# Scynexis Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Scynexis Inc](/companies/scyx.md) (CIK 1178253)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 13, 2023, 16:01 ET
- Period: 2023-09-30
- Accession: 0000950170-23-062894
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1178253/000095017023062894/scyx-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1178253/000095017023062894/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $134.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $6.5m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $20.3m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $5.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $17.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$10.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $95.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $212.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $2.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$1.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $86.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.04 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.78 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.81 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 47,891,996 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 49,397,273 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $67.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $44.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $128.6m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $148.5m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $16.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $56.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $92.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 44,204 characters.

*Operating results for the three and nine months ended September 30, 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. Ibrexafungerp is the first representative of this novel class of antifungals with additional assets from the “fungerp” family, including SCY-247, in pre-clinical stages of development. 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). The parties closed the transactions contemplated by the License Agreement in May 2023 and we received an upfront payment of $90.0 million. In June 2023, we announced the achievement of a $25.0 million performance-based development milestone under the License Agreement. This milestone payment follows a development goal for the Phase 3 MARIO study for ibrexafungerp in IC as we continue executing ongoing ibrexafungerp trials. 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 became 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.

Following the closing of the transactions under the License Agreement, in May 2023, we received the upfront payment pursuant to the terms of the License Agreement, which triggered the obligation of us to repay the amounts due under the terms of the First Amendment. In connection with the repayment of those amounts due, in May 2023, we and the Lenders executed a payoff letter confirming the amounts due under the First Amendment, and our confirmation that the Loan Agreement, as amended by the First Amendment, was terminated.

Following a recent review by GSK of the manufacturing process and equipment at the vendor that manufactures the ibrexafungerp drug substance, we became aware that a non-antibacterial beta-lactam drug substance was manufactured using equipment common to the manufacturing process for ibrexafungerp. Current FDA draft guidance recommends segregating the manufacture of non-antibacterial beta-lactam compounds from other compounds since beta-lactam compounds have the potential to act as sensitizing agents that may trigger hypersensitivity or an allergic reaction in some people. In the absence of the recommended segregation, there is a risk of cross contamination. It is not known whether any ibrexafungerp has been contaminated with a beta-lactam compound and we have not received any reports of adverse events due to the possible beta-lactam cross contamination. Nonetheless, out of an abundance of caution and in line with GSK’s recommendation, we have recalled BREXAFEMME® (ibrexafungerp tablets) from the market and placed a temporary hold on clinical studies of ibrexafungerp, including the Phase 3 MARIO study, until a mitigation strategy is determined.

The patient-level and clinical product recall has been initiated and we are working with an experienced vendor to manage the process. We have begun engaging with the FDA and during a meeting in September 2023, the FDA concurred with our voluntary hold and placed a clinical hold. We are working to provide additional information to the FDA and discuss potential paths for resolution of this issue. The clinical hold and recall affect our two ongoing clinical studies: the Phase 3 MARIO study and a Phase 1 lactation study. The hold does not impact the recently completed FURI, CARES, VANQUISH and SCYNERGIA clinical studies, for which dosing is complete. The FDA determined that the compassionate use program for ibrexafungerp, which provides ibrexafungerp to patients with limited or no other treatment options, can continue provided the patient’s treating physician concludes a favorable benefit-risk assessment and the patient is made aware of and consents to the risk. This applies to patients currently in the program as well as for new patients, pending confirmation of available supply. Our pre-clinical stage compound, SCY-247, is not affected by these developments.

The clinical hold and recall create uncertainty as to the timing of achieving, and our ability to achieve, the milestones under the License Agreement.

On November 7, 2023, a securities class action was filed by Brian Feldman against us and certain of our executives in the United States District Court, District of New Jersey, alleging that, during the period from March 31, 2023 to September 22, 2023, we made materially false and/or misleading statements, as well as failed to disclose material adverse facts about our business, operations, and prospects, alleging specifically that we failed to disclose to investors: (1) that the equipment used to manufacture ibrexafungerp was also used to manufacture a non-antibacterial beta-lactam drug substance, presenting a risk of cross-contamination; (2) that we did not have effective internal controls and procedures, as well as adequate internal oversight policies to ensure that its vendor complied with current Good Manufacturing Practices (cGMP); (3) that, due to the substantial risk of cross-contamination, we were reasonably likely to recall its ibrexafungerp tablets and halt its clinical studies; and (4) as a result of the foregoing, our statements about our business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The complaint seeks unspecified damages, interest, fees and costs on behalf of all persons and entities who purchased and/or acquired shares of our common stock between March 31, 2023 to September 22, 2023.

