Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  VYNE Therapeutics Inc.    VYNE

VYNE THERAPEUTICS INC.

(VYNE)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector news

VYNE THERAPEUTICS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/05/2020 | 07:28am EST
You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with the condensed consolidated
financial statements and the notes thereto included elsewhere in this Quarterly
Report on Form 10-Q, our Annual Report on Form 10-K for the year ended
December 31, 2019, our Current Report on Form 8-K/A filed with the SEC on May 7,
2020 and our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2020 and June 30, 2020 filed with the SEC on May 11, 2020 and August 6, 2020,
respectively. On September 4, 2020, we changed our corporate name from "Menlo
Therapeutics Inc." to "VYNE Therapeutics Inc." In this Quarterly Report on Form
10-Q, unless otherwise indicated, all references to the "Company," "we," "us"
and "our" or similar terms refer to VYNE Therapeutics Inc. after giving effect
to the Merger.
Company Overview
We are a specialty pharmaceutical company focused on developing and
commercializing proprietary, innovative and differentiated therapies in
dermatology and beyond. On March 9, 2020, we combined with Foamix
Pharmaceuticals Ltd. ("Foamix"). In January 2020, Foamix (now our wholly-owned
subsidiary) launched AMZEEQ® (minocycline) topical foam, 4% ("AMZEEQ"), a
once-daily topical antibiotic for the treatment of inflammatory lesions of
non-nodular moderate-to-severe acne vulgaris in patients 9 years of age and
older. On May 28, 2020, the Food and Drug Administration ("FDA") approved ZILXI™
(minocycline) topical foam, 1.5% (formerly FMX103, "ZILXI"), for the treatment
of inflammatory lesions of rosacea in adults. ZILXI became available in
pharmacies nationwide on October 1, 2020. AMZEEQ and ZILXI are the first topical
minocycline products approved by the FDA and serve as a springboard for our
potential commercialization of additional innovative products in dermatology and
beyond.
AMZEEQ and ZILXI utilize our proprietary Molecule Stabilizing Technology (MST)™,
or MST™, that we also use in the development of our product candidate FCD105, a
topical foam comprising minocycline and adapalene for the treatment of acne
vulgaris. On June 2, 2020, we announced positive topline results from our Phase
II clinical trial, Study FX2016-40, to evaluate the efficacy and safety of
FCD105. Pending a successful development program, we intend to file a new drug
application ("NDA") for FCD105 under the 505(b)(2) regulatory pathway, which is
the same regulatory pathway we have pursued for AMZEEQ and ZILXI.
In addition to MST™ and our emulsion platform (which is a different technology),
we have a number of proprietary delivery platforms in development that enable
topical delivery of other APIs, each having unique pharmacological features and
characteristics designed to keep the API stable when delivered and directed to
the target site. We believe our MST vehicle and other topical delivery platforms
may offer significant advantages over alternative delivery options, including
emulsions, and are suitable for multiple application sites across a range of
conditions. We are also actively pursuing opportunities to out-license our
product and product candidates to third parties for development and
commercialization outside the United States.
Key Developments
Below is a summary of selected key developments affecting our business that have
occurred since December 31, 2019:
•On November 10, 2019, the Company, Foamix and Giants Merger Subsidiary Ltd., a
wholly-owned subsidiary of Menlo ("Merger Sub"), entered into an Agreement and
Plan of Merger (as amended by Amendment No. 1 to the Agreement and Plan of
Merger, dated as of December 4, 2019, the "Merger Agreement"). Pursuant to the
terms of the Merger Agreement, Merger Sub merged with and into Foamix, with
Foamix surviving as a wholly-owned subsidiary of Menlo (the "Merger") on March
9, 2020. Foamix was deemed the "accounting acquirer" in the Merger and the
Merger was accounted for as a reverse acquisition, with Foamix allocating the
purchase price consideration to the tangible and intangible assets acquired and
liabilities assumed from Menlo, and the excess purchase price recorded as
goodwill. In accordance with reverse acquisition accounting, Foamix's
consolidated financial statements are deemed those of the predecessor entity.
•On March 9, 2020, we entered into an Amended and Restated Credit Agreement and
Guaranty, whereby we have guaranteed the indebtedness obligation of Foamix
Pharmaceuticals Inc. and granted a first priority security interest in
substantially all of our assets for the benefit of the lenders. The Amended and
Restated Credit Agreement provides for a senior secured delayed draw term loan
facility in an aggregate principal amount of up to $50.0 million, of which $35.0
million was drawn as of December 31, 2019 and September 30, 2020. We did not,
and do not expect to, incur the remaining $15.0 million under the Amended and
Restated Credit Agreement. On August 5, 2020, the parties amended the minimum
net revenue covenant contained in the Amended and Restated Credit Agreement and
Guaranty.
                                       32

