Discussion and analysis of the financial situation and the operating result by the management of SCYNEXIS INC. (Form 10-Q)

0
Operating results for the three and nine months ended September 30, 2021, are
not necessarily indicative of results that may occur in future interim periods
or future fiscal years. Some of the statements in this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" are
forward-looking statements. These forward-looking statements are based on
management's beliefs and assumptions and on information currently available to
our management and involve significant elements of subjective judgment and
analysis. Words such as "expects," "will," "anticipate," "target," "goal,"
"intend," "plan," "seek," "estimate," "potential," "should," "could," variations
of such words, and similar expressions are intended to identify forward-looking
statements. Our actual results and the timing of events may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include those discussed under the heading "Risk Factors"
in Item 1A of Part I of our Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 29, 2021, and in Part II, Item 1A of this
Quarterly Report on Form 10-Q. These and many other factors could affect our
future financial and operating results. We undertake no obligation to update any
forward-looking statement to reflect events after the date of this Quarterly
Report on Form 10-Q. In addition, statements that "we believe" and similar
statements reflect our beliefs and opinions on the relevant subject. These
statements are based on information available to us as of the date of this
Quarterly Report on Form 10-Q. While we believe that information provides a
reasonable basis for these statements, that information may be limited or
incomplete. Our statements should not be read to indicate that we have conducted
an exhaustive inquiry into or review of, all relevant information. These
statements are inherently uncertain and investors are cautioned not to unduly
rely on these statements.

Overview

SCYNEXIS, Inc. is pioneering innovative medicines to potentially help millions
of patients worldwide in need of new options to overcome and prevent
difficult-to-treat and drug-resistant infections. We are developing our lead
product candidate, ibrexafungerp, as a broad-spectrum, intravenous (IV)/oral
agent for multiple fungal indications in both the community and hospital
settings. In June 2021, the U.S. Food and Drug Administration (FDA) approved
BREXAFEMMEâ (ibrexafungerp tablets) for treatment of patients with vulvovaginal
candidiasis (VVC), also known as vaginal yeast infection, and we have commenced
the commercialization of BREXAFEMME in the U.S. We also are continuing
late-stage clinical development of ibrexafungerp for multiple indications,
including the treatment of life-threatening invasive fungal infections caused
primarily by Candida (including C. auris) and Aspergillus species in
hospitalized patients.

Ibrexafungerp, the first representative of a novel class of antifungal agents
called triterpenoids, is a structurally distinct glucan synthase inhibitor and
has shown in vitro and in vivo activity against a broad range of human fungal
pathogens such as Candida and Aspergillus species, including multidrug-resistant
strains, as well as Pneumocystis, Coccidioides,
Histoplasma and Blastomyces species. Candida and Aspergillus species are the
fungi responsible for approximately 85% of all invasive fungal infections 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. These designations may provide us with additional
market exclusivity and expedited regulatory paths.

BREXAFEMME update

In June 2021, the FDA approved BREXAFEMME for use in patients with VVC. This
approval was based on positive results from two Phase 3, randomized,
double-blind, placebo-controlled, multi-center studies (VANISH-303 and
VANISH-306), in which oral ibrexafungerp demonstrated statistically superior
efficacy compared to placebo and a favorable tolerability profile in women with
VVC. The FDA granted BREXAFEMME five years of exclusivity extension under the
Generating Antibiotic Incentives Now (GAIN) Act, which will be added to any
other applicable exclusivity periods, such as the five years of new chemical
entity (NCE) exclusivity, for a combined ten-year period of regulatory
exclusivity. BREXAFEMME also is protected by multiple patents, including a
composition-of-matter patent covering the ibrexafungerp molecule. With patent
term extension, this patent is expected to expire in 2035, providing an expected
14 years of protection from generic competitors in the U.S.

Treatments for VVC have historically included several topical azole antifungals
and oral fluconazole. Approximately 80% of VVC sufferers will have more than one
yeast infection and over a third of women may have six yeast infections or more
in a lifetime. There are over 17 million prescriptions written for VVC in the
U.S. annually, all of which belong to a single drug class, the azoles. Following
approval of BREXAFEMME in June 2021, by August the product had been
manufactured, packaged, and distributed to pharmacies and our sales force had
been hired and trained with the commercial launch formally announced in
September 2021. IQVIA data showed 1,006 total prescriptions for BREXAFEMME in
the third quarter of 2021, with nearly 700 in September, which was in line with
our internal expectations for the first partial quarter of launch. There was

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a consistent week-over-week growth rate of prescriptions from early August to
the end of the quarter, and a similar trajectory of growing positive momentum
continuing into the fourth quarter, with IQVIA showing 1,100 BREXAFEMME
prescriptions in October alone. BREXAFEMME is now covered by commercial
insurance plans that represent more than 30% of commercially covered lives in
the U.S.

