# Scynexis Inc: Form 10-Q for the period ended Mar 31, 2023

- Company: [Scynexis Inc](/companies/scyx.md) (CIK 1178253)
- Form: 10-Q
- Filed: 2023-05-10
- Accepted by EDGAR: May 10, 2023, 16:02 ET
- Period: 2023-03-31
- Accession: 0000950170-23-020486
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1178253/000095017023020486/scyx-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1178253/000095017023020486/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $1.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $6.8m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $4.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$10.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $1.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$33.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.71 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.71 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 47,757,246 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$18.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-03-31 | $26.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $59.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $70.3m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $45.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $100.2m | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $34.6m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-03-31 | −$29.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,655 characters.

*Operating results for the three months ended March 31, 2023, 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 the Securities and Exchange Commission on March 31, 2023, 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.*

### Overview

SCYNEXIS, Inc. is pioneering innovative medicines 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 severe, hospital-based indications. In June 2021 and December 2022, we announced that the U.S. Food and Drug Administration (FDA) approved BREXAFEMME (ibrexafungerp tablets) for treatment of patients with vulvovaginal candidiasis (VVC), also known as vaginal yeast infection, and for the reduction in the incidence of recurrent vulvovaginal candidiasis (RVVC), respectively.

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*genera, including multidrug-resistant strains, as well as *Pneumocystis, Coccidioides, Histoplasma* and *Blastomyces* genera. *Candida* and *Aspergillus* genera are the fungi responsible for approximately 85% of all invasive fungal infections in the United States (U.S.) and Europe. 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. The European Medicines Agency has granted Orphan Medicinal Product designation to ibrexafungerp for IC. These designations may provide us with additional market exclusivity and expedited regulatory paths.

On March 30, 2023, we entered into a license agreement (the License Agreement) with GlaxoSmithKline Intellectual Property (No. 3) Limited (GSK). Pursuant to the terms of the License Agreement, we granted GSK an exclusive (even as to us and our affiliates), royalty-bearing, sublicensable license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, for all indications, in all countries other than Greater China and certain other countries already licensed to third parties (the GSK Territory). If the existing licenses granted to or agreements with third parties are terminated with respect to any country, GSK will have an exclusive first right to negotiate with us to add those additional countries to the GSK Territory. We retain rights to all other assets, with GSK receiving a right of first negotiation (ROFN) to any other enfumafungin-derived compounds or products that we may control. The consummation of the transactions under the License Agreement is subject to the satisfaction of customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act); provided, that either we or GSK may terminate the License Agreement if expiration or termination of the applicable waiting period under the HSR Act has not occurred within nine months of the signing of the License Agreement. The parties expect the transactions contemplated by the License Agreement to close in the second quarter of 2023.

Under the terms of the License Agreement, we will receive an upfront payment of $90 million. We are also eligible to receive potential:

- regulatory approval milestone payments of up to $70 million;
- commercial milestone payments of up to $115 million based on first commercial sale in invasive candidiasis (U.S./EU);
- and sales milestone payments of up to $242.5 million based on annual net sales, with a total of $77.5 million to be paid upon achievement of multiple thresholds up through $200 million; a total of $65 million to be paid upon achievement of multiple thresholds between $300 million and $500 million; and $50 million to be paid at each threshold of $750 million and $1 billion.

We will be responsible for the execution and costs of the ongoing clinical studies of ibrexafungerp but will have the potential to receive up to $75.5 million in success-based development milestones, which are comprised of up to $65 million for the achievement of three interim milestones associated with our continued performance of the ongoing MARIO Study and $10.5 million for the successful completion of the MARIO Study. See further details of the License Agreement, including financial terms, as described in Note 12 of Item 1 on this Quarterly Report.

We, Hercules Capital, Inc. (Hercules Capital) and Silicon Valley Bridge Bank, N.A. (now a division of First Citizens Bank, SVB) are party to a Loan and Security Agreement dated as of May 13, 2021 (the Loan Agreement), pursuant to which Hercules Capital, SVB and each of the other lenders from time-to-time party to the Loan and Security Agreement (collectively, the Lenders) loaned to us $35 million. In connection with the entering into of the License Agreement, we entered into a First Amendment and Consent to Loan and Security Agreement with the Lenders pursuant to which the Lenders consented to us entering into the License Agreement and we agreed to pay to the Lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement (approximately $35.4 million), (ii) the prepayment fee payable under Loan Agreement ($262,500), (iii) the final payment payable under Loan Agreement ($1,382,500), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by us will become due upon the earliest of (A) one business day following receipt by us of the $90 million upfront payment payable to us under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement.