--------------------------------------------------------------------------------

  Table of contents
•On March 24, 2020, we announced that Andrew Saik joined the Company as our
Chief Financial Officer and Treasurer.
•On April 2, 2020, we announced that we have entered into a settlement and
license agreement to resolve the remaining pending patent litigation involving
Finacea® foam.
•In April 2020, LEO Pharma A/S, or LEO, remedied the supply chain issues related
to Finacea foam that Foamix previously disclosed in April 2019 and resumed
commercial sales of Finacea foam.
•On April 6, 2020, we announced top line results from two Phase III clinical
trials evaluating the safety and efficacy of once daily oral serlopitant for the
treatment of pruritus (itch) associated with prurigo nodularis ("PN"), studies
MTI-105 and MTI-106. Neither study met their respective primary endpoint of
demonstrating statistically significant reduction in pruritus in patients
treated with serlopitant compared to placebo based on a 4-point improvement
responder analysis. We currently do not intend to further pursue the development
of serlopitant, other than to assess and explore opportunities, if any, to
license out and or monetize other aspects of the serlopitant asset. As such, the
Company recorded a full impairment charge related to the IPR&D and Goodwill
assets of $50.3 million and $4.0 million, respectively, in its unaudited
consolidated condensed statement of operations and comprehensive loss for the
nine months ending September 30, 2020.
•On April 23, 2020, we announced that we entered into a license agreement with
Cutia Therapeutics (HK) Limited ("Cutia") for AMZEEQ® (minocycline) topical
foam, 4% as well as certain of our other topical minocycline product
candidates, once approved, on an exclusive basis in Greater China. Under the
terms of the agreement, Cutia will have an exclusive license to obtain
regulatory approval of and commercialize AMZEEQ® and, if approved in the U.S.,
FMX103 and FCD105 in the Greater China territory. We will supply the finished
licensed products to Cutia for clinical and commercial use. We received an
upfront cash payment of $10 million and will be eligible to receive an
additional $1 million payment upon the receipt of marketing approval in China of
the first licensed product. We will also receive royalties on net sales of any
licensed products.
•During the first quarter of 2020, an outbreak of respiratory illness caused by
a strain of novel coronavirus, COVID-19, that began in China spread throughout
the globe and directly impacted our business operations. There are many
uncertainties regarding the COVID-19 pandemic, and we are closely monitoring the
impact of the pandemic on all aspects of our business, including how it will
continue to impact our patients, employees, suppliers, vendors, business
partners and distribution channels. We are unable to predict the impact that
COVID-19 will have on our financial position and operating results in future
periods due to numerous uncertainties, including duration, scope and severity of
the pandemic, the actions taken to contain or mitigate its impact, the impact on
governmental programs and budgets, the development of treatments or vaccines,
and the resumption of widespread economic activity. An extended duration of the
pandemic could have a material adverse effect on our product sales for AMZEEQ,
and any future sales of ZILXI. In addition, any prolonged material disruption of
the Company's employees, suppliers, manufacturing, or customers could further
materially negatively impact our consolidated financial position, consolidated
results of operations and consolidated cash flows. We will continue to assess
the evolving impact of the COVID-19 pandemic and will make adjustments to our
operations as necessary.
•Following the receipt of the results of the Phase 3 clinical trials evaluating
serlopitant for the treatment of PN and the impact of the COVID-19 pandemic, the
Company has revised its operating plan to focus on the commercialization of
AMZEEQ and its other topical minocycline product candidates. In addition, the
revised operating plan reflects prudent resource prioritization and allocation
management, including the rationalization of research and development spend to
focus on existing product candidates.
•On May 28, 2020, the FDA approved ZILXI for the treatment of inflammatory
lesions of rosacea in adults. ZILXI is the first minocycline product of any kind
to be approved by the FDA for use in rosacea. ZILXI became available in
pharmacies nationwide on October 1, 2020.
•On June 2, 2020, we announced positive results from a Phase II clinical trial
evaluating the preliminary safety and efficacy of FCD105 (3% minocycline / 0.3%
adapalene foam), the first ever topical minocycline-based combination product,
for the treatment of moderate-to-severe acne vulgaris. Study FX2016-40 enrolled
447 patients in the United States who were randomized to either FCD105 foam, 3%
minocycline foam, 0.3% adapalene foam, or vehicle foam. The Company has
scheduled an end-of-Phase 2 meeting with the FDA in the fourth quarter of 2020.
•On June 9, 2020, we completed an underwritten public offering of 31,107,500
shares of common stock at a price to the public of $1.85 per share. The net
proceeds of the offering were approximately $53.6 million, after deducting
                                       33