We have partnered with Amplity Inc. (Amplity), a leading global contract
commercialization organization, to support the ongoing U.S. commercialization of
BREXAFEMME. We are utilizing Amplity's commercial execution expertise and
resources for sales force, remote engagement, training, market access and select
operations services. BREXAFEMME is now available at pharmacies and our full
sales team is in the field actively engaging healthcare providers (HCPs). An
Early Experience Program was successfully implemented with key HCPs in July
2021, confirming the need for a new treatment option and their willingness to
prescribe BREXAFEMME. Progress with payers has yielded scheduled Pharmacy and
Therapeutic (P&T) reviews and contract discussions and negotiations.

Ibrexafungerp update

Enrollment is complete in the CANDLE study, a Phase 3, multi-center, randomized,
double-blind, placebo-controlled trial designed to evaluate the efficacy and
safety of oral ibrexafungerp for the prevention of recurrent VVC, for which
there is no approved therapy in the U.S. We expect the last-patient/last-visit
for the CANDLE study by the end of 2021 with top-line data early in the second
quarter of 2022. We anticipate filing a potential supplemental NDA submission
for the prevention of recurrent VVC in the second quarter of 2022, resulting in
a potential approval in late 2022.

Enrollment is ongoing in our refractory and difficult-to-treat invasive fungal
infections (rIFI) program, which comprises two open-label Phase 3 studies (FURI
and CARES) designed to support a potential future NDA submission for
ibrexafungerp through the Limited Population Pathway for Antibacterial and
Antifungal Drugs (LPAD). We intend to continue to enroll and analyze the data of
patients that have completed the treatment course in our FURI and CARES
studies.

Enrollment is ongoing in our Phase 2 SCYNERGIA study for patients with invasive
aspergillosis and will be extended into 2022 to enable investigators impacted by
the COVID-19 pandemic additional time to secure patients for this important
trial. SCYNERGIA, which is evaluating oral ibrexafungerp in combination with
voriconazole for the treatment of invasive pulmonary aspergillosis, has not
enrolled as rapidly as initially projected. The prioritization of hospital
resources toward addressing the COVID-19 pandemic has impacted the ability of
many institutions to focus on screening and enrolling patients into some
clinical trials, including SCYNERGIA. With recent decreases in COVID-19
hospitalizations in some regions, we expect enrollment to accelerate over the
next two quarters and anticipate top-line results in the second half of 2022.

We completed our Phase 1 randomized, double-blind, placebo-controlled single and
multiple ascending dose study evaluating the safety, tolerability, and
pharmacokinetics of the liposomal IV formulation of ibrexafungerp in 64 healthy
subjects with treatment durations of up to seven days. Dosing began in March
2021, and the last cohort was completed in October 2021. The liposomal IV
formulation of ibrexafungerp was generally well tolerated with no serious
adverse events reported. The most common adverse events were mostly mild (few
moderate) reactions at the infusion site. The dosing was successfully progressed
until the target exposure was achieved (i.e., exposure associated with efficacy
from animal models). We are evaluating next steps toward the registrational
program for this formulation.

Impact of the COVID-19 pandemic on our business

A novel strain of coronavirus (COVID-19) was first identified in December 2019,
and subsequently declared a global pandemic by the World Health Organization on
March 11, 2020.  The full extent of the future impacts of COVID-19 on our
operations is uncertain.

Company update

In May 2021, we entered into a Loan and Security Agreement (the Loan Agreement)
with Hercules Capital, Inc. (Hercules), as administrative agent and collateral
agent (in such capacity, the Agent) and a lender, and Silicon Valley Bank, as a
lender (SVB), for an aggregate principal amount of $60.0 million (the Term
Loan). We received $20.0 million upon closing of the Loan Agreement and $10.0
million upon the FDA approval of BREXAFEMME for oral use in patients with VVC.
Pursuant to the Loan Agreement, the Term Loan is now available to us in two
additional tranches, subject to certain terms and conditions.

In May 2021, we have an agreement with a third party to sell some of our unused New Jersey NOLs and research and development credits for approx. $ 4.1 million.

In February 2021, we partnered with Amplity Inc. (Amplity) for the ongoing
commercial launch of BREXAFEMME for the treatment of VVC. Under the terms of the
5-year agreement, we are utilizing Amplity's commercial execution expertise and
resources for sales force, remote engagement, training, market access and select
operations services.  Amplity is deferring a portion of its direct service costs
in the first two years (2021 and 2022), which we will repay over three years
starting in

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2023. amplitude has the potential to earn a performance-based success fee in the 2023-2025 period by exceeding certain revenue targets.

