SCYNEXIS, Inc. (SCYX) Earnings Call Transcript & Summary

Greetings, and welcome to SCYNEXIS investor call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deb Etchison, Head of Communication and Investor Relations. Please go ahead.

Hello, everyone, and welcome to today's conference call to discuss our latest corporate business update. Before we start, let me remind you that today's call will include forward-looking statements based on current expectations, including statements concerning our financial outlook for the future, leadership's expectations for our future financial and operational performance as well as our business strategy. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, including in each case under the caption Risk Factors, and all other documents subsequently filed with or furnished to the Security and Exchange Commission. All forward-looking statements speak only as of today, March 30, 2023, SCYNEXIS undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made. The information on today's call is not intended for promotional purposes and not sufficient for prescribing decisions. Joining us on today's call are SCYNEXIS' President and CEO, Dr. David Angulo; Chief Financial Officer, Ivor Macleod; and General Counsel, Scott Sukenick. Following our prepared remarks, we'll open the call to your questions. Now I will turn the call over to Dr. David Angulo, President and CEO.

Thank you, Debbie. Good morning, everyone, and thank you for joining us on this call. Today, we issue a joint news release announcing that SCYNEXIS and GSK have entered into an exclusive license agreement for ibrexafungerp. On this call, we will provide further details about this deal and how this agreement positively impacts our organization, bolstering our ability to execute our vision for the future, including the development of novel innovative assets, such as SCY-247, our next-generation fungerp. Let's start with some details of the agreement. As part of the agreement, GSK will receive an exclusive license to develop and commercialize ibrexafungerp for all indications, including the commercialization of BREXAFEMME, our FDA-approved first-in-class antifungal for the treatment of vulvovaginal candidiasis and future potential indications of ibrexafungerp for severe invasive fungal infections. The scope of this exclusive license to GSK is global, all territories, except Greater China and other regions where prior agreements already exist. This agreement represents a major milestone for SCYNEXIS and we are thrilled to partner with GSK, a world leader in the fight against infectious diseases. We believe that GSK will maximize BREXAFEMME's commercial potential in VVC. This agreement also further validates our vision for this first-in-class antifungal to become a critical treatment option in multiple other fungal infections. And GSK with its global footprint, is an optimal partner in this endeavor, ensuring that this groundbreaking treatment reaches and benefits as many patients as possible around the world. The total potential deal value is $593 million plus royalties, including an upfront payment of $90 million. Under this agreement, SCYNEXIS will continue to progress the ongoing clinical trial for ibrexafungerp, including MARIO, FURI, CARES and VANQUISH, and we will receive future potential development milestones, primarily tied to the successful progression of our MARIO study in the approval of invasive candidiasis indication. We will also be entitled to receive sales milestones and tier royalties as well as other potential regulatory and commercial milestones. SCYNEXIS retains the rights to all other assets in the novel fungerp class, with GSK having a right of first negotiation to this preclinical and discovery-stage assets. For SCYNEXIS and our shareholders, this deal is transformational and create significant value is strengthening our balance sheet and enhancing the opportunity to deliver additional innovative therapies in areas of significant unmet needs. Now I would like to pass the call over to Ivor Macleod, our Chief Financial Officer, to walk you through the financial details.

Thank you, David. Good morning, everyone, and thank you once again for joining the call. As David mentioned, this deal is transformational for SCYNEXIS. Not only does it allow us to realize the full commercial potential of BREXAFEMME, but it also provides us with near-term nondilutive capital, removing the company's perceived financing overhang over our stock. As David mentioned, the total potential deal value is $593 million plus royalties. I'd now like to go over the components of that total. We will receive an upfront payment of $90 million shortly after closing, which is anticipated in the second quarter of 2023. We 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 3 interim milestones associated with SCYNEXIS' continued performance of the ongoing MARIO study, and $10.5 million for the successful completion of the MARIO study. These milestones will cover the costs of the ongoing MARIO study and other development activities for which we are responsible. There are potential regulatory approval milestone of $70 million, primarily linked to the invasive candidiasis indication. The deal also includes commercial milestone payments of $115 million based on the first commercial sale in invasive candidiasis in the United States and the European Union. There are 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 sales thresholds up to $200 million in annual sales. A total of $65 million to be paid upon achievement of multiple thresholds between $300 million and $500 million in annual sales. And $50 million to be paid at each threshold of $750 million and $1 billion. As I mentioned before, SCYNEXIS will also receive royalties based on cumulative annual sales. These will be in the mid-single digit to mid-teen range. Details of the financial terms can be found in our 8-K, which we filed this morning. Upon receipt of the upfront payment of $90 million, we will pay off our debt held by our partners, Hercules Capital and Silicon Valley Bank, further strengthening our balance sheet. Once again, I emphasize that this deal removes the company's perceived financing overhang over our stock. Based on our current projections, receipt of the upfront payment alone provides us with a cash runway of greater than 2 years. With that, let me hand the call back to David.

