SCYNEXIS, INC. Operating results for the three and nine months endedSeptember 30, 2021 , are not necessarily indicative of results that may occur in future interim periods or future fiscal years. Some of the statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to our management and involve significant elements of subjective judgment and analysis. Words such as "expects," "will," "anticipate," "target," "goal," "intend," "plan," "seek," "estimate," "potential," "should," "could," variations of such words, and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed under the heading "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K filed with theSecurities and Exchange Commission onMarch 29, 2021 , and in Part II, Item 1A of this Quarterly Report on Form 10-Q. These and many other factors could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this Quarterly Report on Form 10-Q. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements. OverviewSCYNEXIS, Inc. 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. We are developing our lead product candidate, ibrexafungerp, as a broad-spectrum, intravenous (IV)/oral agent for multiple fungal indications in both the community and hospital settings. InJune 2021 , theU.S. Food and Drug Administration (FDA) approved BREXAFEMMEâ (ibrexafungerp tablets) for treatment of patients with vulvovaginal candidiasis (VVC), also known as vaginal yeast infection, and we have commenced the commercialization of BREXAFEMME in theU.S. We also are continuing late-stage clinical development of ibrexafungerp for multiple indications, including the treatment of life-threatening invasive fungal infections caused primarily by Candida (including C. auris) and Aspergillus species in hospitalized patients. Ibrexafungerp, the first representative of a novel class of antifungal agents called triterpenoids, is a structurally distinct glucan synthase inhibitor and has shown in vitro and in vivo activity against a broad range of human fungal pathogens such as Candida and Aspergillus species, including multidrug-resistant strains, as well as Pneumocystis, Coccidioides, Histoplasma and Blastomyces species. Candida and Aspergillus species are the fungi responsible for approximately 85% of all invasive fungal infections inthe United States (U.S. ) andEurope . To date, we have characterized the antifungal activity, pharmacokinetics, and safety profile of the oral and IV formulations of ibrexafungerp in multiple in vitro, in vivo, and clinical studies. The FDA has granted Qualified Infectious Disease Product (QIDP) and Fast Track designations to ibrexafungerp for the indications of VVC (including the prevention of recurrent VVC), invasive candidiasis (IC) (including candidemia), and invasive aspergillosis (IA), and has granted Orphan Drug designations for the IC and IA indications. These designations may provide us with additional market exclusivity and expedited regulatory paths.
BREXAFEMME Update
InJune 2021 , the FDA approved BREXAFEMME for use in patients with VVC. This approval was based on positive results from two Phase 3, randomized, double-blind, placebo-controlled, multi-center studies (VANISH-303 and VANISH-306), in which oral ibrexafungerp demonstrated statistically superior efficacy compared to placebo and a favorable tolerability profile in women with VVC. The FDA granted BREXAFEMME five years of exclusivity extension under the Generating Antibiotic Incentives Now (GAIN) Act, which will be added to any other applicable exclusivity periods, such as the five years of new chemical entity (NCE) exclusivity, for a combined ten-year period of regulatory exclusivity. BREXAFEMME also is protected by multiple patents, including a composition-of-matter patent covering the ibrexafungerp molecule. With patent term extension, this patent is expected to expire in 2035, providing an expected 14 years of protection from generic competitors in theU.S. Treatments for VVC have historically included several topical azole antifungals and oral fluconazole. Approximately 80% of VVC sufferers will have more than one yeast infection and over a third of women may have six yeast infections or more in a lifetime. There are over 17 million prescriptions written for VVC in theU.S. annually, all of which belong to a single drug class, the azoles. Following approval of BREXAFEMME inJune 2021 , by August the product had been manufactured, packaged, and distributed to pharmacies and our sales force had been hired and trained with the commercial launch formally announced inSeptember 2021 . IQVIA data showed 1,006 total prescriptions for BREXAFEMME in the third quarter of 2021, with nearly 700 in September, which was in line with our internal expectations for the first partial quarter of launch. There was 20
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a consistent week-over-week growth rate of prescriptions from early August to the end of the quarter, and a similar trajectory of growing positive momentum continuing into the fourth quarter, with IQVIA showing 1,100 BREXAFEMME prescriptions in October alone. BREXAFEMME is now covered by commercial insurance plans that represent more than 30% of commercially covered lives in theU.S. We have partnered withAmplity Inc. (Amplity ), a leading global contract commercialization organization, to support the ongoingU.S. commercialization of BREXAFEMME. We are utilizingAmplity's commercial execution expertise and resources for sales force, remote engagement, training, market access and select operations services. BREXAFEMME is now available at pharmacies and our full sales team is in the field actively engaging healthcare providers (HCPs). An Early Experience Program was successfully implemented with key HCPs inJuly 2021 , confirming the need for a new treatment option and their willingness to prescribe BREXAFEMME. Progress with payers has yielded scheduled Pharmacy and Therapeutic (P&T) reviews and contract discussions and negotiations.