### Ibrexafungerp Update

Enrollment is continuing in our prospective, randomized, double-blind, global Phase 3 study to evaluate the efficacy, safety and tolerability of oral ibrexafungerp as a step-down therapy for patients with IC including candidemia following IV echinocandin therapy in the hospital compared to currently available therapies (the MARIO study). Eligible patients with IC will receive treatment with IV echinocandin and will then be switched to either oral ibrexafungerp or a standard of care option, either oral fluconazole or best available therapy for subjects with infections caused by fluconazole non-susceptible strains, once step-down criteria are met. Approximately 220 patients will be enrolled and randomized in the study, and we expect topline results in the first half of 2024 and a potential approval by the end of 2024.

We achieved a target enrollment of 200 patients in our Phase 3 FURI study investigating the potential of ibrexafungerp as a treatment for fungal infections that are refractory or intolerant to other antifungals, including infections caused by *Candida auris (C. auris*), and anticipate study completion activities in the first half of 2023 with a Data Review Committee review and topline data in the first half of 2024. We also achieved a target enrollment of 30 patients in our Phase 3 CARES study, focused on patients with infections caused by *C. auris* which will follow similar completion and reporting timing to the Phase 3 FURI study. The data from the MARIO study along with data from FURI and CARES studies are intended to be supportive of an NDA submission in 2024 with an anticipated first approval for an indication in the hospital setting later in 2024. If the License Agreement closes, such NDA submission would be made by GSK and any resulting approval would be held by GSK.

We have completed the enrollment of SCYNERGIA, our Phase 2 study of oral ibrexafungerp in combination with voriconazole in patients with IA, although the number of patients is smaller than initially projected. The prioritization of hospital resources toward addressing COVID-19 has impacted the ability of many institutions to focus on screening and enrolling patients into some clinical trials, including SCYNERGIA.

We have completed the enrollment of the VANQUISH Phase 3b open-label trial evaluating the safety and efficacy of ibrexafungerp in patients with complicated vulvovaginal candidiasis who failed to respond to treatment with fluconazole.

### Liquidity

We have operated as a public entity since we completed our initial public offering in May 2014, which we refer to as our IPO. We also completed a follow-on public offering of our common stock in April 2015 and public offerings of our common stock and warrants in June 2016, March 2018, December 2019, December 2020, and April 2022. Our principal source of liquidity is cash, cash equivalents, and short-term investments which totaled $54.8 million as of March 31, 2023 and we have the availability to issue up to $46.2 million of our common stock under our at-the-market facility with Cantor Fitzgerald & Co. (Cantor) and Ladenburg Thalmann & Co. Inc. (Ladenburg). We received $30.0 million in 2021 and received $5.0 million in 2022 under our Loan Agreement with Hercules and SVB. In March 2023, in connection with the entering into of the License

Agreement with GSK, we, Hercules and SVB entered into a First Amendment and Consent to Loan and Security Agreement pursuant to which the lenders under the Loan Agreement consented to us entering into the License Agreement and we agreed to pay to the lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement (approximately $35.4 million), (ii) the prepayment fee payable under Loan Agreement ($262,500), (iii) the final payment payable under Loan Agreement ($1,382,500), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by us will become due upon the earliest of (A) one business day following receipt by us of the $90 million upfront payment payable to us under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement. See “Liquidity and Capital Resources” below for amounts sold under the ATM with Cantor and Ladenburg, and the amounts sold under our common stock purchase agreement with Aspire Capital which expired in October 2022.

We have incurred net losses since our inception, including the year ended December 31, 2022. As of March 31, 2023, our accumulated deficit was $456.2 million. We expect we will continue to incur significant research and development expense as we continue to execute our research and drug development strategy. 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 ongoing operations, but that our selling, general and administrative expenses will decrease as we have ceased the active promotional activities associated with BREXAFEMME. 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), strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our effective shelf registration statements, including under our ATM.

### 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 the Greater China region, including mainland China, Hong Kong, Macau, and Taiwan, 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 in Russia, granting it exclusive rights in the field of human health to develop and commercialize ibrexafungerp in Russia 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 (this agreement is not material to our unaudited condensed consolidated balance sheets, statements of operations, or statements of cash flows); (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 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 consists of product sales of BREXAFEMME.