### Preclinical Developments – SCY 247

We continue progressing the IND-enabling development activities for SCY-247. SCY-247 is a broad spectrum antifungal with a potential oral and IV systemic therapeutic option for multiple drug-resistant pathogens. Some of these activities, including assessing the activity of the compound against *Candida auris* and Mucorales are being supported by NIH grants. We anticipate opening an IND for this compound in the second half of 2024.

### 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 investments which totaled $105.2 million as of September 30, 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). 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.

As of September 30, 2023, our accumulated deficit was $335.7 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) GSK, a pharmaceutical company, which we exclusively (even as to us and our affiliates) provide a, royalty-bearing, sublicensable license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, for all indications, in the GSK Territory; (2) 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); (3) 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 (4) 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); (5) 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 (6) 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 license agreement revenue associated with GSK and product sales of BREXAFEMME. For the three and nine months ended September 30, 2023, our product revenue, net comprised of sales of BREXAFEMME that we sold as principal given we control BREXAFEMME product until delivery to our wholesalers at which point control is transferred.

#### 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 and nine months ended September 30, 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 nine months ended September 30, 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 September 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022, together with the changes in those items in dollars and percentage (dollars in thousands):

| Revenue: | Three Months Ended September 30, 2023 | 2022 | Period-to-Period Change |  |
| --- | ---: | ---: | ---: | ---: |
| Product (loss) revenue, net | $(614) | $1,557 | $(2,171) | (139.4)% |
| License agreement revenue | 2,375 | — | 2,375 | —% |
| Total revenue | 1,761 | 1,557 | 204 | 13.1% |
| Operating expenses: |  |  |  |  |
| Cost of product revenue | 379 | 189 | 190 | 100.5% |
| Research and development | 6,466 | 6,430 | 36 | 0.6% |
| Selling, general and administrative | 5,014 | 16,739 | (11,725) | (70.0)% |
| Total operating expenses | 11,859 | 23,358 | (11,499) | (49.2)% |
| Loss from operations | (10,098) | (21,801) | 11,703 | (53.7)% |
| Other (income) expense: |  |  |  |  |
| Amortization of debt issuance costs and discount | 360 | 396 | (36) | (9.1)% |
| Interest income | (1,263) | (531) | (732) | 137.9% |
| Interest expense | 212 | 1,379 | (1,167) | (84.6)% |
| Warrant liabilities fair value adjustment | (7,468) | 6,497 | (13,965) | (214.9)% |
| Derivative liabilities fair value adjustment | (182) | 42 | (224) | (533.3)% |
| Total other income (expense) | (8,341) | 7,783 | (16,124) | (207.2)% |
| **Net loss** | $(1,757) | $(29,584) | $27,827 | (94.1)% |

26

*Revenue.* For the three months ended September 30, 2023, revenue primarily consists of the $2.4 million in license agreement revenue associated the License Agreement with GSK and a product (loss) of $0.6 million as a result of the recall for BREXAFEMME. For the three months ended September 30, 2022, revenues consists of product sales of BREXAFEMME.

*Cost of Product Revenue.* Cost of product revenue in the three months ended September 30, 2023 and 2022 consists primarily of distribution, freight, and royalty costs associated with BREXAFEMME.

*Research and Development.* For the three months ended September 30, 2023, research and development expenses increased to $6.5 million compared to $6.4 million for the three months ended September 30, 2022. The increase of $36,000, or 1%, for the three months ended September 30, 2023, was primarily driven by an increase of $0.5 million in clinical expense, and an increase of $0.1 million in salaries primarily associated with medical affairs, offset in part by a $0.5 million decrease in CMC expense.

The $0.5 million increase in clinical development expense for the three months ended September 30, 2023, was primarily driven by an increase of $1.0 million in clinical expense for the MARIO study, offset in part by a decrease of $0.2 million associated with a Phase 1 study of oral ibrexafungerp that was substantially complete in the second quarter of 2023 and is intended to support the potential NDA filing for the treatment of IC, and a decrease of $0.3 million in expense associated with the VANQUISH study.

*Selling, General & Administrative*. For the three months ended September 30, 2023, selling, general and administrative expenses decreased to $5.0 million from $16.7 million for the three months ended September 30, 2022. The decrease of $11.7 million, or 70%, for the three months ended September 30, 2023, was primarily driven by a decrease of $8.9 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 $1.6 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 decrease of $0.7 million in other medical affairs related expense, and a net decrease in other selling, general and administrative expense of $0.5 million.