Ibrexafungerp Update
Enrollment is complete in the CANDLE study, a Phase 3, multi-center, randomized, double-blind, placebo-controlled trial designed to evaluate the efficacy and safety of oral ibrexafungerp for the prevention of recurrent VVC, for which there is no approved therapy in theU.S. We expect the last-patient/last-visit for the CANDLE study by the end of 2021 with top-line data early in the second quarter of 2022. We anticipate filing a potential supplemental NDA submission for the prevention of recurrent VVC in the second quarter of 2022, resulting in a potential approval in late 2022. Enrollment is ongoing in our refractory and difficult-to-treat invasive fungal infections (rIFI) program, which comprises two open-label Phase 3 studies (FURI and CARES) designed to support a potential future NDA submission for ibrexafungerp through the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD). We intend to continue to enroll and analyze the data of patients that have completed the treatment course in our FURI and CARES studies. Enrollment is ongoing in our Phase 2 SCYNERGIA study for patients with invasive aspergillosis and will be extended into 2022 to enable investigators impacted by the COVID-19 pandemic additional time to secure patients for this important trial. SCYNERGIA, which is evaluating oral ibrexafungerp in combination with voriconazole for the treatment of invasive pulmonary aspergillosis, has not enrolled as rapidly as initially projected. The prioritization of hospital resources toward addressing the COVID-19 pandemic has impacted the ability of many institutions to focus on screening and enrolling patients into some clinical trials, including SCYNERGIA. With recent decreases in COVID-19 hospitalizations in some regions, we expect enrollment to accelerate over the next two quarters and anticipate top-line results in the second half of 2022. We completed our Phase 1 randomized, double-blind, placebo-controlled single and multiple ascending dose study evaluating the safety, tolerability, and pharmacokinetics of the liposomal IV formulation of ibrexafungerp in 64 healthy subjects with treatment durations of up to seven days. Dosing began inMarch 2021 , and the last cohort was completed inOctober 2021 . The liposomal IV formulation of ibrexafungerp was generally well tolerated with no serious adverse events reported. The most common adverse events were mostly mild (few moderate) reactions at the infusion site. The dosing was successfully progressed until the target exposure was achieved (i.e., exposure associated with efficacy from animal models). We are evaluating next steps toward the registrational program for this formulation.
Impact of COVID-19 Pandemic on Our Business
A novel strain of coronavirus (COVID-19) was first identified inDecember 2019 , and subsequently declared a global pandemic by theWorld Health Organization onMarch 11, 2020 . The full extent of the future impacts of COVID-19 on our operations is uncertain.
Corporate Update
InMay 2021 , we 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, andSilicon Valley Bank , as a lender (SVB), for an aggregate principal amount of$60.0 million (the Term Loan). We received$20.0 million upon closing of the Loan Agreement and$10.0 million upon the FDA approval of BREXAFEMME for oral use in patients with VVC. Pursuant to the Loan Agreement, the Term Loan is now available to us in two additional tranches, subject to certain terms and conditions.
In
InFebruary 2021 , we partnered withAmplity Inc. (Amplity ) for the ongoing commercial launch of BREXAFEMME for the treatment of VVC. Under the terms of the 5-year agreement, we are utilizingAmplity's commercial execution expertise and resources for sales force, remote engagement, training, market access and select operations services.Amplity is deferring a portion of its direct service costs in the first two years (2021 and 2022), which we will repay over three years starting in 21
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2023.
InFebruary 2021 , we entered into an Exclusive License and Collaboration Agreement (the Hansoh Agreement) withHansoh (Shanghai) Health Technology Co., Ltd. , andJiangsu Hansoh Pharmaceutical Group Company Limited (collectively, Hansoh), pursuant to which Hansoh obtains an exclusive license from us to research, develop and commercialize ibrexafungerp in theGreater China region, including mainlandChina ,Hong Kong ,Macau , andTaiwan . Under the terms of the Hansoh Agreement, Hansoh shall be responsible for the development, regulatory approval and commercialization of ibrexafungerp inGreater China . We received a$10.0 million upfront payment in the first quarter of 2021 and will also be eligible to receive development and commercial milestones, plus low double-digit royalties on net product sales. InSeptember 2021 , we announced that Hansoh filed an investigational new drug (IND) application with theNational Medical Products Administration (NMPA) ofthe People's Republic of China for a Phase 3 study evaluating the efficacy and safety of ibrexafungerp for the treatment of VVC. OnOctober 26, 2021 ,Eric Francois , our Chief Financial Officer, notified us of his intent to resign to return to his prior career in investment banking.Mr. Francois will continue in his current role throughNovember 19, 2021 , to complete the third quarter 2021 reporting obligations and facilitate a smooth transition.Lawrence Hoffman , CPA, ESQ, ofDanforth Advisors , will serve as interim Chief Financial Officer.