In February 2021, we entered into an Exclusive License and Collaboration
Agreement (the Hansoh Agreement) with Hansoh (Shanghai) Health Technology Co.,
Ltd., and Jiangsu Hansoh Pharmaceutical Group Company Limited (collectively,
Hansoh), pursuant to which Hansoh obtains an exclusive license from us to
research, develop and commercialize ibrexafungerp in the Greater China region,
including mainland China, Hong Kong, Macau, and Taiwan. Under the terms of the
Hansoh Agreement, Hansoh shall be responsible for the development, regulatory
approval and commercialization of ibrexafungerp in Greater China. We received a
$10.0 million upfront payment in the first quarter of 2021 and will also be
eligible to receive development and commercial milestones, plus low double-digit
royalties on net product sales. In September 2021, we announced that Hansoh
filed an investigational new drug (IND) application with the National Medical
Products Administration (NMPA) of the People's Republic of China for a Phase 3
study evaluating the efficacy and safety of ibrexafungerp for the treatment of
VVC.

On October 26, 2021, Eric Francois, our Chief Financial Officer, notified us of
his intent to resign to return to his prior career in investment banking. Mr.
Francois will continue in his current role through November 19, 2021, to
complete the third quarter 2021 reporting obligations and facilitate a smooth
transition. Lawrence Hoffman, CPA, ESQ, of Danforth Advisors, will serve as
interim Chief Financial Officer.

liquidity

We have operated as a public entity since we completed our initial public
offering (IPO) of our common stock in May 2014. 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, and December
2020. As of September 30, 2021, we had received an aggregate of $253.2 million
in net proceeds from the issuance of our common stock and warrants in these six
offerings. Our principal source of liquidity is cash and cash equivalents, which
totaled $100.1 million as of September 30, 2021, and availability to issue up to
$47.4 million and $16.8 million of our common stock under our at-the-market
facility with Cantor Fitzgerald & Co. (Cantor) and Ladenburg Thalmann & Co. Inc.
(Ladenburg) and common stock purchase agreement with Aspire Capital,
respectively. We received $30.0 million under our Term Loan and could
potentially be eligible to receive up to an additional $30.0 million, subject to
certain terms and conditions.

We have incurred annual net losses since our inception, including the year ended
December 31, 2020, and the three and nine months ended September 30, 2021. As of
September 30, 2021, our accumulated deficit was $330.2 million. We anticipate
that we will continue to incur losses for at least the next several
years. We expect we will continue to incur significant research and development
expense as we continue to execute our research and drug development strategy,
but that our research and development expenses will decrease primarily given the
completion of the VANISH Phase 3 registration program and the completion of
enrollment in the CANDLE Phase 3 study. Consistent with our operating plan, we
also expect that we will continue to incur significant selling, general and
administrative expenses to support our public reporting company operations, and
that our selling, general and administrative expenses will increase to support
the ongoing commercial launch of BREXAFEMME for the treatment of vaginal yeast
infections and our ongoing operations. As a result, we will need additional
capital to fund our operations, which we may obtain through one or more of
equity offerings, debt financings, other non-dilutive third-party funding (e.g.,
grants, and New Jersey Technology Business Tax Certificate Transfer (NOL)
Program), strategic alliances and licensing or collaboration arrangements. We
may offer shares of our common stock pursuant to our shelf registrations, and
the common stock purchase agreement with Aspire Capital.

Cooperations and license 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; (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

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receive milestone payments upon the successful progression of certain Cypralis
clinical candidates into later stage clinical studies and royalties payable upon
product commercialization.

Components of the operating result

revenue

Revenues consist mainly of a non-refundable upfront payment under our license agreement with Hansoh and product sales from BREXAFEMME.

Cost of product sales

Cost of product revenue consists primarily of distribution and freight expenses
and other manufacturing costs associated with BREXAFEMME. Prior to the
regulatory approval of BREXAFEMME on June 1, 2021, we expensed as research and
development the costs associated with the third-party manufacture of BREXAFEMME.

Research and development costs

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 associated with conducting preclinical and clinical studies, including

      development milestones, drug formulation, manufacturing and other
      development;

• Salaries and staff-related costs, including fringe and share-based benefits

Remuneration 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;


  • other costs in seeking regulatory approval of our products; and


  • allocated overhead.


Our ibrexafungerp project was the only significant research and development
project during the periods presented. We expect to continue to incur significant
research and development expense for the foreseeable future as we continue our
effort to develop ibrexafungerp, and to potentially develop our other product
candidates, subject to the availability of additional funding.

The successful development of product candidates is highly uncertain. At this
time, we cannot reasonably estimate the nature, timing or costs required to
complete the remaining development of any product candidates. This is due to the
numerous risks and uncertainties associated with the development of product
candidates.

Selling, general and administrative expenses

Selling, general and administrative expense consists primarily of salaries and
personnel-related costs, including employee benefits and any stock-based
compensation. This includes personnel in executive, finance, human resources,
business development, medical affairs, marketing, and administrative support
functions. Other expenses include facility-related costs not otherwise allocated
to research and development expense, professional fees for accounting, auditing,
tax and legal services, consulting costs for general and administrative
purposes, information systems and marketing efforts.

