SCYNEXIS(SCYX) - 2022 Q4 - Annual Report

Part I Business SCYNEXIS, Inc. develops innovative medicines for drug-resistant infections, strategically out-licensing BREXAFEMME to GSK to focus on hospital-based fungal indications Overview and GSK License Agreement SCYNEXIS entered a significant license agreement with GSK for ibrexafungerp, including a $90 million upfront payment and potential milestones, enabling a strategic shift and debt repayment - On March 30, 2023, SCYNEXIS entered into an exclusive license agreement with GSK for the development, manufacture, and commercialization of ibrexafungerp (including BREXAFEMME) in all countries except Greater China and other specified territories[22] GSK License Agreement Financial Terms | Milestone Type | Potential Amount | Details | | :--- | :--- | :--- | | Upfront Payment | $90 million | Payable upon closing of the agreement | | Regulatory Approval Milestones | Up to $70 million | Success-based payments for regulatory approvals | | Development Milestones | Up to $75.5 million | For achieving milestones in the ongoing MARIO Study | | Commercial Milestones | Up to $115 million | Based on the first commercial sale in invasive candidiasis (U.S./EU) | | Sales Milestones | Up to $242.5 million | Tiered payments based on achieving annual net sales thresholds up to $1 billion | | Royalties | Mid-single digit to mid-teen range | Based on cumulative annual net sales | - In connection with the GSK agreement, SCYNEXIS will repay its loan from Hercules Capital and SVB, totaling approximately $37 million (including principal, interest, and fees), upon receipt of the $90 million upfront payment from GSK[25] Clinical Programs and Pipeline The company is advancing a broad clinical program for ibrexafungerp in hospital and community settings, with key Phase 3 data expected in H1 2024 to support a 2024 NDA submission Ibrexafungerp Clinical Program Status and Timelines | Indication | Study Name | Phase | Key Milestone/Data Expected | | :--- | :--- | :--- | :--- | | Invasive Candidiasis (IC) | MARIO | 3 | Topline data H1 2024 | | Refractory Invasive Fungal Infections (rIFI) | FURI | 3 | Topline data H1 2024 | | Candida auris Infections | CARES | 3 | Topline data H1 2024 | | Invasive Aspergillosis (Combination) | SCYNERGIA | 2 | Topline data H1 2023 | | Complicated VVC (Fluconazole Failures) | VANQUISH | 3b | Topline data H1 2024 | - Data from the MARIO, FURI, and CARES studies are intended to support an NDA submission in 2024 for a hospital-based indication, with potential approval later that year[32] - A second-generation fungerp, SCY-247, is under preclinical development with the support of a $3.0 million NIH grant to study its potential against Candida auris[40] Market Opportunity and Competition SCYNEXIS targets significant market opportunities in VVC and invasive fungal infections, addressing unmet needs due to resistance and lack of oral options, while facing competition from established pharmaceutical companies - The U.S. market for VVC accounts for over 17 million prescriptions annually, almost entirely from the azole drug class prior to BREXAFEMME's launch[48] - There is a significant unmet need for new antifungal treatments for invasive candidiasis due to resistance to existing therapies and the lack of oral step-down options for many patients[51] - Key competitors include large pharmaceutical companies such as Merck, Pfizer, Astellas, and Gilead with established antifungal products; newer competitors include Mycovia (Vivjoa) and Cidara Therapeutics (Rezzayo)[54][56][57] Collaborations and Licensing Agreements The company's strategy relies heavily on collaborations, including the significant March 2023 GSK agreement, an exclusive license with Hansoh for Greater China, and an agreement with R-Pharm, while Merck is eligible for royalties from the foundational IP acquisition - Entered into a license agreement with GSK in March 2023 for exclusive rights to ibrexafungerp in all countries except Greater China and other specified territories[65] - In February 2021, granted Hansoh an exclusive license for ibrexafungerp in the Greater China region, receiving a $10.0 million upfront payment and eligibility for up to $112.0 million in milestones plus royalties[74] - Acquired all human health rights to ibrexafungerp from Merck in 2013; Merck is eligible to receive tiered mid- to high-single-digit royalties on worldwide net sales[70][71] Intellectual Property SCYNEXIS maintains a strong intellectual property portfolio, with over 10 issued U.S. patents and 125 non-U.S. patents, protecting ibrexafungerp until at least 2035 through composition of matter and use patents - As of March 1, 2023, the company owns over 10 issued U.S. patents and over 125 issued non-U.S. patents related to its compounds and their uses[118] - The primary composition of matter patent for ibrexafungerp (U.S. Patent No. 8,188,085) is expected to be extended to 2035; patents covering the citrate salt expire in 2035, and use patents expire in 2038[119] Risk Factors The company faces significant risks related to its financial condition, product development, and heavy reliance on third parties, including a history of losses and the critical need for the GSK license agreement to close - The company has a history of unprofitability, with a net loss of $62.8 million for the year ended December 31, 2022, and an accumulated deficit of approximately $422.3 million, raising substantial doubt about its ability to continue as a going concern[129] - The consummation of the license agreement with GSK is subject to closing conditions, including HSR waiting period expiration; failure to close would materially and adversely affect prospects for generating revenue from ibrexafungerp[126][127] - The company is dependent on third-party collaborations with GSK, Hansoh, and R-Pharm for commercialization revenue and relies on third-party CROs and manufacturers for development and supply, creating risks if these partners do not perform[207][208][210] - The business is subject to extensive and evolving data privacy and security laws, such as GDPR and CCPA, and a failure