--------------------------------------------------------------------------------

  Table of contents
underwriting discounts and commissions and other offering expenses. We intend to
use the net proceeds from this offering for (i) a Phase III clinical trial for
FCD105 for the potential treatment of acne vulgaris, (ii) supporting the
commercial launch of ZILXI, (iii) the continued development of our product
candidates and (iv) the remainder, if any, for general corporate purposes.
•On September 4, 2020, we filed a Certificate of Amendment to our Amended and
Restated Certificate of Incorporation with the Secretary of State of the State
of Delaware to change our corporate name to "VYNE Therapeutics Inc."
•Effective as of September 10, 2020, Mr. Patrick G. LePore joined our Board. Mr.
LePore has more than 40 years of experience in the pharmaceutical industry, in
both private and public sectors, and with board and operational experience in
each. He previously served as Chairman, Chief Executive Officer and President of
Par Pharmaceutical Companies, Inc.
•On October 1, 2020, ZILXI became available in pharmacies nationwide, and on
October 7, 2020, we announced that Express Scripts, one of the nation's leading
pharmacy benefit managers (PBMs), has elected to cover ZILXI on Express Scripts'
National Preferred, Flex, and Basic commercial formularies, representing
millions of additional covered lives in the U.S. that follow these formularies.
Financial Overview
Our cash and cash equivalents and investments totaled $76.9 million as
of September 30, 2020. We believe that our cash and cash equivalents and
investments and projected cash flows from revenues will provide sufficient
resources for our current ongoing needs through December 31, 2021. However, the
Company may seek additional financing in order to achieve its longer-term
strategic plans. See "-Liquidity and Capital Resources" below.
We have incurred net losses since our inception. Until the first quarter of
2020, when we commenced commercial operations, our business activities were
primarily limited to developing product candidates, raising capital and
performing research and development activities. As of September 30, 2020, we had
an accumulated deficit of $543.0 million. We recorded net losses of $24.7
million and $23.2 million for the three months ended September 30, 2020 and
2019, respectively, and $232.4 million and $57.4 million for the nine months
ended September 30, 2020 and 2019, respectively.
Our capital resources and business efforts are largely focused on activities
relating to the commercialization of AMZEEQ and ZILXI and advancing our product
candidates and pipeline. We expect to continue to incur operating losses until
our products generate adequate commercial revenue to reach profitability. If we
do not successfully commercialize AMZEEQ, ZILXI or any current or future product
candidates, if approved, we may be unable to generate adequate product revenues
to achieve such profitability. We may be required to obtain further funding
through debt or equity offerings or other sources. Adequate additional funding
may not be available to us on acceptable terms, or at all. If we are unable to
raise capital when needed or on acceptable terms, we may be forced to delay,
reduce or eliminate our research and development programs or commercialization
or manufacturing efforts. Additionally, we are closely monitoring ongoing
developments in connection with the COVID-19 pandemic, which may have an adverse
impact on our commercial prospects and projected cash position.
Components of Operating Results
Revenues
Our revenue during the periods presented has been comprised of AMZEEQ product
sales and collaboration and license revenue.
During 2019, we were engaged in pre-launch sales and marketing planning
activities and other pre-commercialization efforts in order to support the
commercialization of AMZEEQ in the United States. We received FDA approval for
AMZEEQ on October 18, 2019 and launched AMZEEQ in the United States in January
2020. We have generated product revenue of $6.1 million for the nine months
ended September 30, 2020. We commercially launched ZILXI on October 1, 2020. We
will not commercially launch our other product candidates in the United States
or generate any revenues from sales of any of our product candidates unless and
until we obtain marketing approval. Our ability to generate revenues from sales
will depend on the successful commercialization of our drug products AMZEEQ and
ZILXI and any other product candidates that receive marketing approval.
Historically, we have generated revenues under development and license
agreements including royalty payments in relation to Finacea, the prescription
foam product that we developed in collaboration with Bayer, which later assigned
it to LEO. In the three months ended March 31, 2020, we did not receive or
become entitled to any royalty payments due to the ongoing suspension of the
manufacturing of Finacea by LEO, following inadequate supply of
quality-compliant batches of the API used in such product. In April 2020, LEO
informed us that it had reestablished the supply of Finacea foam and resumed
commercial
                                       34