Other expenses (income)

All of our other income recognized in the three and nine months ended September
30, 2021 and 2020, consists of amortization of debt issuance costs and discount,
interest income, interest expense, other income, the warrant liabilities fair
value adjustment, the derivative liabilities fair value adjustment, and the loss
recognized for the extinguishment of debt.

Income tax (service) expense

All of our income tax (benefit) expense recognized in the three and nine months
ended September 30, 2021 consists of an income tax benefit associated with the
sale of our NOLs and research and development credits and tax withholding
expense associated with the upfront payment received from Hansoh.

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Business results for the past three months September 30, 2021 and 2020

The following table summarizes our results of operations for the three months
ended September 30, 2021 and 2020, together with the changes in those items in
dollars and percentage (dollars in thousands):



                                                      Three Months Ended September 30,
                                            2021          2020           Period-to-Period Change
Revenue:
Product revenue, net                      $     516     $       -     $         516               -   %
License agreement revenue                         -             -                 -               -
Total revenue                                   516             -               516               -   %
Operating expenses:
Cost of product revenues                        145             -               145               -   %
Research and development                      4,401         8,030            (3,629 )         (45.2 ) %
Selling, general and administrative          15,411         3,481            11,930           342.7   %
Total operating expenses                     19,957        11,511             8,446            73.4   %
Loss from operations                        (19,441 )     (11,511 )          (7,930 )          68.9   %
Other expense (income):
Amortization of debt issuance costs and                                                               %
discount                                        413           311               102            32.8
Interest income                                  (8 )          (5 )              (3 )          60.0   %
Interest expense                              1,019           330               689           208.8   %
Other expense                                     -            20               (20 )        (100.0 ) %
Warrant liabilities fair value                                                                        %
adjustment                                  (18,810 )      (7,786 )         (11,024 )         141.6
Derivative liabilities fair value                                                                     %
adjustment                                   (1,400 )      (5,290 )           3,890           (73.5 )
Total other income                          (18,786 )     (12,420 )          (6,366 )          51.3   %
(Loss) income before taxes                     (655 )         909            (1,564 )        (172.1 ) %
Income tax benefit                              (50 )           -               (50 )             -   %
Net (loss) income                         $    (605 )   $     909     $      (1,514 )        (166.6 ) %



Revenue. Sales in the past three months September 30, 2021 consists exclusively of product sales by BREXAFEMME.

Cost of product sales. Cost of product sales in the past three months
September 30, 2021 consists mainly of sales and freight costs related to BREXAFEMME.

Research and Development. For the three months ended September 30, 2021,
research and development expenses decreased to $4.4 million compared to $8.0
million for the three months ended September 30, 2020. The decrease of $3.6
million, or 45%, for the three months ended September 30, 2021, was primarily
driven by a decrease of $1.6 million in chemistry, manufacturing, and controls
(CMC) expense, a decrease of $1.2 million in clinical development expense, a
decrease of $0.6 million in regulatory expense, and a net decrease in other
research and development expense of $0.2 million.

The $1.6 million decrease in CMC for the three months ended September 30, 2021,
was primarily driven by $0.6 million and $0.5 million in expense recognized
during the three months ended September 30, 2020 for drug product shipped in the
period and third-party drug product manufacturing, respectively. The $1.2
million decrease in clinical development expense for the three months ended
September 30, 2021, was primarily driven by a decrease of $0.8 million and $0.5
million in expense associated with our CANDLE Phase 3 study and the VANISH Phase
3 program, respectively, as a result of the completion of the VANISH program and
the completion of enrollment in the CANDLE Phase 3 study. Additionally, we
incurred a decrease of $0.3 million in expense associated with the SCYNERGIA
study and a decrease of $0.2 million in expense associated with two drug-drug
interaction studies to support the NDA for BREXAFEMME. The decreases in clinical
development expense for the three months ended September 30, 2021 were offset,
in part, by an increase of $0.3 million in expense for the FURI and CARES
studies in addition to an increase in expense of $0.2 million for the Phase 1
liposomal IV study. The $0.6 million decrease in regulatory expense was
primarily due to the costs incurred during the prior period for the preparation
and filing of the NDA submission for BREXAFEMME.

Selling, General & Administrative. For the three months ended September 30,
2021, selling, general and administrative expenses increased to $15.4 million
from $3.5 million for the three months ended September 30, 2020. The increase of
$11.9 million, or 343%, for the three months ended September 30, 2021, was
primarily driven by a $8.7 million increase in commercial related expense
associated with the ongoing commercialization of BREXAFEMME, an increase of $1.3
million in salary related costs, an increase of $0.7 million in expense
associated with increased information technology costs, an increase

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from $ 0.7 million Medical expenses and a net increase of $ 0.5 million
in other sales, general and administrative costs.

