scPharmaceuticals (SCPH) - 2024 Q1 - Quarterly Report

FORWARD-LOOKING STATEMENTS This section details forward-looking statements for FUROSCIX commercialization and regulatory progress, alongside critical factors that may cause actual results to differ - The report contains forward-looking statements regarding the commercialization of FUROSCIX, including timing and progress, regulatory filings and approvals, potential indication expansion (NYHA Class IV heart failure, chronic kidney disease), auto-injector development, manufacturing capabilities, funding, future financial performance, and the ability to continue as a going concern[9] - Important factors that may cause actual results to differ materially include heavy dependence on FUROSCIX success, manufacturing and supply chain risks, market acceptance challenges, limited operating history, significant operating losses, the need for additional funding, intellectual property protection, and potential product liability lawsuits[11] PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with explanatory notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2023 | Mar 31, 2024 | | :-------------------------- | :----------- | :----------- | | Cash and cash equivalents | $46,814 | $58,447 | | Short-term investments | $29,199 | $- | | Total current assets | $92,938 | $76,525 | | Total assets | $94,479 | $78,454 | | Total current liabilities | $13,134 | $12,318 | | Total liabilities | $57,261 | $53,888 | | Total stockholders' equity | $37,218 | $24,566 | - Cash and cash equivalents increased by $11.6 million, while short-term investments were fully liquidated by March 31, 2024[18] - Total assets decreased by $16.0 million, and total stockholders' equity decreased by $12.6 million from December 31, 2023, to March 31, 2024[18] Condensed Consolidated Statements of Operations and Comprehensive Loss This section presents the company's financial performance over specific periods, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2024 | | :---------------------------------- | :------------------------------ | :------------------------------ | | Product revenues, net | $2,063 | $6,102 | | Cost of product revenues | $605 | $1,785 | | Research and development | $2,116 | $2,726 | | Selling, general and administrative | $10,896 | $17,447 | | Loss from operations | $(11,554) | $(15,856) | | Net loss | $(11,210) | $(14,108) | | Net loss per share — basic and diluted | $(0.30) | $(0.36) | - Product revenues increased by 195% year-over-year, from $2.1 million in Q1 2023 to $6.1 million in Q1 2024[21] - Net loss increased by 25.8% year-over-year, from $11.2 million in Q1 2023 to $14.1 million in Q1 2024, driven by higher operating expenses[21] Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity accounts, reflecting net loss, stock issuances, and stock-based compensation Changes in Stockholders' Equity (in thousands) | Metric | At Dec 31, 2023 | At Mar 31, 2024 | | :------------------------------------ | :-------------- | :-------------- | | Total Stockholders' Equity | $37,218 | $24,566 | | Net loss | - | $(14,108) | | Issuance of common stock (options) | - | $181 | | Stock-based compensation | - | $1,440 | - Total stockholders' equity decreased by $12.6 million, primarily due to the net loss of $14.1 million, partially offset by stock-based compensation and stock option exercises[25] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(16,494) | $(17,701) | | Net cash provided by investing activities | $7,000 | $29,319 | | Net cash provided by financing activities | $13,704 | $15 | | Net increase in cash and cash equivalents | $4,210 | $11,633 | | Cash and cash equivalents at end of period | $75,453 | $58,447 | - Net cash used in operating activities increased by $1.2 million year-over-year, reaching $17.7 million in Q1 2024[29] - Net cash provided by investing activities significantly increased to $29.3 million in Q1 2024, primarily from maturities of short-term investments[29] - Net cash provided by financing activities decreased substantially from $13.7 million in Q1 2023 (due to ATM offering) to $15 thousand in Q1 2024[29] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the company's business, significant accounting policies, and specific financial statement items 1. Description of Business and Basis of Presentation This note describes scPharmaceuticals' business, its focus on subcutaneous therapies, and the basis for financial statement presentation, including going concern considerations - scPharmaceuticals Inc. focuses on developing and commercializing products for subcutaneous administration of therapies previously limited to IV