--------------------------------------------------------------------------------

  Table of contents
sale in the United States. In the three and nine months ended September 30, 2020
we received royalties of $0.4 million and $0.6 million, respectively.
We may become entitled to additional contingent payments in the future, subject
to achievement of the applicable clinical results by our other licensees.
However, in light of the current phase of development and associated milestone
schedules under these agreements, we do not expect to receive significant
payments in the near term, if at all. We are also entitled to additional
royalties from net sales or net profits generated by other products to be
developed under these agreements, if they are successfully commercialized. In
those development and license agreements in which royalties are based on net
sales, their rate ranges from 3% to 8.5%, and in the agreement in which
royalties are based on net profits, their rate is 6%.
Additionally, as described in "Key Developments," on April 23, 2020, we
announced that we entered into a licensing agreement with Cutia for AMZEEQ as
well as certain of our other topical minocycline product candidates, once
approved, on an exclusive basis in Greater China. Under the terms of the
agreement, Cutia will have an exclusive license to obtain regulatory approval of
and commercialize AMZEEQ, ZILXI and, if approved in the U.S., FCD105 in
the Greater China territory. We will supply the finished licensed products to
Cutia for clinical and commercial use. We received an upfront cash payment
of $10 million and will be eligible to receive an additional $1 million payment
upon the receipt of marketing approval in China of the first licensed product.
We will also receive royalties on net sales of any licensed products pursuant to
the agreement. In the nine months ended September 30, 2020, we recognized
license revenue of $10.0 million.
Cost of Goods Sold
Cost of goods sold was $0.9 million for the nine months ended September 30,
2020. There was no cost of goods sold in the nine months ended September 30,
2019 because the revenues in that period consisted solely of royalties, which do
not bear related cost of goods sold.
Our gross margin percentage of 86% was favorably impacted during the nine months
ended September 30, 2020 by product sales with certain materials produced prior
to FDA approval and therefore expensed in prior periods. If inventory sold
during the nine months ended September 30, 2020 was valued at cost, our gross
margin for the period then ended would have been 82%.
Cost of goods sold expenses consist primarily of:
•third party expenses incurred in manufacturing product for sale;
•transportation costs incurred in shipping manufacturing materials between third
parties; and
•other costs associated with delivery and manufacturing of product.
Operating Expenses
Research and Development Expenses
Our research and development expenses to date relate primarily to the
development of AMZEEQ, ZILXI and FCD105. Our total research and development
expenses for the nine months ended September 30, 2020 and 2019 were
approximately $35.7 million and $35.9 million, respectively. We charge all
research and development expenses to operations as they are incurred.
Research and development expenses consist primarily of:
•employee-related expenses, including salaries, benefits and related expenses,
including share-based compensation expenses;
•expenses incurred under agreements with third parties, including
subcontractors, suppliers and consultants that conduct regulatory activities,
clinical trials and preclinical studies;
•expenses incurred to acquire, develop and manufacture clinical trial materials;
•facilities, depreciation and other expenses, which include direct and allocated
expenses for rent and maintenance of facilities, insurance, and other operating
costs;
•costs associated with the creation, development and protection of intellectual
property;
•other costs associated with preclinical and clinical activities and regulatory
operations; and
                                       35