Amortization of Debt Issuance Costs and Discount. For the three months ended
September 30, 2021 and 2020, we recognized $0.4 million $0.3 million in
amortization of debt issuance costs and discount. The 2021 and 2020 debt
issuance costs and discount for both the April 2020 and March 2019 convertible
notes primarily consisted of an allocated portion of advisory fees and other
issuance costs. The 2021 debt issuance costs and discount for the Loan Agreement
comprised issuance and commitment costs, customary closing and final fees, and
the fair value of the warrants issued in conjunction with the Loan Agreement.

Interest income. For the three months over September 30, 2021 and in 2020 we recognized $ 8,000 and $ 5,000, or in the interest income mainly on our money market funds.

Interest expenses. For the three months over September 30, 2021 and in 2020 we recognized $ 1.0 million and $ 0.3 million in interest expense. The interest expense recorded in both periods is essentially related to the loan agreement and the April 2020 and March 2019 changeable notes.

Other edition. For the three months over September 30, 2020, we noticed
$ 20,000 in other expenses mainly in connection with realized losses from foreign currency transactions.

Warrant Liabilities Fair Value Adjustment. For the three months ended September
30, 2021 and 2020, we recognized gains of $18.8 million and $7.8 million,
respectively, in the fair value adjustment related to the warrant liabilities
primarily due to the decrease in our stock price during the quarter.

Derivative liabilities fair value adjustment. For the three months over
September 30, 2021 and in 2020 we have profits of $ 1.4 million and $ 5.3 million, or the fair value adjustment for derivative liabilities, mainly due to the decline in our share price during the quarter.

Income Tax Benefit. Income tax benefit in the three months ended September 30,
2021 consists of $0.1 million in income tax benefit associated with an upfront
payment received from Hansoh.

Business results for the past nine months September 30, 2021 and 2020


                                                       Nine Months Ended September 30,
                                            2021          2020           Period-to-Period Change
Revenue:
Product revenue, net                      $     516     $       -     $         516               -   %
License agreement revenue                    12,050             -            12,050               -   %
Total revenue                                12,566             -            12,566               -   %
Operating expenses:
Cost of product revenues                        145             -               145               -   %
Research and development                     16,083        26,364           (10,281 )         (39.0 ) %
Selling, general and administrative          34,879         9,448            25,431           269.2   %
Total operating expenses                     51,107        35,812            15,295            42.7   %
Loss from operations                        (38,541 )     (35,812 )          (2,729 )           7.6   %
Other expense (income):
Loss on extinguishment of debt                2,725           806             1,919           238.1   %
Amortization of debt issuance costs and                                                               %
discount                                        937           910                27             3.0
Interest income                                 (20 )        (188 )             168           (89.4 ) %
Interest expense                              1,678           859               819            95.3   %
Other income                                      -          (386 )             386          (100.0 ) %
Other expense                                     -           602              (602 )        (100.0 ) %
Warrant liabilities fair value                                                                        %
adjustment                                  (35,378 )     (16,114 )         (19,264 )         119.5
Derivative liabilities fair value                                                                     %
adjustment                                   (1,772 )      (6,683 )           4,911           (73.5 )
Total other income                          (31,830 )     (20,194 )         (11,636 )          57.6   %
Loss before taxes                            (6,711 )     (15,618 )           8,907           (57.0 ) %
Income tax benefit                           (3,088 )      (3,144 )              56            (1.8 ) %
Net loss                                  $  (3,623 )   $ (12,474 )   $       8,851           (71.0 ) %




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Revenue. Revenue in the nine months ended September 30, 2021, consists primarily
of a non-refundable upfront payment received under our license agreement with
Hansoh and product sales of BREXAFEMME.

Cost of product sales. Cost of product sales over the past nine months
September 30, 2021 consists mainly of sales and freight costs related to BREXAFEMME.

Research and Development. For the nine months ended September 30, 2021, research
and development expenses decreased to $16.1 million from $26.4 million for the
nine months ended September 30, 2020. The decrease of $10.3 million, or 39%, for
the nine months ended September 30, 2021, was primarily driven by a decrease of
$4.7 million in clinical development expense, a decrease of $4.1 million in
chemistry, manufacturing, and controls (CMC) expense, a decrease of $0.8 million
in preclinical expense, and a decrease of $0.7 million in regulatory expense.