delivery, with headquarters in Burlington, Massachusetts[32] - As of March 31, 2024, the Company had an accumulated deficit of approximately $295.5 million and cash and cash equivalents of $58.4 million[35] - Management expects continued operating losses and has substantial doubt about the Company's ability to continue as a going concern for one year from the financial statement issuance date, relying on future equity offerings, debt financings, and third-party funding[35][37][38] 2. Significant Accounting Policies This note outlines the company's key accounting policies, including revenue recognition, inventory valuation, and financial instrument treatment - The Company's financial instruments are subject to minimal credit risk due to high-quality financial institutions and an investment policy limiting exposure[43] - Customer concentration is high, with three customers representing 99% of accounts receivable as of March 31, 2024, and 99% of revenue for the three months ended March 31, 2024[44] - Inventory costs for FUROSCIX began capitalization after FDA approval on October 7, 2022, and are stated at the lower of cost and net realizable value on a FIFO basis[48] - Revenue from FUROSCIX product sales is recognized upon receipt by specialty pharmacies and distributors, net of allowances for discounts, rebates, co-pay assistance, and estimated returns[53] 3. Net Loss per Share This note details the calculation of basic and diluted net loss per share, including the treatment of potentially dilutive securities Net Loss per Share (in thousands, except share and per share data) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net loss | $(11,210) | $(14,108) | | Weighted-average shares outstanding | 37,800,960 | 38,952,131 | | Net loss per share, basic and diluted | $(0.30) | $(0.36) | - Potentially dilutive securities (stock options, warrants, RSUs) were excluded from diluted EPS calculation as their effect would be anti-dilutive[63] 4. Investments This note provides information on the company's investment portfolio, specifically available-for-sale debt securities and their fair values Available-for-Sale Investments (in thousands) as of Dec 31, 2023 | Investment Type | Cost Basis | Fair Value | | :------------------------------ | :--------- | :--------- | | United States Treasury securities | $13,967 | $13,969 | | Commercial paper | $9,427 | $9,425 | | Corporate bonds | $3,815 | $3,815 | | United States Government Agency securities | $1,991 | $1,990 | | Total | $29,200 | $29,199 | - The Company had no investments as of March 31, 2024, indicating a liquidation of its available-for-sale debt securities[65] 5. Inventory This note details the composition and valuation of the company's inventory, including raw materials, work-in-process, and finished goods Inventory Balance (in thousands) | Inventory Component | Dec 31, 2023 | Mar 31, 2024 | | :------------------ | :----------- | :----------- | | Raw materials | $4,256 | $4,139 | | Work-in-process | $4,188 | $3,985 | | Finished goods | $396 | $1,448 | | Total | $8,840 | $9,572 | - Total inventory increased by $0.7 million to $9.6 million as of March 31, 2024, primarily due to an increase in finished goods[66] - An allowance for excess, damaged, and obsolete inventory of $25 thousand was recorded as of March 31, 2024, up from $0 at December 31, 2023[68] 6. Property and Equipment This note presents the company's property and equipment, net of accumulated depreciation, and related depreciation expense Property and Equipment, Net (in thousands) | Category | Dec 31, 2023 | Mar 31, 2024 | | :------------------------ | :----------- | :----------- | | Total cost | $119 | $119 | | Less: Accumulated depreciation | $(61) | $(67) | | Property and equipment, net | $58 | $52 | - Net property and equipment decreased slightly to $52 thousand as of March 31, 2024, with depreciation expense remaining constant at $6 thousand for both periods[69] 7. Accrued Expenses This note details the components of accrued expenses, including employee compensation, sales allowances, and contract research and development costs Accrued Expenses (in thousands) | Category | Dec 31, 2023 | Mar 31, 2024 | | :-------------------------------- | :----------- | :----------- | | Employee compensation and related costs | $4,375 | $2,723 | | Sales allowances and related costs | $1,418 | $1,733 | | Contract research and development | $1,202 | $1,696 | | Consulting and professional service fees | $945 | $1,625 | | Manufacturing costs | $434 | $822 | | Total accrued expenses | $8,901 | $9,206 | - Total accrued expenses increased by $0.3 million to $9.2 million, driven by increases