Liquidity
We have operated as a public entity since we completed our initial public offering (IPO) of our common stock inMay 2014 . We also completed a follow-on public offering of our common stock inApril 2015 and public offerings of our common stock and warrants inJune 2016 ,March 2018 ,December 2019 , andDecember 2020 . As ofSeptember 30, 2021 , we had received an aggregate of$253.2 million in net proceeds from the issuance of our common stock and warrants in these six offerings. Our principal source of liquidity is cash and cash equivalents, which totaled$100.1 million as ofSeptember 30, 2021 , and availability to issue up to$47.4 million and$16.8 million of our common stock under our at-the-market facility withCantor Fitzgerald & Co. (Cantor) andLadenburg Thalmann & Co. Inc. (Ladenburg) and common stock purchase agreement withAspire Capital , respectively. We received$30.0 million under our Term Loan and could potentially be eligible to receive up to an additional$30.0 million , subject to certain terms and conditions. We have incurred annual net losses since our inception, including the year endedDecember 31, 2020 , and the three and nine months endedSeptember 30, 2021 . As ofSeptember 30, 2021 , our accumulated deficit was$330.2 million . We anticipate that we will continue to incur losses for at least the next several years. We expect we will continue to incur significant research and development expense as we continue to execute our research and drug development strategy, but that our research and development expenses will decrease primarily given the completion of the VANISH Phase 3 registration program and the completion of enrollment in the CANDLE Phase 3 study. Consistent with our operating plan, we also expect that we will continue to incur significant selling, general and administrative expenses to support our public reporting company operations, and that our selling, general and administrative expenses will increase to support the ongoing commercial launch of BREXAFEMME for the treatment of vaginal yeast infections and our ongoing operations. As a result, we will need additional capital to fund our operations, which we may obtain through one or more of equity offerings, debt financings, other non-dilutive third-party funding (e.g., grants, and New Jersey Technology Business Tax Certificate Transfer (NOL) Program), strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our shelf registrations, and the common stock purchase agreement withAspire Capital .
Collaborations and Licensing Agreements
We are party to a number of licensing and collaboration agreements with partners in human health, including: (1) Merck, a pharmaceutical company, under which we exclusively licensed the rights to ibrexafungerp in the field of human health, and agreed to pay Merck milestones upon the occurrence of specified events as well as tiered royalties based on worldwide sales of ibrexafungerp when and if it is approved (in 2014, Merck assigned to us the patents related to ibrexafungerp that it had exclusively licensed to us and, as contemplated by the agreement, we will continue to pay milestones and royalties); (2) Hansoh, a pharmaceutical company, which we exclusively provide a license from us to research, develop and commercialize ibrexafungerp in theGreater China region, including mainlandChina ,Hong Kong ,Macau , andTaiwan , under which we are entitled to receive development and commercial milestones and royalties (3) R-Pharm, CJSC, or "R-Pharm," a leading supplier of hospital drugs inRussia , granting it exclusive rights in the field of human health to develop and commercialize ibrexafungerp inRussia and several non-core markets, under which we are entitled to receive potential milestones and royalties and reimbursement for certain development costs incurred by us; (4) Waterstone, an international pharmaceutical business, granting Waterstone exclusive worldwide rights to development and commercialization of SCY-635 for the treatment of viral diseases in humans, under which we are entitled to receive potential milestones and royalties; and (5)Cypralis Limited , or "Cypralis," a life sciences company, transferring to it certain cyclophilin inhibitor assets of ours, under which we are eligible to 22
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receive milestone payments upon the successful progression of certain Cypralis clinical candidates into later stage clinical studies and royalties payable upon product commercialization.
Components of Operating Results
Revenue
Revenue primarily consists of a non-refundable upfront payment received under our license agreement with Hansoh and product sales of BREXAFEMME.
