaware law may have anti-takeover effects, discouraging acquisitions or making it difficult to replace current management[264][265] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on any unregistered sales of equity securities and the use of proceeds - There were no unregistered sales of equity securities or use of proceeds to report for the period[266] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q - The report includes various exhibits such as the Amended and Restated Certificate of Incorporation, Bylaws, Specimen Common Stock Certificate, Forms of Warrants, License Agreement amendments, Securities Purchase Agreements, and certifications[268] - Financial statements are also provided in XBRL format[268] SIGNATURES Confirms the official signing and submission of the quarterly report by authorized officers - The report was signed on May 8, 2019, by Briggs W. Morrison, M.D., Chief Executive Officer, and Richard P. Shea, Chief Financial Officer and Treasurer[273]