in sales allowances, contract R&D, consulting fees, and manufacturing costs, partially offset by a decrease in employee compensation[70] 8. Fair Value of Financial Instruments This note provides fair value measurements for financial instruments, including cash equivalents, investments, and derivative liabilities Fair Value of Financial Instruments (in thousands) | Instrument | Dec 31, 2023 (Total) | Mar 31, 2024 (Total) | | :----------------- | :------------------- | :------------------- | | Cash equivalents | $44,202 | $57,054 | | Investments | $29,199 | $- | | Derivative liability | $3,857 | $733 | - The fair value of the Level 3 derivative liability decreased significantly from $3.9 million at December 31, 2023, to $0.7 million at March 31, 2024, reflecting a $3.1 million change in fair value[76] 9. Debt This note details the company's term loan facility, including principal amounts, interest rates, covenants, and future payment obligations Debt Balance (in thousands) | Metric | Dec 31, 2023 | Mar 31, 2024 | | :-------------------- | :----------- | :----------- | | Face value | $50,000 | $50,000 | | Less: discount | $(11,189) | $(10,615) | | Carrying value | $38,811 | $39,385 | - The Company has a $100.0 million term loan facility with Oaktree, with $50.0 million drawn and an additional $50.0 million contingent on reaching net sales revenue milestones by September 30, 2024, and December 31, 2024[79][80] - The term loan bears interest at three-month SOFR plus 8.75% (with a 1.00% floor and 3.00% cap), stepping down to 8.25% once FUROSCIX achieves $100.0 million in trailing 12-month net sales[81] - The Oaktree Agreement includes warrants to purchase 516,345 common shares at $5.40 per share and embedded derivative liabilities, which are re-evaluated each reporting period[82][83] Future Principal Payments for Oaktree Agreement (in thousands) as of March 31, 2024 | Year Ended | Principal Payments | | :---------------- | :----------------- | | Dec 31, 2024 | $— | | Dec 31, 2025 | $2,500 | | Dec 31, 2026 | $10,000 | | Dec 31, 2027 | $37,500 | | Total | $50,000 | 10. Stockholders' Equity This note outlines changes in stockholders' equity, including common stock activity, stock options, restricted stock units, and stock-based compensation - The Company amended its at-the-market (ATM) offering program, establishing a new $50.0 million 2024 ATM Agreement; no shares were issued under this program as of March 31, 2024[91][92] Stock Option Activity (Three Months Ended March 31, 2024) | Metric | Shares | | :-------------------------- | :------- | | Outstanding, Dec 31, 2023 | 4,681,326 | | Granted | 864,827 | | Exercised | (8,411) | | Forfeited | (98,540) | | Outstanding, Mar 31, 2024 | 5,439,202 | RSU Activity (Three Months Ended March 31, 2024) | Metric | RSUs | | :------------------------ | :------- | | RSUs outstanding, Dec 31, 2023 | 368,411 | | Granted | 442,407 | | Released | (79,108) | | Forfeited | (9,901) | | RSUs outstanding, Mar 31, 2024 | 721,809 | Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2024 | | :------------------------ | :------------------------------ | :------------------------------ | | Research and development | $340 | $365 | | General and administrative | $640 | $1,075 | | Total | $980 | $1,440 | 11. Commitments and Contingencies This note details the company's operating lease liabilities and other contractual commitments, along with related cash flow maturities Operating Lease Liabilities Maturity Analysis (in thousands) as of March 31, 2024 | Year Ended | Undiscounted Cash Flows | | :---------------- | :---------------------- | | Dec 31, 2024 | $255 | | Dec 31, 2025 | $341 | | Dec 31, 2026 | $349 | | Dec 31, 2027 | $358 | | Dec 31, 2028 | $367 | | Thereafter | $249 | | Total | $1,919 | - Total lease cost for the three months ended March 31, 2024, was $99 thousand, a decrease from $121 thousand in the prior year period[104] 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, operational results, and future outlook, including liquidity and capital resources Overview This section provides a strategic overview of scPharmaceuticals, its lead product FUROSCIX, market opportunities, and going concern considerations - scPharmaceuticals is focused on subcutaneous administration of therapies, with FUROSCIX (furosemide injection) approved for congestion in NYHA Class II/III chronic heart failure patients, offering IV equivalent diuresis at home[107] - The company is pursuing expansion of FUROSCIX indication to NYHA Class IV heart failure and chronic kidney disease (CKD) patients, with a sNDA for CKD filed in May 2024 (PDUFA Q1 2025)[108] - Development of an 