--------------------------------------------------------------------------------

  Table of contents
•materials and manufacturing costs related to commercial production prior to FDA
approval.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the nine months ended
September 30, 2020 and 2019 were approximately $71.6 million and $22.9 million,
respectively. This increase was primarily associated with the expansion of our
employee base, including sales force, to support the growth of our operations,
severance expenses for Menlo employees, stock based compensation awards, merger
expenses and sales and marketing expenses incurred in connection with the
commercialization of AMZEEQ and ZILXI.
Our selling, general and administrative expenses consist principally of:
•employee-related expenses, including salaries, benefits and related expenses,
including share-based compensation expenses;
•costs associated with selling, marketing and shipping and handling costs;
•legal and professional fees for auditors and other consulting expenses; and
•facility, information technology and depreciation expenses.
Financial Income and Expenses
Financial income primarily consists of gains from interest earned from our bank
deposits, financial income on our marketable securities and a revaluation of our
derivative liability. Financial expenses primarily consist of interest expense
on our long-term debt.
Income Taxes and Net Operating Loss Carryforwards
We have incurred significant net operating losses ("NOLs") since our inception.
We expect to continue to incur NOLs until such a time when AMZEEQ, ZILXI or any
other product, if approved in the future, generates adequate revenues for us to
reach profitability. As of December 31, 2019, we had federal and state net
operating loss carryforwards of $165.8 million and $17.6 million, respectively,
of which $44.3 million and $16.8 million of these carryforwards will begin to
expire in 2031 for federal and state purposes, respectively. As of December 31,
2019, we had federal and state research and development tax credit carryforwards
of $7.1 million and $2.1 million, respectively. The federal credits begin to
expire in 2031 and the California research credits have no expiration dates. As
of December 31, 2019, Foamix had foreign NOL carryforwards of $224.4 million,
which are available solely to offset taxable income of our foreign subsidiary,
subject to any applicable limitations under foreign law and $27.3 million in
federal and state NOLs with no limited period of use.
NOLs and tax credit carryforwards are subject to review and possible adjustment
by the Internal Revenue Service and may become subject to an annual limitation
in the event of certain cumulative changes in the ownership interest of
significant stockholders over a three-year period in excess of 50%, as defined
under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended.
This could limit the amount of tax attributes that can be utilized annually to
offset future taxable income or tax liabilities. The amount of the annual
limitation is determined based on the value of our company immediately prior to
the ownership change. Subsequent ownership changes may further affect the
limitation in future years. State NOLs and tax credit carryforwards may be
subject to similar limitations under state laws. We have not determined if we
have experienced Section 382 ownership changes in the past and if a portion of
our net operating loss and tax credit carryforwards are subject to an annual
limitation under Sections 382 or 383. We may have experienced ownership changes
in the past, including in connection to our initial public offering ("IPO"), and
as a result of the Merger and/or subsequent shifts in our stock ownership, some
of which may be outside of our control. As a result, even if we earn net taxable
income, our ability to use the NOL and tax credit carryforwards may be
materially limited, which could harm our future operating results by effectively
increasing our future tax obligations.
Results of Operations
Comparison of the Three-Month Periods Ended September 30, 2020 and 2019
Revenue
                                       36

--------------------------------------------------------------------------------

  Table of contents
Revenues totaled $3.3 million for the three months ended September 30, 2020.
There were no revenues for the three months ended September 30, 2019. For the
three months ended September 30, 2020, our revenue consisted of $2.9 million of
product sales, primariy associated with AMZEEQ, which was launched in January
2020, and $0.4 million of royalty revenue.
During the first quarter of 2020, as a result of the COVID-19 pandemic, we
suspended the vast majority of our in-person interactions by our customer-facing
professionals in healthcare settings and engaged with these customers remotely
in an effort to continue to support healthcare professionals and patient care
under unprecedented circumstances. During the second quarter of 2020, we began
limited in-person customer meetings and interactions in certain regions,
consistent with local government mandates. As a result, the Company's product
sales for AMZEEQ were negatively impacted by office closures during this period.
While the Company's product sales for AMZEEQ experienced a modest recovery
during the three months ended September 30, 2020, circumstances surrounding the
COVID-19 pandemic have negatively impacted our ability to execute our commercial
strategy with respect to AMZEEQ. The length of time and extent to which the
COVID-19 pandemic will directly or indirectly impact the Company's business,
results of operations and financial condition will depend on future developments
that are highly uncertain, subject to change and will continue to evolve with
geographical re-openings and virus waves. An extended duration of the COVID-19
pandemic could continue to negatively impact sales of AMZEEQ, and any future
sales of ZILXI.
Cost of Goods Sold
Cost of goods sold was $0.4 million for the three months ended September 30,
2020. There was no cost of goods sold in the three months ended September 30,
2019 because the revenues in that period consisted solely of royalties, which do
not bear related cost of goods sold.
Our gross margin percentage of 87% was favorably impacted during the three
months ended September 30, 2020 by product sales with certain materials produced
prior to FDA approval and therefore expensed in prior periods. If inventory sold
during the three months ended September 30, 2020 was valued at cost, our gross
margin for the period then ended would have been 85%.
Research and Development Expenses
Our research and development expenses for the three months ended September 30,
2020 were $6.6 million, representing a decrease of $5.8 million, or 47%,
compared to $12.5 million for the three months ended September 30, 2019.
Employee-related expenses decreased by $1.7 million. Clinical and manufacturing
costs related to AMZEEQ and ZILXI decreased by $4.1 million.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the three months ended
September 30, 2020 were $19.8 million, representing an increase of $9.0 million,
or 84%, compared to $10.7 million for the three months ended September 30, 2019.
Employee-related expenses increased by $3.7 million, primarily due to the
expansion of our employee base, including sales force, to support the growth of
our operations and stock based compensation. Sales and marketing expenses
increased by $5.3 million related to the commercialization of AMZEEQ and ZILXI.
Finance Income and Expenses
Finance expenses and income are as follows:
                                                                  Three months ended September 30
                                                                     2020                 2019
                                                                  (in thousands of U.S. dollars)
Interest on bank deposits                                       $         (3)         $     (154)