Cost of Product Revenue
Cost of product revenue consists primarily of distribution and freight expenses and other manufacturing costs associated with BREXAFEMME. Prior to the regulatory approval of BREXAFEMME onJune 1, 2021 , we expensed as research and development the costs associated with the third-party manufacture of BREXAFEMME.
Research and Development Expense
Research and development expense consists of expenses incurred while performing research and development activities to discover, develop, or improve potential product candidates we seek to develop. This includes conducting preclinical studies and clinical trials, manufacturing and other development efforts, and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Our research and development expense primarily consists of:
• costs related to executing preclinical and clinical trials, including
development milestones, drug formulation, manufacturing and other
development;
• salaries and personnel-related costs, including benefits and any stock-based
compensation, for personnel in research and development functions;
• fees paid to consultants and other third parties
candidate development and intellectual property protection;
• other costs in seeking regulatory approval of our products; and
• allocated overhead.
Our ibrexafungerp project was the only significant research and development
project during the periods presented. We expect to continue to incur significant
research and development expense for the foreseeable future as we continue our
effort to develop ibrexafungerp, and to potentially develop our other product
candidates, subject to the availability of additional funding.
The successful development of product candidates is highly uncertain. At this
time, we cannot reasonably estimate the nature, timing or costs required to
complete the remaining development of any product candidates. This is due to the
numerous risks and uncertainties associated with the development of product
candidates.
Selling, General and Administrative Expense
Selling, general and administrative expense consists primarily of salaries and personnel-related costs, including employee benefits and any stock-based compensation. This includes personnel in executive, finance, human resources, business development, medical affairs, marketing, and administrative support functions. Other expenses include facility-related costs not otherwise allocated to research and development expense, professional fees for accounting, auditing, tax and legal services, consulting costs for general and administrative purposes, information systems and marketing efforts.
Other Expense (Income)
All of our other income recognized in the three and nine months endedSeptember 30, 2021 and 2020, consists of amortization of debt issuance costs and discount, interest income, interest expense, other income, the warrant liabilities fair value adjustment, the derivative liabilities fair value adjustment, and the loss recognized for the extinguishment of debt.
Income Tax (Benefit) Expense
All of our income tax (benefit) expense recognized in the three and nine months endedSeptember 30, 2021 consists of an income tax benefit associated with the sale of our NOLs and research and development credits and tax withholding expense associated with the upfront payment received from Hansoh. 23
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Results of Operations for the Three Months Ended
The following table summarizes our results of operations for the three months endedSeptember 30, 2021 and 2020, together with the changes in those items in dollars and percentage (dollars in thousands): Three Months Ended September 30, 2021 2020 Period-to-Period Change Revenue: Product revenue, net$ 516 $ - $ 516 - % License agreement revenue - - - - Total revenue 516 - 516 - % Operating expenses: Cost of product revenues 145 - 145 - % Research and development 4,401 8,030 (3,629 ) (45.2 ) % Selling, general and administrative 15,411 3,481 11,930 342.7 % Total operating expenses 19,957 11,511 8,446 73.4 % Loss from operations (19,441 ) (11,511 ) (7,930 ) 68.9 % Other expense (income): Amortization of debt issuance costs and % discount 413 311 102 32.8 Interest income (8 ) (5 ) (3 ) 60.0 % Interest expense 1,019 330 689 208.8 % Other expense - 20 (20 ) (100.0 ) % Warrant liabilities fair value % adjustment (18,810 ) (7,786 ) (11,024 ) 141.6 Derivative liabilities fair value % adjustment (1,400 ) (5,290 ) 3,890 (73.5 ) Total other income (18,786 ) (12,420 ) (6,366 ) 51.3 % (Loss) income before taxes (655 ) 909 (1,564 ) (172.1 ) % Income tax benefit (50 ) - (50 ) - % Net (loss) income$ (605 ) $ 909 $ (1,514 ) (166.6 ) %
Revenue. Revenue in the three months ended
Cost of Product Revenue. Cost of product revenue in the three months ended