80mg/1mL auto-injector for FUROSCIX is underway, with an IND submitted and PK/PD study initiated in April 2024, aiming for sNDA submission in Q4 2024[108] - The estimated total addressable market for FUROSCIX in the U.S. is $12.5 billion, including chronic heart failure and CKD, with an average treatment cost of $4,490 per episode, potentially reducing hospitalization costs[109] - As of March 31, 2024, approximately 47,000 FUROSCIX doses were written by 2,200 unique prescribers, with 24,000 doses filled, demonstrating commercial progress and payer coverage[110] - The company had an accumulated deficit of $295.5 million as of March 31, 2024, and expects continued net losses due to commercialization and R&D efforts, raising substantial doubt about its ability to continue as a going concern[113][114] Components of Our Results of Operations This section defines the key components of the company's financial results, including product revenues, cost of revenues, R&D, and SG&A expenses - Product revenues consist of net sales of FUROSCIX, recognized upon customer receipt, net of discounts, fees, returns, and rebates[115] - Cost of product revenues includes manufacturing, packaging, freight, and royalty expenses for FUROSCIX, with inventory costs capitalized post-FDA approval[116] - Research and development (R&D) expenses are expensed as incurred, covering engineering, clinical trials, regulatory, medical affairs, and quality assurance, and are expected to increase with new product development[117][122] - Selling, general and administrative (SG&A) expenses include employee-related costs, promotional activities, marketing, professional services, and general corporate expenses, anticipated to increase with FUROSCIX commercialization[118][119] Results of Operations This section analyzes the company's financial performance for the period, detailing changes in revenues, expenses, and net loss Key Financial Results (Three Months Ended March 31, in thousands) | Metric | 2023 | 2024 | Increase (Decrease) | | :---------------------------------- | :----- | :----- | :------------------ | | Product revenues, net | $2,063 | $6,102 | $4,039 | | Cost of product revenues | $605 | $1,785 | $1,180 | | Research and development | $2,116 | $2,726 | $610 | | Selling, general and administrative | $10,896 | $17,447 | $6,551 | | Loss from operations | $(11,554) | $(15,856) | $4,302 | | Other income | $990 | $2,972 | $1,982 | | Interest income | $1,315 | $877 | $(438) | | Interest expense | $(1,961) | $(2,101) | $140 | | Net loss | $(11,210) | $(14,108) | $2,898 | - Product revenues increased by $4.0 million (195%) due to a full quarter of FUROSCIX sales in 2024 and increased demand[120] - Selling, general and administrative expenses increased by $6.6 million, primarily due to higher employee-related costs ($3.9 million) and commercial costs ($2.5 million) to support FUROSCIX commercialization[124] - Other income increased by $2.0 million, mainly due to fair value adjustment to derivative liability and foreign exchange gains[125] Liquidity and Capital Resources This section discusses the company's cash position, funding sources, and future capital requirements, highlighting going concern risks - As of March 31, 2024, the Company had $58.4 million in cash and cash equivalents[128] - The Company has funded operations through common stock sales, preferred stock, and debt, including $15.2 million from the 2021 ATM offering and a $50.0 million initial draw from the Oaktree Agreement[128][129][131] - Substantial doubt exists about the Company's ability to continue as a going concern for one year from the report date, necessitating future equity offerings (including a new $50.0 million 2024 ATM Program), debt financings, or other third-party funding[130][133] - Future capital requirements depend on FUROSCIX commercialization success, R&D expenditures, manufacturing capacity, clinical trials, and intellectual property costs[133] Cash Flows This section analyzes cash flows from operating, investing, and financing activities, explaining significant changes year-over-year Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(16,494) | $(17,701) | | Net cash provided by investing activities | $7,000 | $29,319 | | Net cash provided by financing activities | $13,704 | $15 | | Net increase in cash and cash equivalents | $4,210 | $11,633 | - Net cash used in operating activities increased to $17.7 million in Q1 2024, primarily due to a higher net loss and increased net operating assets for FUROSCIX commercialization[136] - Net cash provided by investing activities significantly increased to $29.3 million in Q1 2024, driven by