Gain from marketable securities, net                                      (1)               (227)
Total income                                                              (4)               (381)
Other expenses                                                            14                   6
Foreign exchange loss                                                    120                   8
Finance expenses on loans interest and discount                        1,092                 329
Total expenses                                                  $      1,226$      343


Income Taxes
                                       37

--------------------------------------------------------------------------------

  Table of contents
Our tax expense for the three months ended September 30, 2020 was $1 thousand.
During the three months ended September 30, 2019 we had no tax expenses.
Comparison of the Nine-Month Periods Ended September 30, 2020 and 2019
Revenue
Revenues totaled $16.7 million and $0.3 million for the nine months ended
September 30, 2020 and 2019, respectively. For the nine months ended
September 30, 2020, our revenue consisted of $6.1 million of product sales,
primarily associated with AMZEEQ, which was launched in January 2020, $10.0
million of license revenue, and $0.6 million of royalty revenue. For the nine
months ended September 30, 2019, revenues consisted solely of royalty revenues.
The increase in license revenue for the nine months ended September 30, 2020 as
compared to license revenue for the nine months ended September 30, 2019 is due
to the upfront payment received under the Cutia license agreement for the
marketing and sale of our topical minocycline products in China.
During the first quarter of 2020, as a result of the COVID-19 pandemic, we
suspended the vast majority of our in-person interactions by our customer-facing
professionals in healthcare settings and engaged with these customers remotely
in an effort to continue to support healthcare professionals and patient care
under unprecedented circumstances. During the second quarter of 2020, we began
limited in-person customer meetings and interactions in certain regions,
consistent with local government mandates. As a result, the Company's product
sales for AMZEEQ were negatively impacted by office closures during this period.
While the Company's product sales for AMZEEQ experienced a modest recovery
during the three months ended September 30, 2020, circumstances surrounding the
COVID-19 pandemic have negatively impacted our ability to execute our commercial
strategy with respect to AMZEEQ. The length of time and extent to which the
COVID-19 pandemic will directly or indirectly impact the Company's business,
results of operations and financial condition will depend on future developments
that are highly uncertain, subject to change and will continue to evolve with
geographical re-openings and virus waves. An extended duration of the COVID-19
pandemic could continue to negatively impact sales of AMZEEQ, and any future
sales of ZILXI.
Cost of Goods Sold
Cost of goods sold was $0.9 million for the nine months ended September 30,
2020. There was no cost of goods sold in the nine months ended September 30,
2019 because the revenues in that period consisted solely of royalties, which do
not bear related cost of goods sold.
Our gross margin percentage of 86% was favorably impacted during the nine months
ended September 30, 2020 by product sales with certain materials produced prior
to FDA approval and therefore expensed in prior periods. If inventory sold
during the nine months ended September 30, 2020 was valued at cost, our gross
margin for the period then ended would have been 82%.
Research and Development Expenses
Our research and development expenses for the nine months ended September 30,
2020 were $35.7 million, representing a decrease of $0.2 million, or 0.4%,
compared to $35.9 million for the nine months ended September 30, 2019. Clinical
and manufacturing expense for AMZEEQ and ZILXI decreased by $14.1 million. This
was offset by an increase of $7.1 million of clinical costs related to
serlopitant and employee-related expenses of $6.8 million, including $3.8
million related to severance expenses payable to our former employees, and stock
based compensation of $2.8 million.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the nine months ended
September 30, 2020 were $71.6 million, representing an increase of $48.7
million, or 213%, compared to $22.9 million for the nine months ended
September 30, 2019. Employee-related expenses increased by $24.9 million
consisting of $13.3 million primarily due to the expansion of our employee base,
including sales force to support the growth of our operations, $6.6 million of
stock based compensation and $4.7 million of severance expenses payable to our
former employees. Sales and marketing expenses increased by $16.1 million,
related to the commercialization of AMZEEQ and ZILXI. We incurred $7.7 million
expenses relating to the merger transaction between Foamix and Menlo included in
selling, general and administrative expenses.
Goodwill and in-process research & development impairments
Goodwill and in-process research & development impairments for the nine months
ended September 30, 2020 were $54.3 million. There were no impairments for the
nine months ended September 30, 2019. In the nine months ended September 30,
                                       38