Thank you, Ivor. Before opening the call up for questions, I want to reiterate that this deal creates significant value for shareholders in 2 key ways. First, this deal will help us realize BREXAFEMME's full commercial potential and validate provision of the potential for ibrexafungerp to become a significant component of the treatment of [indiscernible] for invasive candidiasis and other life-threatening infections. We are excited to see that GSK shares this vision, and we are very happy to embark in this collaboration that will bring ibrexafungerp closer to patients in need. Second, this deal provides SCYNEXIS with the resources for the development of additional innovative therapies. We have an excellent track record of efficiently developing and obtaining regulatory approval for first-in-class therapies in areas of significant unmet need. Now with additional resources on hand, we have the opportunity to continue bringing groundbreaking therapies to patients in need and creating additional value for our shareholders. The importance of having novel effective treatment alternatives for severe fungal infection has been clearly recognized by multiple global health organizations, such as the WHO, which last year published the list of priority fungal pathogens and has been further highlighted by the recent report announced by the CDC indicating a worsening of the spread of the often multi-drug resistant and deadly pathogen, Candida auris. Earlier, I mentioned that as part of the agreement, SCYNEXIS will retain the rights to all other assets derived from [ lymphoma fungerp ], the fungerps, as we refer to them, at a novel class of structurally distinct glucan synthase inhibitor called Antifungal Triterpenoids and represent the first new class of antifungals approved in over 20 years. Ibrexafungerp is the first representative of this new class, and we are already progressing the development of our next-generation fungerp, SCY-247, currently in the preclinical stage. The selection of SCY-247 as the next compound for development came after the evaluation of [ dose of encouraging analogs ] within the fungerp class. The collective attributes of this analog, including its spectrum of activity that includes multi-drug resistant pathogens and favorable preliminary assessment of tolerability and tissue penetration, making it an attractive potential agent for the treatment and prevention of difficult-to-treat and emerging fungal infection, including Candida auris. It should be noted that the National Institutes of Health has awarded a $3 million grant to researchers at the Case Western Reserve University to investigate SCY-247 as a potential treatment for Candida auris infections. SCY-247 also shares the favorable attributes of the fungerp family of compounds, including a validated mechanism of action and low risk of drug interactions. We are still in the process of characterizing all the attributes of this novel compound, and we'll be glad to report on progress as data arises. Under this agreement, GSK will have a right of first negotiation to the fungerps that we may develop, including SCY-247. Let me close by saying that we are thrilled to have GSK as a partner and believe this partnership validates the value of BREXAFEMME for the treatment of VVC as well as ibrexafungerp's potential to fight life-threatening infections in the hospital setting. This transaction provides SCYNEXIS with non-dilutive capital and significant options for the future to continue advancing innovative therapies and create value to our shareholders. The deal also provides a validation of the significant work that we have done over the past 8 years to deliver on our mission. And I also want to recognize the significant contributions of the SCYNEXIS team that made possible the development of ibrexafungerp and all the work that went into executing this agreement. Thank you. At SCYNEXIS, we remain committed to continue developing innovative therapies in areas of significant needs. We have all the internal expertise and now the resources to continue providing solutions to critical health threats. Now we will open the floor for questions.

[Operator Instructions] Our first question comes from Louise Chen with Cantor.

Congratulations on the deal. So I had a few questions for you. I wanted to ask you about your royalty here. And if you could give any more color on the breakpoints for the sales and tiers? Also, does this royalty reset every year? Or is it a cumulative sales target? And then another thing I wanted to ask you is that we've seen GSK active in the anti-infective space over a couple of deals in antifungals and other areas. And I'm wondering if you could elaborate more as to what their optimism is here, especially when you did the deal with them? And then why not just outright acquire these companies given the small market caps? And the last one I wanted to ask you was when you were in negotiation with the deal and if you can say, how much was GSK's interest in VVC versus the hospital indications?