maturities of short-term investments[138] - Net cash provided by financing activities decreased sharply to $15 thousand in Q1 2024, compared to $13.7 million in Q1 2023 from the 2021 ATM Agreement[139] Critical Accounting Policies and Estimates This section confirms no material changes to the company's critical accounting policies and estimates from the prior annual report - There have been no material changes to the critical accounting policies and estimates disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[140] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to market risks, specifically related to foreign currency exchange rates and interest rates, and assesses their potential impact on financial performance - The Company has immaterial exposure to foreign currency exchange rate fluctuations (principally Swiss franc and Euro) from foreign vendor contracts and does not currently hedge this exposure[142] - Interest rate risk is related to $50.0 million in outstanding indebtedness, which bears interest at three-month SOFR plus 8.75% (with a 1.00% floor and 3.00% cap); an immediate 100 basis point change would not materially affect the fair value of debt due to the SOFR cap[143] - Inflation has not had a material effect on the business, but significant inflationary pressures on costs could adversely impact financial condition[144] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures, identifying a material weakness in internal control over financial reporting related to the fair value accounting of a derivative liability, and outlines the remediation plan - Management concluded that disclosure controls and procedures were not effective as of March 31, 2024, due to a continued material weakness in internal control over financial reporting[146] - The material weakness relates to controls, processes, and procedures over the fair value accounting of the embedded derivative liability in connection with the Oaktree Agreement, specifically errors in the third-party valuation specialist's calculation[149] - The remediation plan includes additional quality control processes by the valuation specialist, detailed discussions on assumption changes, and more thorough review of sample iterations for derivative fair value determination[150] PART II – OTHER INFORMATION This section covers additional disclosures including legal proceedings, risk factors, equity sales, and other pertinent information Item 1. Legal Proceedings This section states that the Company is not currently aware of any legal proceedings or claims that would have a material adverse effect on its business, financial condition, or results of operations - The Company is not currently aware of any legal proceedings or claims that are expected to have a material adverse effect on its business[152] Item 1A. Risk Factors This section highlights that investing in the common stock involves a high degree of risk and reiterates the substantial doubt about the Company's ability to continue as a going concern, emphasizing the need for additional funding - Investing in the Company's common stock involves a high degree of risk, as detailed in the Annual Report on Form 10-K[153] - Substantial doubt exists regarding the Company's ability to continue as a going concern for at least one year from the financial statement issuance date, due to an accumulated deficit of $295.5 million and $58.4 million in cash and cash equivalents as of March 31, 2024[154] - The Company plans to fund operations through future equity offerings, debt financings, and other third-party funding, but there is no assurance that additional funds will be available on acceptable terms[154] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report - None[155] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities to report - None[156] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Not applicable[157] Item 5. Other Information This section confirms no disclosure in lieu of an 8-K, no material changes to board nominee procedures, and no changes to insider trading arrangements during the quarter - No disclosure in lieu of reporting on a Current Report on Form 8-K[158] - No material changes to the procedures by which security holders may recommend nominees to the board of directors[158] - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended March 31, 2024[159] Item 6. Exhibits This section provides an index of exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate documents, warrants, certifications, and XBRL data - The exhibit index lists various corporate documents, warrant forms, certifications (302 and 906), and Inline XBRL documents[162][163]