#### Cost of Product Revenue

Cost of product revenue consists primarily of distribution, freight expenses, royalties due to Merck, and other manufacturing costs associated with BREXAFEMME. Prior to the regulatory approval of BREXAFEMME on June 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 who support our product candidate development and intellectual property protection;
- medical affairs related expense and salary that is incurred to discover, develop, or improve potential product candidates;
- other costs in seeking regulatory approval of our products; and
- allocated overhead.

Ibrexafungerp was the only key 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 commercial, 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 months ended March 31, 2023 and 2022, consists of amortization of debt issuance costs and discount, interest income, interest expense, other income, the warrant liabilities fair value adjustment, and the derivative liabilities fair value adjustment.

#### Income Tax Benefit

All of our income tax benefit recognized in the three months ended March 31, 2022 consists of an income tax benefit associated with the sale of our NOLs and research and development credits.

### Results of Operations for the Three Months Ended March 31, 2023 and 2022

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022, together with the changes in those items in dollars and percentage (dollars in thousands):

| Revenue: | Three Months Ended March 31, 2023 | 2022 | Period-to-Period Change |  |
| --- | ---: | ---: | ---: | ---: |
| Product revenue, net | $1,130 | $687 | $443 | 64.5% |
| Operating expenses: |  |  |  |  |
| Cost of product revenue | 137 | 99 | 38 | 38.4% |
| Research and development | 6,835 | 5,735 | 1,100 | 19.2% |
| Selling, general and administrative | 4,840 | 14,591 | (9,751) | (66.8)% |
| Total operating expenses | 11,812 | 20,425 | (8,613) | (42.2)% |
| Loss from operations | (10,682) | (19,738) | 9,056 | (45.9)% |
| Other expense (income): |  |  |  |  |
| Amortization of debt issuance costs and discount | 255 | 390 | (135) | (34.6)% |
| Interest income | (587) | (13) | (574) | 4,415.4% |
| Interest expense | 1,447 | 1,059 | 388 | 36.6% |
| Other income | — | (13) | 13 | (100.0)% |
| Warrant liabilities fair value adjustment | 21,673 | (10,030) | 31,703 | (316.1)% |
| Derivative liabilities fair value adjustment | 406 | (980) | 1,386 | (141.4)% |
| Total other expense (income) | 23,194 | (9,587) | 32,781 | (341.9)% |
| **Loss before taxes** | (33,876) | (10,151) | (23,725) | 233.7% |
| Income tax benefit | — | (4,700) | 4,700 | (100.0)% |
| **Net loss** | $(33,876) | $(5,451) | $(28,425) | 521.5% |

*Revenue.* Revenue in the three months ended March 31, 2023 and 2022 consists solely of product sales of BREXAFEMME.

*Cost of Product Revenue.* Cost of product revenue in the three months ended March 31, 2023 and 2022 consists primarily of distribution, freight, and royalty costs associated with BREXAFEMME.

*Research and Development.* For the three months ended March 31, 2023, research and development expenses increased to $6.8 million compared to $5.7 million for the three months ended March 31, 2022. The increase of $1.1 million, or 19%, for the three months ended March 31, 2023, was primarily driven by an increase of $0.6 million in clinical development expense and an increase of $0.6 million in medical affairs expense.

The $0.6 million increase in clinical development expense for the three months ended March 31, 2023, was primarily driven by an increase of $0.7 million associated with a Phase 1 study of oral ibrexafungerp that was substantially completed in the current period and is intended to support the potential NDA filing for the treatment of IC, an increase of $0.3 million in the FURI and CARES studies, and an increase of $0.2 million in expense associated with the VANQUISH study, offset in part by a $0.8 million decrease in expense associated with the CANDLE Phase 3 study which was substantially complete in the first quarter of 2022.

*Selling, General & Administrative*. For the three months ended March 31, 2023, selling, general and administrative expenses decreased to $4.8 million from $14.6 million for the three months ended March 31, 2022. The decrease of $9.8 million, or 67%, for the three months ended March 31, 2023, was primarily driven by a decrease of $7.3 million in commercial expense due to the costs incurred in the prior comparable period associated with the active promotion of BREXAFEMME which ceased in the fourth quarter of 2022, a decrease of $1.4 million in salary related expense primarily driven by the workforce reduction in the fourth quarter of 2022 concentrated in the commercial and medical affairs functions, a $0.5 million decrease associated with other medical affairs related expense, and a net decrease of $0.6 million in other selling, general, and administrative expenses.