Let me start by addressing the last two questions, and then I will let Ivor to address regarding the royalty details and all that. Sounds good. So number one, Louise, thank you for the question, and thank you for joining the call in the interest. So certainly, we see GSK very, very -- we consider that they were the optimal partner because their full commitment to the anti-infective space. And as you mentioned, you have seen a lot of action and they have been publicly saying that they have interest in really becoming a leader in this particular area. So that was very exciting to see the possibility to having a partnership with them and now have it in this way. Regarding their interest in which of the 2 indications, VVC and hospital setting. Well, we -- obviously, we wanted to maximize the potential value of ibrexafungerp as a molecule, and we see them interested and really committed to the development and the commercialization of both indications, such as that we saw that there are going to be a great potential to really maximize the value for BREXAFEMME in the VVC indication, but also are fully committed to the continued development of ibrexafungerp for the hospital setting indications. And that's exactly what was very exciting to us in this partnership because we consider that this will maximize the potential of ibrexa as a whole molecule. Regarding why they decided not to acquire or the company and entering to licensing agreement? We certainly cannot comment on what are the corporate strategies and decisions in that regard from GSK. What I can tell you is that this particular deal is structured and the exclusive license with them and partnership with them really lead us in a great position as an organization to really continue doing what we have demonstrated to do well. So we will continue developing not only ibrexafungerp to ensure that we can maximize that we are able to really monetize all the parts of this deal through the deliverables that we have committed to them, but also to be able to create additional shareholder value, bringing new innovative therapy. So this particular structure position us extraordinarily well to really continue developing new therapies. And that's -- we believe that this is certainly is a great outcome from this particular transaction with them. And I'm going to let Ivor speak a little bit more about the royalty structure.

Thank you, David. Yes, thanks for the question, Louise. With regard to the royalties, they're based on cumulative annual sales and as such, reset at the end of each calendar year. I hope that addresses your question. And with regard to the sales milestones, I can't disclose more than I've already disclosed. Suffice to say that there are several sales thresholds up to $200 million in annual sales and the aggregate value of that is 75.5 -- I beg your pardon, $65 million.

$77 million.

These numbers are so big. And then the next threshold up to $300 million, and then finally, $750 million and $1 billion. And that's all I can disclose at the moment.

Okay. Can I squeeze one other question in that we got from investors, does GSK get the IV formulation as well or just the oral?

Thank you, Louise, they get any formulations that are for ibrexafungerp, and they also get all the indications. So it's all indications, all formulations.

The next question comes from Vamil Divan with Guggenheim.

Maybe a couple of ones sort of following up on the prior discussion around the community versus the hospital indications. I'm just curious from your perspective that you're sort of assuming you do something on the community side, I think the hospital side was a little bit of a surprise. What sort of changed in your thinking in terms of doing a broader collaboration across both sets of indications as opposed to just the community side was that just sort of that's the most attractive deal overall that you're finding? Or maybe if you can just talk if something changed in other ways to lead you to do the broader collaboration? And then maybe the second one, just given this broad collaboration now for ibrexafungerp, if you can just talk a little bit more on SCY-247, I know it's still preclinical. But just in terms of kind of where you see that being more differentiated from ibrexafungerp or other antifungals in development? And also, do you see that being an oral and IV or potentially both formulations?

Thank you, Vamil, for the questions. So in regards to the scope of the collaboration, in regards to focus only in the community setting, VVC versus hospital. Certainly, as we made -- as we announced previously, we were specifically seeking a partner for the commercialization of BREXAFEMME in the United States, which is focusing the VVC. However, well, we received several interest around that and some of them with different scope, as you can see right now. And certainly, the opportunity to partner with the GSK and considering partnering all the indications, community and hospital, consider their interest, they're really focus in becoming a world leader in the anti-infective space, and the opportunity to have such a global footprint for the entire molecule was what we consider in the best interest of the molecule and our shareholders in the long term. So for that reason, we decided certainly to really consider this opportunity for partnership, the whole molecule. And as you can see, we believe that this is a great decision for the organization, for the molecule and for our shareholders. And we'll give certainly ibrexafungerp the opportunity to be in a very, very substantial, well positioned globally for both indications, community and hospital. Regarding SCY-247, as you know, we have a large library of analogs to which we have the right to. And all of them are within the [ lymphoma fungerp ] derivative family. They are glucan synthase inhibitors. So from that point of view, they all shared the mechanism of action. However, each molecule is structurally distinct. And they may have -- they have different attributes. And some of the attributes may have potential better tissue penetration to certain tissues, potential -- better urinary excretion and those are the attributes that we are further corroborating in regard 247. We have already made an assessment regarding the antifungal activity and it has a broad spectrum of activity that is able to cover the most critical pathogens as well. And we are still in the process of really creating what is going to be all the attributes that will define specific indications for SCY-247. We have preliminary assessment of tolerability, which has been quite good in an initial animal models. And also, we have preliminary assessments of efficacy. Some of that information is already in the public domain. We published it, I think, 1 year ago or 2 years ago. We -- at this point, we are envisioning this molecule to be both. Orally administered and intravenously administered. So really providing that maximum flexibility. We are still at earlier stages of the development from that point of view, but we will certainly be sharing information as we can continue collecting the attributes of the molecule. There is a very significant unmet need, not for new antifungal, and from that point of view, we consider that any new product like SCY-247 will be complementary to what is right now in development and/or in the market. And from that point of view, we are focusing in areas of very significant antifungal unmet need, multi-drug resistant pathogens, difficult-to-treat fungal infections for which there are very limited treatment options. So that will be our priority focus. However, the characteristics of the molecule and the attributes of the molecule will dictate what are the right indications for this particular molecule. But as you know, we have a lot of experience. We have a lot of internal expertise in terms of drug development and very, very particularly antifungal development, and we are very, very excited to really have this molecule in our hands to really progress them very fastest, as fast as we can to the next stages of development.