to comply could lead to significant fines, litigation, and reputational harm[245][247][249] Properties SCYNEXIS leases approximately 19,275 square feet of office space for its corporate headquarters in Jersey City, New Jersey, under a lease agreement extending until July 2029 - The company leases approximately 19,275 square feet of office space in Jersey City, New Jersey, under a long-term lease agreement that runs until July 2029[277] Legal Proceedings As of the report date, SCYNEXIS, Inc. is not a party to any material legal proceedings that would require disclosure - The company is not party to any legal proceedings requiring disclosure under this item[278] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Market under "SCYX", with no history or intention of paying cash dividends, as funds are retained for operations and growth - Common stock trades on the Nasdaq Global Market under the symbol "SCYX"[281] - The company has never declared or paid cash dividends and does not intend to for the foreseeable future, with future earnings to be retained for operations[282] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights the strategic shift to hospital-based indications, a $62.8 million net loss in 2022 driven by increased SG&A and R&D, and critical liquidity concerns necessitating the GSK deal's closing Results of Operations (in thousands) | | 2022 | 2021 | | :--- | :--- | :--- | | Total revenue | $5,091 | $13,163 | | Product revenue, net | $4,988 | $1,113 | | License agreement revenue | $103 | $12,050 | | Total operating expenses | $90,848 | $74,001 | | Research and development | $27,259 | $23,773 | | Selling, general and administrative | $62,961 | $49,916 | | Loss from operations | ($85,757) | ($60,838) | | Net Loss | ($62,809) | ($32,866) | | Net loss per share | ($1.47) | ($1.25) | - The decrease in total revenue in 2022 was primarily due to the recognition of a $12.1 million upfront payment from the Hansoh license agreement in 2021, which was not repeated in 2022[315] - The increase in operating expenses was driven by a $13.0 million rise in SG&A costs to support the commercialization of BREXAFEMME and a $3.5 million increase in R&D expenses for clinical studies like MARIO[317][319] - The company's financial condition, with significant losses and negative cash flows, raises substantial doubt about its ability to continue as a going concern; the company will need additional capital to fund operations[337] Consolidated Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for SCYNEXIS, Inc., highlighting a $62.8 million net loss in 2022 and an auditor's "Going Concern" opinion, with notes detailing the subsequent GSK license agreement and debt repayment Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP's report states fair presentation but includes a "Going Concern" paragraph due to significant losses and negative cash flows, also identifying Gross-to-net (GTN) rebate accruals as a Critical Audit Matter - The auditor's report includes a "Going Concern" paragraph, citing significant losses and negative cash flows from operations, which raises substantial doubt about the company's ability to continue as a going concern[366] - The audit identified Gross-to-net (GTN) rebate accruals as a Critical Audit Matter, highlighting the complexity and subjective judgment required in estimating these adjustments to revenue[371][373] Financial Statements The consolidated financial statements for 2022 show a significant deterioration, with total assets decreasing to $87.8 million, total liabilities increasing to $84.6 million, stockholders' equity plummeting to $3.2 million, and a net loss of $62.8 million Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $79,061 | $109,377 | | Cash and cash equivalents | $45,814 | $104,484 | | Total Assets | $87,810 | $119,837 | | Total Liabilities | $84,577 | $78,579 | | Total Stockholders' Equity | $3,233 | $41,258 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Total Revenue | $5,091 | $13,163 | | Loss from Operations | ($85,757) | ($60,838) | | Net Loss | ($62,809) | ($32,866) | Consolidated Statement of Cash Flows Data (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($79,883) | ($54,560) | | Net cash provided by financing activities | $48,602 | $67,120 | | Net (decrease) increase in cash | ($58,670) | $11,388 | Subsequent Events (Note 16) Subsequent to year-end, on March 30, 2023, SCYNEXIS entered a pivotal license agreement with GSK for ibrexafungerp, including a $90 million upfront payment and significant milestones, concurrently agreeing to repay approximately $37 million in outstanding debt - On March 30, 2023, the company entered into a license agreement with GSK, which includes a $90 million upfront payment and potential for significant future milestones and royalties[527][528] - In connection with the GSK deal, the company agreed to repay its outstanding loan with Hercules and SVB; the total repayment amount is approximately $35.4 million plus a prepayment fee of $262,500 and a final payment of $1,382,500[535] Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, with no material changes reported during the fourth quarter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[540] - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2022[541] Part III Directors, Executive Compensation, Security Ownership, and Accountant Fees Information for Items 10 through 14, covering corporate governance, executive compensation, security ownership, and principal accountant fees, is incorporated by reference from the company's definitive Proxy Statement for its 2023 Annual Meeting of Stockholders - The information required by Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's Proxy Statement to be filed for the 2023 Annual Meeting of Stockholders[547][548][549] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements from Item 8 and provides a detailed index of all exhibits filed with the report, noting the omission of financial statement schedules as not applicable - This section contains the list of financial statements from Item 8 and an index of all exhibits filed with the Form 10-K[550][552]