*Amortization of Debt Issuance Costs and Discount*. For the three months ended March 31, 2023 and 2022, we recognized $0.3 million and $0.4 million in amortization of debt issuance costs and discount, respectively. The 2023 and 2022 debt issuance costs and discount for our March 2019 convertible notes primarily consisted of an allocated portion of advisory fees and other issuance costs and the initial fair value of the derivative liability. The 2023 and 2022 debt issuance costs and discount for our 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 March 31, 2023 and 2022, we recognized $0.6 million and $13,000, respectively, in interest income; the increase was primarily due to the increase in the interest rate on our money market fund.

*Interest Expense*. For the three months ended March 31, 2023 and 2022, we recognized $1.4 million and $1.1 million, respectively, in interest expense primarily associated with the Loan Agreement.

*Other Income.* For the three months ended March 31, 2022, we recognized $13,000 in other income primarily associated with realized gains on foreign currency transactions.

*Warrant Liabilities Fair Value Adjustment*. For the three months ended March 31, 2023 and 2022, we recognized a loss of $21.7 million and a gain $10.0 million, respectively, in the fair value adjustment related to the warrant liabilities primarily due to the increase and decrease in our stock price during the periods, respectively.

*Derivative Liabilities Fair Value Adjustment.* For the three months ended March 31, 2023 and 2022, we recognized a loss of $0.4 million and a gain of $1.0 million, respectively, in the fair value adjustment related to the derivative liabilities primarily due to the increase and decrease in our stock price during the respective periods.

*Income Tax Benefit.* Income tax benefit in the three months ended March 31, 2022 consists of $4.7 million associated with the sale of a portion of our NOLs and research and development credits.

### Liquidity and Capital Resources

#### Sources of Liquidity

Through March 31, 2023, we have primarily funded our operations from net proceeds from equity and debt issuances and through revenue from development services. As of March 31, 2023, we had cash and cash equivalents and short-term investments of $54.8 million, compared to cash and cash equivalents and short-term investments of $73.5 million as of December 31, 2022. The decrease in our cash and cash equivalents and short-term investments was primarily due to the continued development costs associated with ibrexafungerp and the payment of the deferred fees associated with Amplity. We have incurred annual net losses since our inception, and we incurred a net loss during the three months ended March 31, 2023. As of March 31, 2023, our accumulated deficit was $456.2 million.

If we do not successfully close the License Agreement with GSK, we will likely continue to incur losses for at least the foreseeable future. Consistent with our operating plan, we expect to incur significant research and development expenses and selling, general and administrative expenses; however, we expect our selling, general, and administrative expenses will decrease as we have ceased the active promotion of BREXAFEMME. As a result of our continued significant expenses, 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, 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 on May 17, 2021 with Cantor and Ladenburg. Upon closing of our License Agreement with GSK that is expected in the second quarter of 2023, we will receive $90.0 million, of which approximately $37.1 million we must use to pay all amounts payable under the Loan Agreement with Hercules Capital and SVB.

#### Cash Flows

The following table sets forth the significant sources and uses of cash for the three months ended March 31, 2023 and 2022 (in thousands):

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Cash, cash equivalents, and restricted cash, January 1 | $46,032 | $104,702 |
| Net cash used in operating activities | (18,923) | (15,988) |
| Net cash used in investing activities | — | (9) |
| Net cash provided by financing activities | 22 | 6,723 |
| Net decrease in cash, cash equivalents, and restricted cash | (18,901) | (9,274) |
| Cash, cash equivalents, and restricted cash, March 31 | $27,131 | $95,428 |

#### Operating Activities

The $2.9 million increase in net cash used in operating activities for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, was primarily due to the continued development costs associated with ibrexafungerp. In the prior comparable period, we received a cash receipt of $4.7 million the sale of our NOLs, that partially offset selling, general and administrative expenses to support the commercial launch of BREXAFEMME and the continued development costs associated with ibrexafungerp and ongoing operations. Consistent with our operating plan, we expect to incur significant research and development expenses; however, we expect our selling, general and administrative expenses to decrease as we have ceased actively promoting BREXAFEMME.