[Operator Instructions] Our next question comes from Michael Higgins with Ladenburg Thalmann.

Congratulations from us as well. It's a fantastic news. Great to see your development efforts in this first antifungal and the fourth antifungal class get the attention it deserves, and not just U.S. but globally. Speaking to which our question, first question is on GSK marketing, provide some feedback for us on their efforts in the [ OB offices ], IV and/or hospital-based reps. Just trying to get an understanding as to their marketing muscle on the VVC indication. Second question then is on your discussions with European regulators on the ibrexafungerp, if you give us some feedback as to where you are there with VVC and the other invasive candidiasis question -- opportunity as well. Appreciate it.

Thank you, Michael, for the comment and the questions. Regarding GSK marketing footprint and efforts, that's something that we cannot comment on specifically. However, I'm sure that they will be happy to comment on that in the future. However, suffice to say that we -- GSK has an extraordinary great reputation as an organization to be able to successfully commercialize the products. You can see by the magnitude of this deal that they -- is very clearly recognized that they will put very good efforts in really trying to maximize the commercial opportunity for BREXAFEMME as well as for the hospital indications [indiscernible]. So from that point of view and their stated commitment to the space, we are very confident that the adequate resources will be put in place and the adequate footprint will be put in place in the effort and targets, et cetera, to ensure that BREXAFEMME has the best possible opportunity in the commercialization. And so we are -- that's one of the reasons why GSK was the right candidate or the right partner for this particular opportunity. Regarding the EU, as you know, we conducted our clinical trials totally in agreement and following guidelines and following any advice that we got from EU regulators. We have to -- at this point, we have not submitted any regulatory approval request, as you know. And regulatory path for the product in the EU will now need to be discussed and agreed upon with GSK, our partner. And well, that will be potentially subject to future disclosures in that regard once we come to an agreement, what would be the regulatory path in that regard in the EU.

[Operator Instructions] The next question comes from Steve Brozak with WBB.

Well, congratulations, gentlemen. This is an exciting moment for a ibrexafungerp, but also for your model. David, you had mentioned obviously, the transaction and its details. But one of the details you alluded to was the model for SCYNEXIS and how it's a master of drug development and what targets or what opportunities you might see. How would you detail that kind of an approach? And is this a new anti-infective model that we should be looking for elsewhere as well? I'll hop back in the queue.

Thank you, Steve, for the question. Certainly, after the many years of effort in developing a drug that really was the focusing innovation, focusing unmet needs. And now we have developed that level of expertise that we are very proud of. And now we have seen that it has been successfully resulted not only in 2 approvals, but also in really ensuring that someone understands and really validates the value of this particular great asset. And now with additional, I would say, also business development expertise that we have developed as well internally, additional resources on hand, et cetera. Is this a validation of a model that really what we did in regards to focusing in significant unmet medical needs, focusing great expertise in development will eventually attract partners, et cetera, we believe that, that is a possibility. However, in terms of future or other areas that you mentioned, so I think that we have, as I mentioned, created a great opportunity for us and options for the future. And we have right now a new asset on hand that we are planning to progress rapidly. And we will have an opportunity to continue looking for something else that the other opportunities in the future if they fit, what is [ our vision ] and what is our internal expertise in that regard.