The $4.7 million decrease in clinical development expense for the nine months
ended September 30, 2021, was primarily driven by a decrease of $1.8 million and
$1.7 million in expense associated with the VANISH Phase 3 program and CANDLE
study, respectively, as a result of the completion of the VANISH program and the
completion of enrollment in the CANDLE Phase 3 study. Additionally, we incurred
decreases of $0.9 million in expense for both the two drug-drug interaction
studies to support the NDA for BREXAFEMME and the SCYNERGIA study as well as a
decrease in expense of $0.6 million for certain Phase 1 studies to support the
NDA submission for BREXAFEMME. The decreases in clinical development expense for
the nine months ended September 30, 2021 were offset, in part, by an increase of
$0.5 million in expense for the FURI and CARES studies in addition to an
increase in expense of $0.4 million for the Phase 1 liposomal IV study The $4.1
million decrease in CMC for the nine months ended September 30, 2021, was
primarily driven by $2.7 million in expense recognized during the nine months
ended September 30, 2020 for drug product shipped in the period. The $0.8
million decrease in preclinical expenses was primarily driven by a $0.8 million
decrease in certain pharmacokinetic and preclinical expenses incurred during the
prior comparable period.

Selling, General & Administrative. For the nine months ended September 30, 2021,
selling, general and administrative expenses increased to $34.9 million from
$9.4 million for the nine months ended September 30, 2020. The increase of $25.4
million, or 269%, for the nine months ended September 30, 2021, was primarily
driven by a $16.0 million increase in commercial related expense, an increase of
$2.9 million in salary related costs, an increase of $2.0 million in expense
associated with increased information technology, and an increase of $1.9
million in medical affairs expense, all primarily due to the costs recognized to
support the ongoing commercialization of BREXAFEMME. The increase for the nine
months ended September 30, 2021, was also driven by an increase of $1.2 million
in business development expense associated with the licensing agreement entered
into with Hansoh in February 2021, a $0.9 million increase in certain
professional fees, and a net increase of $0.5 million in other selling, general
and administrative expense.

Loss on Extinguishment of Debt. For the nine months ended September 30, 2021, we
recognized $2.7 million in loss on extinguishment of debt associated with the
January 2021 conversation of our remaining April 2020 convertible notes.

Amortization of Debt Issuance Costs and Discount. For both the nine months ended
September 30, 2021 and 2020, we recognized $0.9 million in amortization of debt
issuance costs and discount. The 2021 and 2020 debt issuance costs and discount
for both the April 2020 and March 2019 convertible notes primarily consisted of
an allocated portion of advisory fees and other issuance costs. The 2021 debt
issuance costs and discount for the Loan Agreement comprised issuance and
commitment costs, customary closing and final fees, and the fair value of the
warrants issued in conjunction with the Loan Agreement.

Interest income. For the nine months over September 30, 2021 and in 2020 we recognized $ 20,000 and $ 0.2 million, or in the interest income. The decline in interest income is mainly due to the 2020 maturity of all of our short-term investments.

Interest Expense. For the nine months ended September 30, 2021 and 2020, we
recognized $1.7 million and $0.9 million in interest expense, respectively. The
interest expense recognized in the periods is primarily associated with the Loan
Agreement and the April 2020 and March 2019 convertible notes.

Other Income. For the nine months ended September 30, 2020, we recognized $0.4
million in other income associated with certain research and development tax
credits.

Other Expense. For the nine months ended September 30, 2020, we recognized $0.6
million in expense associated with the noncash consideration associated with
the common stock purchase agreement with Aspire Capital.

Warrant Liabilities Fair Value Adjustment. For the nine months ended September
30, 2021 and 2020, we recognized gains of $35.4 million and $16.1 million,
respectively, in the fair value adjustment related to the warrant liabilities
primarily due to the decrease in our stock price during the periods.

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Derivative liabilities fair value adjustment. For the nine months over
September 30, 2021 and in 2020 we have profits of $ 1.8 million and $ 6.7 million, or when adjusting the fair value of the derivative liabilities, mainly due to the decline in our share price over the reporting periods.

Income Tax Benefit. For the nine months ended September 30, 2021, we recognized
a $4.1 million income tax benefit associated with the sale of a portion of our
NOLs and research and development credits and $1.1 million of tax withholding
expense primarily associated with the upfront payment received from Hansoh. For
the nine months ended September 30, 2020, we recognized a $3.1 million income
tax benefit associated with the sale of a portion of our NOLs and research and
development credits.

Liquidity and capital resources

Sources of liquidity

Through September 30, 2021, we have primarily funded our operations from net
proceeds from equity and debt issuances and through revenue from development
services. As of September 30, 2021, we had cash and cash equivalents of $100.1
million, compared to cash and cash equivalents of $93.0 million as of
December 31, 2020. The increase in our cash and cash equivalents was primarily
due to the $28.7 million in net proceeds received from the Loan Agreement and
the $10.0 million cash receipt from Hansoh, offset in part by our increase in
selling, general and administrative expenses to support the ongoing commercial
launch of BREXAFEMME for the treatment of vaginal yeast infections and the
continued development costs associated with ibrexafungerp. We have incurred
annual net losses since our inception, and we incurred a net loss during the
three and nine months ended September 30, 2021. As of September 30, 2021, our
accumulated deficit was $330.2 million.