--------------------------------------------------------------------------------

  Table of contents
2020, we recorded impairments of $4.0 million for Goodwill and $50.3 million for
in process research and development due to the failed clinical trials for
serlopitant for the treatment of pruritus associated with prurigo nodularis.
CSR Remeasurement
Contingent Stock Right Remeasurement for the nine months ended September 30,
2020 was $84.7 million. For the nine months ended September 30, 2020 we incurred
$84.7 million of expense due to the remeasurement of the CSR to fair value which
was driven by the result of the failed serlopitant trials. At the time of our
merger transaction with Foamix, we entered into a contingent stock right
agreement that called for the issuance of additional shares of our common stock
to legacy Foamix shareholders upon negative data from both Phase 3 serlopitant
trials. Since the trials did not meet the milestones outlined per the agreement,
the contingent stock rights were remeasured, resulting in an expense of
$84.7 million for the nine months ended September 30, 2020.
Finance Income and Expenses
In the nine months ended September 30, 2020 and 2019, our financial income was
primarily attributable to gains from marketable securities, interest earned on
our bank deposits and revaluation of our derivative liability. Our financial
expenses included interest expense on our long-term debt.
Finance expenses and income are as follows:
                                                                 Nine months ended September 30,
                                                                    2020                  2019
                                                                  (in thousands of U.S. dollars)
Interest on bank deposits                                      $        (32)$      (495)
Finance gains on derivative liabilities                                (975)                   -
Other income                                                            (10)                   -

Gain from marketable securities, net                                   (201)                (890)
Total income                                                         (1,218)              (1,385)
Other expenses                                                           28                   15
Foreign exchange loss                                                    49                  133
Finance expenses on loans interest and discount                       3,229                  329
Total expenses                                                 $      3,306$       477


Income Taxes
Our tax benefit for the nine months ended September 30, 2020 was $0.3 million,
representing an increase of $0.1 million, or 47%, compared to $0.2 million for
the nine months ended September 30, 2019.
Liquidity and Capital Resources
Since inception, we have funded operations primarily through private and public
placements of our equity, debt, warrants and through fees, cost reimbursements
and royalties received from our licensees. We commenced generating product
revenues related to sales of AMZEEQ in the first quarter of 2020.  ZILXI became
available in pharmacies nationwide on October 1, 2020. We have incurred losses
and experienced negative operating cash flows since our inception and anticipate
that we will continue to incur losses until such a time when our product and
product candidates, if approved, are commercially successful, if at all. We will
not generate any revenue from any current or future product candidates unless
and until we obtain regulatory approval and commercialize such products.
As of September 30, 2020, we had cash, cash equivalents and investments of $76.9
million. Our cash, cash equivalents and investments are held in money market
accounts and marketable securities.
Foamix Pharmaceuticals Inc., a Delaware corporation (the "Borrower"), Foamix and
Menlo, each as a guarantor, the lenders party thereto, and Perceptive Credit
Holdings II, LP, as administrative agent for the lenders, entered into an
Amended and Restated Credit Agreement and Guaranty, dated as of March 9, 2020
(the "Credit Agreement"). We have guaranteed the indebtedness obligation of the
Borrower under the Credit Agreement and in connection with the Credit Agreement
also granted a first priority security interest in substantially all of our
assets for the benefit of the lenders. The Credit Agreement provides for a
senior secured delayed draw term loan facility in an aggregate principal amount
of up to $50.0 million, and as of
                                       39