Research and Development. For the three months endedSeptember 30, 2021 , research and development expenses decreased to$4.4 million compared to$8.0 million for the three months endedSeptember 30, 2020 . The decrease of$3.6 million , or 45%, for the three months endedSeptember 30, 2021 , was primarily driven by a decrease of$1.6 million in chemistry, manufacturing, and controls (CMC) expense, a decrease of$1.2 million in clinical development expense, a decrease of$0.6 million in regulatory expense, and a net decrease in other research and development expense of$0.2 million . The$1.6 million decrease in CMC for the three months endedSeptember 30, 2021 , was primarily driven by$0.6 million and$0.5 million in expense recognized during the three months endedSeptember 30, 2020 for drug product shipped in the period and third-party drug product manufacturing, respectively. The$1.2 million decrease in clinical development expense for the three months endedSeptember 30, 2021 , was primarily driven by a decrease of$0.8 million and$0.5 million in expense associated with our CANDLE Phase 3 study and the VANISH Phase 3 program, respectively, as a result of the completion of the VANISH program and the completion of enrollment in the CANDLE Phase 3 study. Additionally, we incurred a decrease of$0.3 million in expense associated with the SCYNERGIA study and a decrease of$0.2 million in expense associated with two drug-drug interaction studies to support the NDA for BREXAFEMME. The decreases in clinical development expense for the three months endedSeptember 30, 2021 were offset, in part, by an increase of$0.3 million in expense for the FURI and CARES studies in addition to an increase in expense of$0.2 million for the Phase 1 liposomal IV study. The$0.6 million decrease in regulatory expense was primarily due to the costs incurred during the prior period for the preparation and filing of the NDA submission for BREXAFEMME. Selling, General & Administrative. For the three months endedSeptember 30, 2021 , selling, general and administrative expenses increased to$15.4 million from$3.5 million for the three months endedSeptember 30, 2020 . The increase of$11.9 million , or 343%, for the three months endedSeptember 30, 2021 , was primarily driven by a$8.7 million increase in commercial related expense associated with the ongoing commercialization of BREXAFEMME, an increase of$1.3 million in salary related costs, an increase of$0.7 million in expense associated with increased information technology costs, an increase 24
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of
Amortization of Debt Issuance Costs and Discount. For the three months endedSeptember 30, 2021 and 2020, we recognized$0.4 million $0.3 million in amortization of debt issuance costs and discount. The 2021 and 2020 debt issuance costs and discount for both theApril 2020 andMarch 2019 convertible notes primarily consisted of an allocated portion of advisory fees and other issuance costs. The 2021 debt issuance costs and discount for the Loan Agreement comprised issuance and commitment costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the Loan Agreement.
Interest Income. For the three months ended
Interest Expense. For the three months ended
Other Expense. For the three months ended
Warrant Liabilities Fair Value Adjustment. For the three months endedSeptember 30, 2021 and 2020, we recognized gains of$18.8 million and$7.8 million , respectively, in the fair value adjustment related to the warrant liabilities primarily due to the decrease in our stock price during the quarter.
Derivative Liabilities Fair Value Adjustment. For the three months ended
Income Tax Benefit. Income tax benefit in the three months endedSeptember 30, 2021 consists of$0.1 million in income tax benefit associated with an upfront payment received from Hansoh.
Results of Operations for the Nine Months Ended
Nine Months Ended September 30,
2021 2020 Period-to-Period Change
Revenue:
Product revenue, net $ 516 $ - $ 516 - %
License agreement revenue 12,050 - 12,050 - %
Total revenue 12,566 - 12,566 - %
Operating expenses:
Cost of product revenues 145 - 145 - %
Research and development 16,083 26,364 (10,281 ) (39.0 ) %
Selling, general and administrative 34,879 9,448 25,431 269.2 %
Total operating expenses 51,107 35,812 15,295 42.7 %
Loss from operations (38,541 ) (35,812 ) (2,729 ) 7.6 %
Other expense (income):
Loss on extinguishment of debt 2,725 806 1,919 238.1 %
Amortization of debt issuance costs and %
discount 937 910 27 3.0
Interest income (20 ) (188 ) 168 (89.4 ) %
Interest expense 1,678 859 819 95.3 %
Other income - (386 ) 386 (100.0 ) %
Other expense - 602 (602 ) (100.0 ) %
Warrant liabilities fair value %
adjustment (35,378 ) (16,114 ) (19,264 ) 119.5
Derivative liabilities fair value %
adjustment (1,772 ) (6,683 ) 4,911 (73.5 )
Total other income (31,830 ) (20,194 ) (11,636 ) 57.6 %
Loss before taxes (6,711 ) (15,618 ) 8,907 (57.0 ) %
Income tax benefit (3,088 ) (3,144 ) 56 (1.8 ) %
Net loss $ (3,623 ) $ (12,474 ) $ 8,851 (71.0 ) %
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Table of Contents Revenue. Revenue in the nine months endedSeptember 30, 2021 , consists primarily of a non-refundable upfront payment received under our license agreement with Hansoh and product sales of BREXAFEMME.