We expect that we will continue to incur losses for at least the foreseeable
future. Consistent with our operating plan, we expect our research and
development expenses to decrease primarily given the completion of the VANISH
Phase 3 registration program and the completion of enrollment in our CANDLE
study and we expect our selling, general and administrative expenses to increase
to support the ongoing commercial launch for the treatment of vaginal yeast
infections and our ongoing operations. As a result, we may need additional
capital to fund our operations, which we may obtain through one or more of
equity offerings, debt financings, or other non-dilutive third-party funding
(e.g., grants, and New Jersey Technology Business Tax Certificate Transfer (NOL)
Program), strategic alliances and licensing or collaboration arrangements. We
may offer shares of our common stock pursuant to our shelf registrations,
including the related at-the-market facility entered into on May 17, 2021 with
Cantor and Ladenburg and the common stock purchase agreement entered into on
April 10, 2020 with Aspire Capital. During the nine months ended September 30,
2021, we sold 430,605 and 400,000 shares of our common stock and received net
proceeds of $2.5 million and $2.6 million under our at-the-market facility and
common stock purchase agreement, respectively. During the nine months ended
September 30, 2021, 360,134 and 2,060,000 of the December 2020 public offering
warrants and prefunded warrants were exercised for proceeds of $2.6 million and
$2,000, respectively.

Cash Flows

The following table shows the main sources and uses of cash for the nine months ended September 30, 2021 and 2020 (in thousands):


                                                         Nine Months Ended September 30,
                                                           2021                   2020
Cash, cash equivalents, and restricted cash,
January 1                                            $         93,314       $         42,193
Net cash used in operating activities                         (29,040 )              (32,782 )
Net cash (used in) provided by investing
activities                                                       (589 )                6,474
Net cash provided by financing activities                      36,642       

13,882

Net increase (decrease) in cash, cash equivalents, and restricted cash

                                             7,013                (12,426 )
Cash, cash equivalents, and restricted cash,
September 30                                         $        100,327       $         29,767




Operating Activities

The $3.7 million decrease in net cash used in operating activities for the nine
months ended September 30, 2021, as compared to the nine months ended September
30, 2020, was primarily due to the cash receipt of $10.0 million from Hansoh
received during the current period, offset by an increase in selling, general
and administrative expenses to support the ongoing commercial launch of
BREXAFEMME for the treatment of vaginal yeast infections and the continued
development costs associated with ibrexafungerp. Consistent with our operating
plan, we expect that our research and development expenses will decrease
primarily given the completion of the VANISH Phase 3 registration program and
the completion of enrollment in the CANDLE Phase 3 study and we expect our
selling, general and administrative expenses to increase to support the ongoing
commercial launch of BREXAFEMME for the treatment of vaginal yeast infections
and our ongoing operations.

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Net cash used in operating activities of $29.0 million for the nine months ended
September 30, 2021, primarily consisted of the $3.6 million net loss adjusted
for non-cash charges that included the gain on change in fair value of the
warrant liabilities of $35.4 million, the gain on change in fair value of the
derivative liabilities of $1.8 million, stock-based compensation expense of $1.5
million, amortization of debt issuance costs and discount of $0.9 million, and
the loss on extinguishment of debt of $2.7 million, plus a net favorable change
in operating assets and liabilities of $6.3 million. The net favorable change in
operating assets and liabilities was due to an increase in accounts payable,
accrued expenses, and other of $5.0 million and a decrease in prepaid expenses,
deferred costs, and other of $1.3 million. The $5.0 million increase in accounts
payable, accrued expenses, and other was primarily due to the increase in
accounts payable of $2.3 million, an increase in accrued expenses of $0.6
million, and an increase of $2.1 million in other liabilities associated with
the long term deferred fees due to Amplity, The decrease in prepaid expense,
deferred cost, and other of $1.3 million was primarily due to the collection of
a $2.9 million receivable in February 2021 and a $0.7 million decrease in
prepaid research and development services, primarily offset by an increase of
$0.6 million in inventory and $0.4 million in prepaid insurance.

Net cash used in operating activities of $32.8 million for the nine months ended
September 30, 2020, primarily consisted of the $12.5 million net loss adjusted
for non-cash charges that included the gain on change in fair value of the
warrant liabilities of $16.1 million, the gain on change in fair value of the
derivative liabilities of $6.7 million, stock-based compensation expense of $1.2
million, amortization of debt issuance costs and discount of $0.9 million, and
the loss on extinguishment of debt of $0.8 million, plus a net unfavorable
change in operating assets and liabilities of $1.3 million. The net unfavorable
change in operating assets and liabilities was primarily due to a decrease in
accounts payable, accrued expenses, and other of $2.8 million and offset in part
by a decrease in prepaid expenses, deferred costs, and other of $1.5
million. The $2.8 million decrease in accounts payable, accrued expenses, and
other was primarily due to the decrease in accounts payable of $1.9 million as
of September 30, 2020 and the decrease of $0.6 million in accrued employee bonus
compensation as a result of the payment of the 2019 related employee bonus
compensation in 2020. The decrease in prepaid expense, deferred cost, and other
of $1.5 million was primarily due to a $1.2 million decrease in prepaid research
and development costs associated with drug product shipped during the period.