Net cash used in operating activities of $18.9 million for the three months ended March 31, 2023, primarily consisted of the $33.9 million net loss adjusted for non-cash charges that included the loss on change in fair value of the warrant liabilities of $21.7 million, the loss on change in fair value of the derivative liabilities of $0.4 million, stock-based compensation expense of $0.7 million, and amortization of debt issuance costs and discount of $0.3 million, partially offset by a net unfavorable change in operating assets and liabilities of $8.6 million. The net unfavorable change in operating assets and liabilities was due to a decrease in accounts payable, accrued expenses, other liabilities and other of $6.7 million and by an increase in prepaid expenses, accounts receivable, inventory, and other of $1.9 million. The $6.7 million decrease in accounts payable, accrued expenses, other liabilities, and other was primarily due to the decrease of $5.8 million in other liabilities associated with the deferred fees due to Amplity that were fully paid as of February 2023 and a $0.9 million decrease in accrued expenses primary due to the bonus and separation payments made during the current period for 2022. The increase in prepaid expenses, accounts receivable, inventory, and other of $1.9 million was primarily due to a $2.1 million increase in inventory for raw material purchased in the current period.

Net cash used in operating activities of $16.0 million for the three months ended March 31, 2022, primarily consisted of the $5.5 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $10.0 million, the gain on change in fair value of the derivative liabilities of $1.0 million, stock-based compensation expense of $0.9 million, amortization of debt issuance costs and discount of $0.4 million, plus a net unfavorable change in operating assets and liabilities of $1.0 million. The net unfavorable change in operating assets and liabilities was due to an increase in accounts payable, accrued expenses, other liabilities and other of $0.4 million, offset by an increase in prepaid expenses, accounts receivable, inventory, and other of $1.4 million. The $0.4 million increase in accounts payable, accrued expenses, other liabilities, and other was primarily due to the increase in accounts payable of $0.7 million and an increase of $0.9 million in other liabilities associated with the deferred fees due to Amplity, offset in part by a decrease in accrued expenses of $1.2 million primarily due to the $1.5 million decrease in accrued bonus that was paid during the current quarter. The increase in prepaid expenses, accounts receivable, inventory, and other of $1.4 million was primarily due to the increase in accounts receivable of $0.8 million, a $0.5 million increase in prepaid research and development services, and an increase of $0.3 million in inventory.

#### Investing Activities

Net cash used in investing activities of $9,000 for the three months ended March 31, 2022, consisted solely of purchases of intangible assets.

#### Financing Activities

Net cash provided by financing activities of $22,000 for the three months ended March 31, 2023, consisted primarily of the proceeds for the repurchase of shares to satisfy tax withholdings and the proceeds from the employee stock purchase plan.

Net cash provided by financing activities of $6.7 million for the three months ended March 31, 2022, consisted primarily of the gross proceeds of $5.0 million received from the Loan Agreement and $2.2 million in gross proceeds from common stock issued under our at-the-market and common stock purchase agreements.

#### Future Funding Requirements

We have generated limited revenue from the product sales for BREXAFEMME and we expect our product sales to decrease as we have ceased actively promoting BREXAFEMME. We expect to incur expenses in connection with our efforts to further 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. We anticipate that we will need substantial additional funding in connection with our continuing future operations. As discussed in Note 1 to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, we have incurred significant losses and negative cash flows from operations and have limited capital resources to fund ongoing operations which raises substantial doubt about our ability to continue as a going concern.

We received $30.0 million in 2021 and received $5.0 million in 2022 under our Loan Agreement with Hercules and Silicon Valley Bank. In March 2023, in connection with the entering into of the License Agreement with GSK, we, Hercules and SVB entered into a First Amendment and Consent to Loan and Security Agreement pursuant to which the lenders under the Loan Agreement consented to us entering into the License Agreement and we agreed to pay to the lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement (approximately $35.4 million), (ii) the prepayment fee payable under Loan Agreement ($262,500), (iii) the final payment payable under Loan Agreement ($1,382,500), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by us will become due upon the earliest of (A) one business day following receipt by us of the $90 million upfront payment payable to us under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement.

Our future capital requirements will depend on many factors, including:

- our ability to close the transactions contemplated by the License Agreement with GSK;
- 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), strategic alliances and licensing arrangements, in particular the License Agreement with GSK. To the extent that we raise additional capital through the sale of equity or convertible debt securities, 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, similar to our Loan Agreement or the convertible senior notes we sold in March 2019 and April 2020, 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.

### Significant Estimates and Judgements

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the 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 estimates and judgements are described within Item 7 to our Annual Report on Form 10-K for the year ended December 31, 2022.

## Controls and procedures

As filed, 1,812 characters.

#### Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

As of March 31, 2023, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of March 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

#### Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2023, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 217 characters.

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022.

Filed May 10, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-020486. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.