Cost of Product Revenues. Cost of product revenue in the nine months ended
Research and Development. For the nine months endedSeptember 30, 2021 , research and development expenses decreased to$16.1 million from$26.4 million for the nine months endedSeptember 30, 2020 . The decrease of$10.3 million , or 39%, for the nine months endedSeptember 30, 2021 , was primarily driven by a decrease of$4.7 million in clinical development expense, a decrease of$4.1 million in chemistry, manufacturing, and controls (CMC) expense, a decrease of$0.8 million in preclinical expense, and a decrease of$0.7 million in regulatory expense. The$4.7 million decrease in clinical development expense for the nine months endedSeptember 30, 2021 , was primarily driven by a decrease of$1.8 million and$1.7 million in expense associated with the VANISH Phase 3 program and CANDLE study, respectively, as a result of the completion of the VANISH program and the completion of enrollment in the CANDLE Phase 3 study. Additionally, we incurred decreases of$0.9 million in expense for both the two drug-drug interaction studies to support the NDA for BREXAFEMME and the SCYNERGIA study as well as a decrease in expense of$0.6 million for certain Phase 1 studies to support the NDA submission for BREXAFEMME. The decreases in clinical development expense for the nine months endedSeptember 30, 2021 were offset, in part, by an increase of$0.5 million in expense for the FURI and CARES studies in addition to an increase in expense of$0.4 million for the Phase 1 liposomal IV study The$4.1 million decrease in CMC for the nine months endedSeptember 30, 2021 , was primarily driven by$2.7 million in expense recognized during the nine months endedSeptember 30, 2020 for drug product shipped in the period. The$0.8 million decrease in preclinical expenses was primarily driven by a$0.8 million decrease in certain pharmacokinetic and preclinical expenses incurred during the prior comparable period. Selling, General & Administrative. For the nine months endedSeptember 30, 2021 , selling, general and administrative expenses increased to$34.9 million from$9.4 million for the nine months endedSeptember 30, 2020 . The increase of$25.4 million , or 269%, for the nine months endedSeptember 30, 2021 , was primarily driven by a$16.0 million increase in commercial related expense, an increase of$2.9 million in salary related costs, an increase of$2.0 million in expense associated with increased information technology, and an increase of$1.9 million in medical affairs expense, all primarily due to the costs recognized to support the ongoing commercialization of BREXAFEMME. The increase for the nine months endedSeptember 30, 2021 , was also driven by an increase of$1.2 million in business development expense associated with the licensing agreement entered into with Hansoh inFebruary 2021 , a$0.9 million increase in certain professional fees, and a net increase of$0.5 million in other selling, general and administrative expense. Loss on Extinguishment of Debt. For the nine months endedSeptember 30, 2021 , we recognized$2.7 million in loss on extinguishment of debt associated with theJanuary 2021 conversation of our remainingApril 2020 convertible notes. Amortization of Debt Issuance Costs and Discount. For both the nine months endedSeptember 30, 2021 and 2020, we recognized$0.9 million in amortization of debt issuance costs and discount. The 2021 and 2020 debt issuance costs and discount for both theApril 2020 andMarch 2019 convertible notes primarily consisted of an allocated portion of advisory fees and other issuance costs. The 2021 debt issuance costs and discount for the Loan Agreement comprised issuance and commitment costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the Loan Agreement.
Interest Income. For the nine months ended
Interest Expense. For the nine months endedSeptember 30, 2021 and 2020, we recognized$1.7 million and$0.9 million in interest expense, respectively. The interest expense recognized in the periods is primarily associated with the Loan Agreement and theApril 2020 andMarch 2019 convertible notes. Other Income. For the nine months endedSeptember 30, 2020 , we recognized$0.4 million in other income associated with certain research and development tax credits. Other Expense. For the nine months endedSeptember 30, 2020 , we recognized$0.6 million in expense associated with the noncash consideration associated with the common stock purchase agreement withAspire Capital . Warrant Liabilities Fair Value Adjustment. For the nine months endedSeptember 30, 2021 and 2020, we recognized gains of$35.4 million and$16.1 million , respectively, in the fair value adjustment related to the warrant liabilities primarily due to the decrease in our stock price during the periods. 26
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Derivative Liabilities Fair Value Adjustment. For the nine months ended
Income Tax Benefit. For the nine months endedSeptember 30, 2021 , we recognized a$4.1 million income tax benefit associated with the sale of a portion of our NOLs and research and development credits and$1.1 million of tax withholding expense primarily associated with the upfront payment received from Hansoh. For the nine months endedSeptember 30, 2020 , we recognized a$3.1 million income tax benefit associated with the sale of a portion of our NOLs and research and development credits.