--------------------------------------------------------------------------------

  Table of contents
September 30, 2020, approximately $35.0 million was drawn under the Credit
Agreement. We did not, and do not expect to, incur the remaining $15.0 million
under the Credit Agreement.
We have incurred significant transaction-related expenses in connection with
negotiating and completing the Merger. Transaction-related expenses, which
include legal, accounting and financial advisor fees and other service provider
costs, were approximately $21.8 million. We incurred $11.7 million of these
costs during the nine months ended September 30, 2020 in our statements of
operations and comprehensive loss, and we do not expect to incur any additional
significant costs relating to the Merger in future periods.
Prior to the Merger, the Company was focused on the development and
commercialization of serlopitant for pruritic conditions. Following the receipt
of the results of the Phase 3 clinical trials evaluating serlopitant for the
treatment of PN and the impact of the COVID-19 pandemic, the Company has revised
its operating plan to focus on the commercialization of AMZEEQ and its other
topical minocycline product candidates. In addition, the revised operating plan
reflects prudent resource prioritization and allocation management, including
the rationalization of research and development spend to focus on existing
product candidates.
We believe that our cash and cash equivalents and investments and projected cash
flows from revenues will provide sufficient resources for our current ongoing
needs through December 31, 2021. However, the Company may seek additional
financing in order to achieve its longer-term strategic plans. We have based
this estimate on assumptions that may prove to be wrong, and we could use our
capital resources sooner than we currently expect.
In the first quarter of 2020, as a result of the COVID-19 pandemic, the Company
suspended the vast majority of its in-person interactions by its customer-facing
professionals in healthcare settings and engaged with customers remotely in an
effort to continue to support healthcare professionals and patient care under
unprecedented circumstances. During the second quarter of 2020, the Company
began limited in-person customer meetings and interactions in certain regions,
consistent with local government mandates. During this period, the Company's
product sales for AMZEEQ were negatively impacted by office closures. On August
5, 2020, the Company and its lenders amended the minimum net revenue covenant in
the Amended and Restated Credit Agreement. See "Note 8 - Long-Term Debt." While
the Company's product sales for AMZEEQ experienced a modest recovery during the
three months ended September 30, 2020, circumstances surrounding the COVID-19
pandemic have negatively impacted our ability to execute our commercial strategy
with respect to AMZEEQ. The length of time and extent to which the COVID-19
pandemic will directly or indirectly impact the Company's business, results of
operations and financial condition will depend on future developments that are
highly uncertain, subject to change and will continue to evolve with
geographical re-openings and virus waves. An extended duration of the COVID-19
pandemic could continue to negatively impact sales of AMZEEQ, and any future
sales of ZILXI, and have a material adverse effect on our liquidity, as well as
our ability to remain in compliance with the minimum net revenue covenants
contained in our loan documents.
Summary Statement of Cash Flows
The following table summarizes our statement of cash flows for the nine months
ended September 30, 2020 and 2019:

© Edgar Online, source Glimpses

All news about VYNE THERAPEUTICS INC.
01/07VYNE THERAPEUTICS INC. : Regulation FD Disclosure, Financial Statements and Exhi..
AQ
01/05VYNE THERAPEUTICS : to Present at the LifeSci Partners 10th Annual Healthcare Co..
AQ
2020VYNE THERAPEUTICS : Completes End-of-Phase 2 Meeting With FDA for FCD105 to Trea..
MT
2020VYNE Therapeutics Reports Successful End-of-Phase 2 Meeting with the FDA for ..
GL
2020VYNE THERAPEUTICS : to Join Nasdaq Biotechnology Index
MT
2020VYNE THERAPEUTICS : Added to Nasdaq Biotechnology Index
AQ
2020VYNE THERAPEUTICS : Wins US Patent for Acne Treatment Amzeeq
MT
2020VYNE THERAPEUTICS : Announces New U.S. Patent Expiring in 2037 for AMZEEQ® (mino..
AQ
2020VYNE Therapeutics Announces Publication of Long-term Safety & Efficacy Data f..
GL
2020VYNE THERAPEUTICS : to Present at the 32nd Annual Piper Sandler Healthcare Confe..
AQ
More news