Investment activity

Cash outflow from investing activities of $ 0.6 million for the nine months to end
September 30, 2021, consisted solely of purchases of intangible assets.

Net cash provided by investing activities of $6.5 million for the nine months
ended September 30, 2020 consisted of purchases and maturities of short-term
investments of $14.2 million and $20.7 million, respectively.

Financing activity

Cash inflow from financing activities of $ 36.6 million for the nine months to end September 30, 2021, consisted mainly of the net proceeds of $ 28.7 million obtained from the loan agreement and $ 8.0 million in the proceeds of common stock issued.

Net cash provided by financing activities of $13.9 million for the nine months
ended September 30, 2020, consisted primarily of gross proceeds from the sale of
the April 2020 Notes for $10.0 million and the gross proceeds from the sale of
our common stock issued under our at-the-market facilities and common stock
purchase agreement of $4.7 million.

Future financing needs

We have begun to generate revenue from product sales for BREXAFEMME. In
addition, we expect to incur significant expenses in connection with our ongoing
efforts to commercialize BREXAFEMME and further other development activities,
particularly as we continue the research, development and clinical trials of,
and seek regulatory approval for, product candidates. We anticipate that we will
need substantial additional funding in connection with our continuing future
operations.

Based upon our existing operating plan, we believe that our existing cash and
cash equivalents, the sale of a portion of our New Jersey NOLs, and the
anticipated sales of BREXAFEMME will enable us to fund our operating
requirements into 2023. These funds are also sufficient to enable us to support
the ongoing commercial launch of BREXAFEMME for the treatment of vaginal yeast
infections and complete the development activities for the CANDLE
study. However, we are continually evaluating our operating plan and assessing
the optimal cash utilization for our ibrexafungerp development strategy. We have
based our estimates on assumptions that may prove to be wrong, and we may use
our available capital resources sooner than we currently expect. Because of the
numerous risks and uncertainties associated with the development and
commercialization of product candidates, we are unable to estimate the amounts
of increased capital outlays and operating expenses necessary to complete the
development of product candidates.

Our future capital needs will depend on many factors including:

    • the costs and potential revenue associated with the commercialization of
      BREXAFEMME;


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• Progress and cost of Ibrexafungerp clinical development;

• Outcome, cost, and timing of finding and obtaining the FDA and others

legal permits;

• The ability of product candidates to go 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 intellectuals

Real estate portfolio, including the amount and timing of any payments

are required or we are in connection with the

Licensing, filing, prosecuting, defending and enforcing patents or

other intellectual property rights;

• our needs and our ability to have additional management and scientific and

medical staff;

• Our need to implement additional ones as well as to improve existing ones internally

Systems and infrastructure, including financial and reporting processes and

Systems and associated compliance costs; and

• the economic and other conditions, timing and success of our existing licenses

Agreements and any collaboration, licensing or other arrangements in

which we can enter in the future.


Until such time, if ever, as we can generate substantial revenue from product
sales, we expect to finance our cash needs through a combination of net proceeds
from equity offerings, debt financings or other non-dilutive third-party funding
(e.g., grants, and New Jersey Technology Business Tax Certificate Transfer (NOL)
Program), strategic alliances and licensing arrangements. To the extent that we
raise additional capital through the sale of equity or convertible debt
securities as we did in April 2015, June 2016, March 2018, December 2019, and
December 2020, as well as through our common stock purchase agreement with
Aspire Capital, the ownership interests of our common stockholders will be
diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect the rights of our common stockholders. Debt
financing, if available, may involve agreements that include covenants limiting
or restricting our ability to take specific actions, such as incurring
additional debt, making capital expenditures or declaring dividends. If we raise
additional funds through sales of assets, other third-party funding, strategic
alliances and licensing or collaboration arrangements with third parties, we may
have to relinquish valuable rights to our technologies, future revenue streams,
research programs or product candidates or to grant licenses on terms that may
not be favorable to us.

Off-balance sheet agreements

In the periods shown, we did not have any off-balance sheet agreements in the sense of SEK Rules.

Critical accounting policies and material judgments and estimates

Our management's discussion and analysis of our financial condition and results
of operations is based on our interim condensed consolidated financial
statements, which we have prepared in accordance with accounting principles
generally accepted 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 accounting policies, significant judgments, and estimates are
described within Item 7 and Note 2 to our Annual Report on Form 10-K for the
year ended December 31, 2020, as well as Note 2 to our unaudited interim
condensed consolidated financial statements in Part I, Item 1 of this Quarterly
Report on Form 10-Q.

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