*Amortization of Debt Issuance Costs and Discount*. For both the three months ended September 30, 2023 and 2022, we recognized $0.4 million in amortization of debt issuance costs and discount. 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.

*Interest Income*. For the three months ended September 30, 2023 and 2022, we recognized $1.3 million and $0.5 million, respectively, in interest income; the increase was primarily due to the increase in the interest rate on our money market funds.

*Interest Expense*. For the three months ended September 30, 2023 and 2022, we recognized $0.2 million and $1.4 million, respectively. The decrease in interest expense was primarily due to the repayment of the Loan Agreement in May 2023.

*Warrant Liabilities Fair Value Adjustment*. For the three months ended September 30, 2023 and 2022, we recognized a gain of $7.5 million and a loss of $6.5 million, respectively, in the fair value adjustment related to the warrant liabilities primarily due to the decrease and increase in our stock price during the periods, respectively.

*Derivative Liabilities Fair Value Adjustment.* For the three months ended September 30, 2023 and 2022, we recognized a gain of $0.2 million and a loss $42,000, respectively, in the fair value adjustment related to the derivative liabilities primarily due to the decrease and increase in our stock price during the respective periods, respectively.

### Results of Operations for the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022, together with the changes in those items in dollars and percentage (dollars in thousands):

| Revenue: | Nine Months Ended September 30, 2023 | 2022 | Period-to-Period Change |  |
| --- | ---: | ---: | ---: | ---: |
| Product revenue, net | $984 | $3,567 | $(2,583) | (72.4)% |
| License agreement revenue | 133,360 | — | 133,360 | —% |
| Total revenue | 134,344 | 3,567 | 130,777 | 3,666.3% |
| Operating expenses: |  |  |  |  |
| Cost of product revenue | 940 | 432 | 508 | 117.6% |
| Research and development | 20,342 | 19,410 | 932 | 4.8% |
| Selling, general and administrative | 17,328 | 47,001 | (29,673) | (63.1)% |
| Total operating expenses | 38,610 | 66,843 | (28,233) | (42.2)% |
| Income (loss) from operations | 95,734 | (63,276) | 159,010 | (251.3)% |
| Other expense (income): |  |  |  |  |
| Amortization of debt issuance costs and discount | 2,616 | 1,194 | 1,422 | 119.1% |
| Interest income | (2,590) | (724) | (1,866) | 257.7% |
| Interest expense | 2,908 | 3,669 | (761) | (20.7)% |
| Warrant liabilities fair value adjustment | 5,991 | (13,215) | 19,206 | (145.3)% |
| Derivative liabilities fair value adjustment | 182 | (1,120) | 1,302 | (116.3)% |
| Total other expense (income) | 9,107 | (10,196) | 19,303 | (189.3)% |
| **Income (loss) before taxes** | 86,627 | (53,080) | 139,707 | (263.2)% |
| Income tax benefit | — | (4,700) | 4,700 | (100.0)% |
| **Net income (loss)** | $86,627 | $(48,380) | $135,007 | (279.1)% |

*Revenue.* For the nine months ended September, 2023, revenue primarily consists of the $130.1 million recognized upon the transfer of the license associated with the License Agreement with GSK in May 2023. For the nine months ended September 30, 2022, revenues consists of product sales of BREXAFEMME.

*Cost of Product Revenue.* Cost of product revenue in the nine months ended September 30, 2023 and 2022 consists primarily of distribution, freight, and royalty costs associated with BREXAFEMME.

*Research and Development.* For the nine months ended September 30, 2023, research and development expenses increased to $20.3 million compared to $19.4 million for the nine months ended September 30, 2022. The increase of $0.9 million , or 5% , for the nine months ended September 30, 2023, was primarily driven by an increase of $0.6 million in salaries primarily associated with medical affairs and a $1.2 million increase in clinical development expense, offset in part by a decrease of $0.3 million in regulatory expense given the costs incurred in the prior period for the submission of the supplemental NDA in RVVC in the third quarter of 2022, a decrease of $0.4 million in CMC expense, and a decrease in preclinical expense of $0.2 million.