Liquidity and Capital Resources
Sources of Liquidity
ThroughSeptember 30, 2021 , we have primarily funded our operations from net proceeds from equity and debt issuances and through revenue from development services. As ofSeptember 30, 2021 , we had cash and cash equivalents of$100.1 million , compared to cash and cash equivalents of$93.0 million as ofDecember 31, 2020 . The increase in our cash and cash equivalents was primarily due to the$28.7 million in net proceeds received from the Loan Agreement and the$10.0 million cash receipt from Hansoh, offset in part by our increase in selling, general and administrative expenses to support the ongoing commercial launch of BREXAFEMME for the treatment of vaginal yeast infections and the continued development costs associated with ibrexafungerp. We have incurred annual net losses since our inception, and we incurred a net loss during the three and nine months endedSeptember 30, 2021 . As ofSeptember 30, 2021 , our accumulated deficit was$330.2 million . We expect that we will continue to incur losses for at least the foreseeable future. Consistent with our operating plan, we expect our research and development expenses to decrease primarily given the completion of the VANISH Phase 3 registration program and the completion of enrollment in our CANDLE study and we expect our selling, general and administrative expenses to increase to support the ongoing commercial launch for the treatment of vaginal yeast infections and our ongoing operations. As a result, we may need additional capital to fund our operations, which we may obtain through one or more of equity offerings, debt financings, or other non-dilutive third-party funding (e.g., grants, and New Jersey Technology Business Tax Certificate Transfer (NOL) Program), strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our shelf registrations, including the related at-the-market facility entered into onMay 17, 2021 with Cantor and Ladenburg and the common stock purchase agreement entered into onApril 10, 2020 withAspire Capital . During the nine months endedSeptember 30, 2021 , we sold 430,605 and 400,000 shares of our common stock and received net proceeds of$2.5 million and$2.6 million under our at-the-market facility and common stock purchase agreement, respectively. During the nine months endedSeptember 30, 2021 , 360,134 and 2,060,000 of theDecember 2020 public offering warrants and prefunded warrants were exercised for proceeds of$2.6 million and$2,000 , respectively. Cash Flows
The following table sets forth the significant sources and uses of cash for the
nine months ended
Nine Months Ended September 30,
2021 2020
Cash, cash equivalents, and restricted cash,
January 1 $ 93,314 $ 42,193
Net cash used in operating activities (29,040 ) (32,782 )
Net cash (used in) provided by investing
activities (589 ) 6,474
Net cash provided by financing activities 36,642 13,882
Net increase (decrease) in cash, cash equivalents, and restricted cash
7,013 (12,426 )
Cash, cash equivalents, and restricted cash,
September 30 $ 100,327 $ 29,767
Operating Activities
The $3.7 million decrease in net cash used in operating activities for the nine
months ended September 30, 2021 , as compared to the nine months ended September
30, 2020 , was primarily due to the cash receipt of $10.0 million from Hansoh
received during the current period, offset by an increase in selling, general
and administrative expenses to support the ongoing commercial launch of
BREXAFEMME for the treatment of vaginal yeast infections and the continued
development costs associated with ibrexafungerp. Consistent with our operating
plan, we expect that our research and development expenses will decrease
primarily given the completion of the VANISH Phase 3 registration program and
the completion of enrollment in the CANDLE Phase 3 study and we expect our
selling, general and administrative expenses to increase to support the ongoing
commercial launch of BREXAFEMME for the treatment of vaginal yeast infections
and our ongoing operations.