Next question comes from Michael Higgins, Ladenburg Thalmann.

Question on MARIO. Originally, this asset was dreamed to be an IV to oral step down in hospital to home antifungal approach or for fungal infections. So MARIO, was up and going, the Phase III to be enrolled across 75 global sites by year-end. Any potential amendments? How are your conversations with GSK? Do they want to do anything with this trial? Do we look for anything interim prior to enrollment later this year? Any feedback on MARIO that would be helpful here.

Thank you, Michael, for the question. Yes, certainly, as you can imagine, after the transaction is completed, a joint development committee will be put in place where the details for potential -- specific details of each one of the studies may be discussed. From the time being, there is nothing that I can disclose in regards to any decisions made to amend this protocol at this point. The protocol is very well designed from the point of view of investigating oral ibrexafungerp as the optimal step-down therapy from an IV [ acenocanin ] in patients with invasive candidiasis, and that is the most significant unmet need, as you know, right now. And so from that point of view, the protocol is designed to really address that particular need and really being able to get that specific approval, that is very clearly understood by our partner, from that point of view. However, if they are a further opportunities to enhance the study or to modify the study in the future with something that we can certainly we will discuss within the joint development committee. But at this point, there is nothing that I can speculate about that.

Okay. And one follow-up if I could here on the FURI and CARES trials. You've noted last fall that by May, we would have last patient, last visit, but it's been an annual tradition, I guess, in the spring of the last couple of years, you've given us interim updates. Is there potential to do so? You've not guided to that. I'm wondering if this news may change that. We're obviously eager to see CARES but also FURI as well. So any feedback updates on those.

Thank you, Michael. Well, we have -- I think that we had announced, and you can find that information as well in the public domain that we have completed the enrollment of both studies, FURI and CARES. So from that point of view, we still have a few subjects that are in both studies. We still have a few subjects that are still receiving therapy. So last subject, last visit has not occurred, and however, the enrollment has been completed. At this point, as you mentioned, we have not guided as providing a subsequent interim analysis, and our previous guidance was that we were planning to really wrap up the study and just to do a final analysis. And certainly, I must say that in the future, decisions for potential future interim analysis and other analysis will need to be discussed within this joint development committee with the GSK. And as we have information, we will share that as well.

And then just one final question on patent exclusivity in the U.S. and Europe. Can you give us an update there on where that sits?

Sorry, Michael, exclusivity in regards to -- for the VVC [ composition ]?

Yes. Just overall composition of matter and others, what is your latest patent exclusivity in both Europe and U.S.?

Thank you. Let me ask Scott Sukenick, our General Counsel, to really help me address that question. And by the way, I just want to recognize that he was the one leading here internally all the efforts that went into executing these deals. So he is extraordinary familiar with the deal, but as well he's managing our patents and exclusivity aspects as well. Scott, please.

Thank you, David. With regard to patents, as we've disclosed, we have a composition of matter patent on ibrexafungerp essentially worldwide. And in the United States, that patent is slated to expire in the year 2030. We have filed for patent term extension, and we expect it will be granted, and we expect it will take the patent life on that one out to 2035. We have another patent covering the salt form of ibrexafungerp also with an expiration -- a natural expiration in 2035 in the United States. In Europe, we also have the composition of matter patent for ibrexafungerp. We have salt patent. And in that case, I believe it goes out to 2036. We have patents filed and in some cases, issued around the world on the liposomal IV formulation of ibrexafungerp as well as the use of ibrexafungerp for the treatment of VVC as well as in combination with an azole for the treatment of invasive aspergillosis. And those all expire in the late 2030s to the extent they've been issued. I hope that answers your question.

As you can see, a long patent life that allows for these type of molecules to really have a very reached life cycle, with multiple -- you can envision multiple potential uses indications, et cetera, which is great for a molecule that has many potential multiple uses.

There are no further questions at this time. I would like to turn the floor back over to David Angulo, President and CEO, for closing remarks.

Thank you very much, and thank you, everyone, for joining us on the call. I just want to reiterate we're extraordinarily excited with this partnership with GSK. This really provides -- leaves SCYNEXIS as an organization, not only with the validation of the value of all the work that we have done, the potential opportunity for maximum commercial potential for BREXAFEMME and in the future for other indications for ibrexafungerp. And we will continue developing the innovative therapies in those areas of very significant unmet medical need, and we're very happy to continue reporting our progress to you in future calls. Thank you, everyone, for attending the call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.