The $1.2 million increase in clinical development expense for the nine months ended September 30, 2023, was primarily driven by an increase of $0.8 million in clinical development expense associated with the MARIO study, an increase of $0.6 million associated with a Phase 1 study of oral ibrexafungerp which was substantially complete in the second quarter of 2023 and is intended to support the potential NDA filing for the treatment of IC, an increase of $0.5 million in the FURI and CARES studies, an increase of $0.2 million in expense associated with the VANQUISH study, and an increase of $0.3 million in other clinical expense, offset in part by a $1.2 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 nine months ended September 30, 2023, selling, general and administrative expenses decreased to $17.3 million from $47.0 million for the nine months ended September 30, 2022. The decrease of $29.7 million, or 63%, for the nine months ended September 30, 2023, was primarily driven by a decrease of $25.1 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 $4.3 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 $2.0 million decrease associated with other medical affairs related expense, a $0.7 million decrease in information technology expense, and a net decrease in other selling, general, and administrative costs of $0.4 million, offset in part by an increase in professional fees of $2.8 million. The $2.8 million increase in professional fees is primarily due to a $3.1 million expense incurred during the current period for business development associated with the License Agreement.

*Amortization of Debt Issuance Costs and Discount*. For the nine months ended September 30, 2023 and 2022, we recognized $2.6 million and $1.2 million in amortization of debt issuance costs and discount, respectively. The increase of $1.4 million, or 119%, was primarily driven by the recognition of $1.9 million in amortization during the nine months ended September 30, 2023 for the remaining debt issuance costs and discount associated with the loan payable with Hercules and SVB which was fully paid in May 2023. 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.

*Interest Income*. For the nine months ended September 30, 2023 and 2022, we recognized $2.6 million and $0.7 million, 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 nine months ended September 30, 2023 and 2022, we recognized $2.9 million and $3.7 million, respectively. The decrease in interest expense was primarily due to the repayment of the Loan Agreement in May 2023.

*Warrant Liabilities Fair Value Adjustment*. For the nine months ended September 30, 2023 and 2022, we recognized a loss of $6.0 million and a gain $13.2 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 nine months ended September 30, 2023 and 2022, we recognized a loss of $0.2 million and a gain of $1.1 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 nine months ended September 30, 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 September 30, 2023, we have primarily funded our operations from net proceeds from equity and debt issuances and through revenue from development services. As of September 30, 2023, we had cash and cash equivalents and investments of $105.2 million, compared to cash and cash equivalents and short-term investments of $73.5 million as of December 31, 2022. We believe our capital resources are sufficient to fund our on-going operations for a period of at least 12 months subsequent to the issuance of the accompanying unaudited condensed consolidated financial statements. The increase in our cash and cash equivalents and investments was primarily due to the $90.0 upfront receipt from the closing of the License Agreement, offset by the $37.0 million repayment in full of our Loan Agreement, 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, although we anticipate net income for the current annual period given amounts received under the License Agreement with GSK. As of September 30, 2023, our accumulated deficit was $335.7 million.

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 in May 2023, we received an upfront payment of $90.0 million, of which approximately $37.0 million was used 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 nine months ended September 30, 2023 and 2022 (in thousands):

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Cash, cash equivalents, and restricted cash, January 1 | $46,032 | $104,702 |
| Net cash provided by (used in) operating activities | 67,894 | (57,077) |
| Net cash used in investing activities | (32,725) | (27,389) |
| Net cash (used in) provided by financing activities | (36,586) | 48,602 |
| Net decrease in cash, cash equivalents, and restricted cash | (1,417) | (35,864) |
| Cash, cash equivalents, and restricted cash, September 30 | $44,615 | $68,838 |

29

#### Operating Activities

The $125.0 million increase in net cash provided by operating activities for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to the $90.0 million upfront receipt upon the closing of the License Agreement with GSK offset by the continued development costs associated with ibrexafungerp. 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 provided by operating activities of $67.9 million for the nine months ended September 30, 2023, primarily consisted of the $86.6 million net income adjusted for non-cash charges that included the loss on change in fair value of the warrant liabilities of $6.0 million, stock-based compensation expense of $2.1 million, and amortization of debt issuance costs and discount of $2.6 million, partially offset by a net unfavorable change in operating assets and liabilities of $30.3 million. The net unfavorable change in operating assets and liabilities was due to a net decrease in operating liabilities of $0.4 million and by a net increase of $30.0 million in operating assets. The net $30.0 million increase in operating assets is primarily due to a $19.3 million increase in license agreement contract asset associated with the License Agreement with GSK, a $7.4 million increase in inventory for raw material purchased in the current period, and an increase in accounts receivable and license agreement receivable of $2.5 million. The $0.4 million decrease in accounts payable, accrued expenses, deferred revenue, 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 decrease of $2.5 million in accounts payable, offset primarily by a $4.1 million increase in deferred revenue associated with the License Agreement with GSK and a $3.9 million increase in accrued expenses due to the $3.5 million increase in expense for product recall.