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Net cash used in operating activities of$29.0 million for the nine months endedSeptember 30, 2021 , primarily consisted of the$3.6 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of$35.4 million , the gain on change in fair value of the derivative liabilities of$1.8 million , stock-based compensation expense of$1.5 million , amortization of debt issuance costs and discount of$0.9 million , and the loss on extinguishment of debt of$2.7 million , plus a net favorable change in operating assets and liabilities of$6.3 million . The net favorable change in operating assets and liabilities was due to an increase in accounts payable, accrued expenses, and other of$5.0 million and a decrease in prepaid expenses, deferred costs, and other of$1.3 million . The$5.0 million increase in accounts payable, accrued expenses, and other was primarily due to the increase in accounts payable of$2.3 million , an increase in accrued expenses of$0.6 million , and an increase of$2.1 million in other liabilities associated with the long term deferred fees due toAmplity , The decrease in prepaid expense, deferred cost, and other of$1.3 million was primarily due to the collection of a$2.9 million receivable inFebruary 2021 and a$0.7 million decrease in prepaid research and development services, primarily offset by an increase of$0.6 million in inventory and$0.4 million in prepaid insurance. Net cash used in operating activities of$32.8 million for the nine months endedSeptember 30, 2020 , primarily consisted of the$12.5 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of$16.1 million , the gain on change in fair value of the derivative liabilities of$6.7 million , stock-based compensation expense of$1.2 million , amortization of debt issuance costs and discount of$0.9 million , and the loss on extinguishment of debt of$0.8 million , plus a net unfavorable change in operating assets and liabilities of$1.3 million . The net unfavorable change in operating assets and liabilities was primarily due to a decrease in accounts payable, accrued expenses, and other of$2.8 million and offset in part by a decrease in prepaid expenses, deferred costs, and other of$1.5 million . The$2.8 million decrease in accounts payable, accrued expenses, and other was primarily due to the decrease in accounts payable of$1.9 million as ofSeptember 30, 2020 and the decrease of$0.6 million in accrued employee bonus compensation as a result of the payment of the 2019 related employee bonus compensation in 2020. The decrease in prepaid expense, deferred cost, and other of$1.5 million was primarily due to a$1.2 million decrease in prepaid research and development costs associated with drug product shipped during the period.
Investing Activities
Net cash used in investing activities of
Net cash provided by investing activities of$6.5 million for the nine months endedSeptember 30, 2020 consisted of purchases and maturities of short-term investments of$14.2 million and$20.7 million , respectively.
Financing Activities
Net cash provided by financing activities of
Net cash provided by financing activities of$13.9 million for the nine months endedSeptember 30, 2020 , consisted primarily of gross proceeds from the sale of theApril 2020 Notes for$10.0 million and the gross proceeds from the sale of our common stock issued under our at-the-market facilities and common stock purchase agreement of$4.7 million .
Future Funding Requirements
We have begun to generate revenue from product sales for BREXAFEMME. In addition, we expect to incur significant expenses in connection with our ongoing efforts to commercialize BREXAFEMME and further other development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, product candidates. We anticipate that we will need substantial additional funding in connection with our continuing future operations. Based upon our existing operating plan, we believe that our existing cash and cash equivalents, the sale of a portion of our New Jersey NOLs, and the anticipated sales of BREXAFEMME will enable us to fund our operating requirements into 2023. These funds are also sufficient to enable us to support the ongoing commercial launch of BREXAFEMME for the treatment of vaginal yeast infections and complete the development activities for the CANDLE study. However, we are continually evaluating our operating plan and assessing the optimal cash utilization for our ibrexafungerp development strategy. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses necessary to complete the development of product candidates.
Our future capital requirements will depend on many factors, including:
• the costs and potential revenue associated with the commercialization of
BREXAFEMME;
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• the progress, and costs, of the clinical development of ibrexafungerp;
• the outcome, costs and timing of seeking and obtaining FDA and any other
regulatory approvals;
• the ability of product candidates to progress through clinical development
successfully;
• our need to expand our research and development activities;
• the costs associated with securing, establishing and maintaining
commercialization and manufacturing capabilities;
• our ability to maintain, expand and defend the scope of our intellectual
property portfolio, including the amount and timing of any payments we may
be required to make, or that we may receive, in connection with the
licensing, filing, prosecution, defense and enforcement of any patents or
other intellectual property rights;
• our need and ability to hire additional management and scientific and
medical personnel;
• our need to implement additional, as well as to enhance existing, internal
systems and infrastructure, including financial and reporting processes and
systems and the associated compliance costs; and
• the economic and other terms, timing and success of our existing licensing
arrangements and any collaboration, licensing or other arrangements into
which we may enter in the future.
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of net proceeds from equity offerings, debt financings or other non-dilutive third-party funding (e.g., grants, and New Jersey Technology Business Tax Certificate Transfer (NOL) Program), strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities as we did inApril 2015 ,June 2016 ,March 2018 ,December 2019 , andDecember 2020 , as well as through our common stock purchase agreement withAspire Capital , the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through sales of assets, other third-party funding, strategic alliances and licensing or collaboration arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
Off-Balance Sheet Arrangements
During the periods presented we did not have, nor do we currently have, any
off-balance sheet arrangements as defined under
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our interim condensed consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted inthe United States , or GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies, significant judgments, and estimates are described within Item 7 and Note 2 to our Annual Report on Form 10-K for the year endedDecember 31, 2020 , as well as Note 2 to our unaudited interim condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. 29
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