Net cash used in operating activities of $57.1 million for the nine months ended September 30, 2022, primarily consisted of the $48.4 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $13.2 million, the gain on change in fair value of the derivative liabilities of $1.1 million, stock-based compensation expense of $3.2 million, and amortization of debt issuance costs and discount of $1.2 million, partially offset by a net favorable change in operating assets and liabilities of $0.7 million. The net favorable change in operating assets and liabilities was due to an increase in accounts payable, accrued expenses, other liabilities and other of $2.4 million partially offset by an increase in prepaid expenses, accounts receivable, inventory, and other of $1.7 million. The $2.4 million increase in accounts payable, accrued expenses, other liabilities, and other was primarily due to the increase of $2.3 million in other liabilities associated with the deferred fees due to Amplity. The increase in prepaid expenses, accounts receivable, inventory, and other of $1.7 million was primarily due to the increase in accounts receivable of $1.6 million in accounts receivable.

#### Investing Activities

Net cash used in investing activities of $32.7 million for the nine months ended September 30, 2023 consisted of purchases and maturities of short-term investments of $73.3 million and $40.6 million, respectively.

Net cash used in investing activities of $27.4 million for the nine months ended September 30, 2022, consisted primarily of purchases of short-term investments.

#### Financing Activities

Net cash used in financing activities of $36.6 million for the nine months ended September 30, 2023, consisted primarily of the full repayment of the Loan Agreement with Hercules and SVB in May 2023.

Net cash provided by financing activities of $48.6 million for the nine months ended September 30, 2022, consisted primarily of the gross proceeds of $45.0 million from the April 2022 Public Offering, the $2.2 million in gross proceeds from common stock issued under our at-the-market and common stock purchase agreements, and the $5.0 million received from the Loan Agreement, offset in part by payments of offering costs and underwriting discounts and commissions of $3.6 million.

#### 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.

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

- our ability to successfully achieve the development, regulatory, and commercial milestones under our 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 Judgments

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 judgments 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, 1,824 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 September 30, 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 September 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

#### Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 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, 3,074 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, except as follows:

**There is uncertainty as to the timing of achieving, and our ability to achieve, the milestones under our License Agreement with GSK as a result of the clinical hold and recall resulting from the discovery of a non-antibacterial beta-lactam drug substance was manufactured using equipment common to the manufacturing process for ibrexafungerp.**

Following a recent review by GSK of the manufacturing process and equipment at the vendor that manufactures the ibrexafungerp drug substance, we became aware that a non-antibacterial beta-lactam drug substance was manufactured using equipment common to the manufacturing process for ibrexafungerp. Current FDA draft guidance recommends segregating the manufacture of non-antibacterial beta-lactam compounds from other compounds since beta-lactam compounds have the potential to act as sensitizing agents that may trigger hypersensitivity or an allergic reaction in some people. In the absence of the recommended segregation, there is a risk of cross contamination. It is not known whether any ibrexafungerp has been contaminated with a beta-lactam compound and we have not received any reports of adverse events due to the possible beta-lactam cross contamination. Nonetheless, out of an abundance of caution and in line with GSK’s recommendation, we have recalled BREXAFEMME® (ibrexafungerp tablets) from the market and placed a temporary hold on clinical studies of ibrexafungerp, including the Phase 3 MARIO study, until a mitigation strategy is determined.

The patient-level and clinical product recall has been initiated and we are working with an experienced vendor to manage the process. We have begun engaging with the FDA and during a meeting in September 2023, the FDA concurred with our voluntary hold and placed a clinical hold. We are working to provide additional information to the FDA and discuss potential paths for resolution of this issue. The clinical hold and recall affect our two ongoing clinical studies: the Phase 3 MARIO study and a Phase 1 lactation study. The hold does not impact the recently completed FURI, CARES, VANQUISH and SCYNERGIA clinical studies, for which dosing is complete. The FDA determined that the compassionate use program for ibrexafungerp, which provides ibrexafungerp to patients with limited or no other treatment options, can continue provided the patient’s treating physician concludes a favorable benefit-risk assessment and the patient is made aware of and consents to the risk. This applies to patients currently in the program as well as for new patients, pending confirmation of available supply. Our pre-clinical stage compound, SCY-247, is not affected by these developments.

The clinical hold and recall create uncertainty as to the timing of achieving, and our ability to achieve, the milestones under the License Agreement.

Filed Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-062894. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.