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NATURE OF OPERATIONS | 6 Months Ended
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Jun. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
NATURE OF OPERATIONS | NATURE OF OPERATIONS VYNE Therapeutics Inc. ("VYNE" or the "Company") is a biopharmaceutical company focused on developing proprietary, innovative and differentiated therapies for the treatment of immuno-inflammatory diseases of high unmet medical need. The Company is a Delaware corporation, has its principal executive offices in Bridgewater, New Jersey and operates as one business segment. The Company currently has two commercial products, AMZEEQ® (minocycline) topical foam, 4%, and ZILXI® (minocycline) topical foam, 1.5%. As discussed below, the Company has initiated a process to explore a possible sale or license of its topical minocycline franchise. Strategic Business Review Beginning in the second quarter of 2021, the Company conducted a review of its commercial and research and development portfolio to determine how to optimally deploy capital and drive shareholder value. During the course of this review, the Company carefully considered the revenues received from the commercialization of AMZEEQ and ZILXI and the associated costs to drive those revenues, the protracted negative impact of the COVID-19 pandemic over the past 18 months during the commercial launches of both AMZEEQ and ZILXI, the current payor landscape, as well as the costs to develop each of its pipeline products. During this process, the Company evaluated several strategic options including the acquisition of marketed assets, out-licensing its approved products outside of the United States, and possible partnering or co-development relationships with interested parties. Following its review, the Company has determined to initiate a process to explore a possible sale or license of its topical minocycline franchise, including AMZEEQ, ZILXI, FCD105 (the Company’s Phase 3 proprietary novel topical combination foam formulation of minocycline and adapalene for the treatment of moderate-to-severe acne vulgaris) and the underlying Molecule Stabilizing Technology platform. By leveraging its drug development and clinical development capabilities and strong network of discovery and preclinical science partners, the Company will transition its strategic focus to develop therapies for the treatment of immuno-inflammatory diseases of high unmet medical need. The Company expects to continue to invest in FMX114 for the treatment of mild to moderate atopic dermatitis and anticipates the first patient in its Phase 2a proof-of-concept study will be enrolled in the third quarter of 2021. The Company expects results from this study by the end of 2021. In addition, on August 12, 2021, the Company announced a transaction with In4Derm Limited, a company incorporated and registered in Scotland (“In4Derm”). In4Derm is a spin-out of the University of Dundee’s School of Life Sciences which has discovered and is developing proprietary Bromodomain and Extra-Terminal Domain Inhibitors (“BETi”) for the treatment of immunology and oncology conditions. On April 30, 2021, the parties entered into an Evaluation and Option Agreement (the “Option Agreement”) pursuant to which In4Derm granted the Company an exclusive option to obtain exclusive worldwide rights to research, develop and commercialize products containing In4Derm’s BETi compounds, which are new chemical entities, in both topical (the “Topical BETi Option”) and oral (the “Oral BETi Option”) treatments in all fields for any disease, disorder or condition in humans. On August 6, 2021, the Company exercised the Topical BETi Option and the parties entered into a License Agreement granting the Company a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of In4Derm’s BETi compounds identified to be suitable for topical administration in all fields. The Company paid a $1.0 million cash payment to In4Derm upon the execution of the Option Agreement and $0.5 million in connection with the exercise of the Topical BETi Option. Pursuant to the License Agreement, the Company has agreed to make cash payments to In4Derm upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed topical product in the U.S. of up to $15.75 million for all indications. In addition, the Company currently expects to exercise the Oral BETi Option following the selection of a lead candidate for the program. Upon exercise of the exclusive Oral BETi Option, the parties will sign a license agreement (the “Oral License Agreement”), and the Company will be required to pay In4Derm a $4.0 million cash payment. The Oral License Agreement will include cash payments of up to $43.75 million payable to In4Derm upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the U.S. for all indications. The license agreements also provide for tiered royalty payments of up to 10% of net annual sales across licensed BETi products by the Company. In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S. The initial BETi candidates that the Company plans to develop are VYN201 and VYN202. VYN201 is a pan-bromodomain or pan-BD BET inhibitor. It is a first-in-class “soft” pan-BD BET inhibitor that is designed to mitigate systemic drug exposure and will be developed for topical applications. The Company intends to progress VYN201 into rare, neutrophilic, dermatological indications where there is significant unmet need due to a lack of indicated treatment options. The Company plans to enter this program into the clinic in 2022 after the prerequisite non-clinical safety assessments have been completed. The second candidate, VYN202, is an orally-delivered, first-in-class BET inhibitor that is highly selective for Bromodomain 2 ("BD2"). Recent research has suggested that the majority of pro-inflammatory signaling via BET protein action is via interactions with BD2. By selectively inhibiting BD2, the Company believes VYN202 could have a more targeted anti-inflammatory effect with an improved benefit/risk profile. The Company views VYN202 as having significant potential as a novel, oral treatment for major immuno-inflammatory indications. Following the exercise of the Oral BETi Option, the Company intends to commence a IND-enabling non-clinical safety program for VYN202 and enter the clinic in 2022. As the Company transitions from a commercial organization to one focused on research and development, the Company intends to streamline operations by eliminating the vast majority of planned expenditures supporting its commercial operations. Furthermore, the Company intends to reduce its workforce by terminating approximately 70 employees, which the Company expects to be completed by December 31, 2021. The Company expects to incur a one-time charge in the range of approximately $1.5 million to $2.0 million, excluding non-cash charges, in connection with this restructuring plan, consisting primarily of employee termination costs, including severance and other benefits. This charge is expected to be incurred during the quarter ending September 30, 2021 with related cash payments expected to be substantially paid out by December 31, 2021. Reverse Merger On November 10, 2019, Menlo, Foamix Pharmaceuticals Ltd. (“Foamix”) and Giants Merger Subsidiary Ltd. (“Merger Sub”), a wholly-owned subsidiary of Menlo, entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of December 4, 2019, the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Foamix, with Foamix surviving as a wholly-owned subsidiary of Menlo (the “Merger”) on March 9, 2020 (the “Effective Date”). For accounting purposes, the Merger is treated as a “reverse acquisition” under generally accepted accounting principles in the United States (“U.S. GAAP”) and Foamix is considered the accounting acquirer. Accordingly, upon consummation of the Merger, the historical financial statements of Foamix became the Company’s historical financial statements, and the historical financial statements of Foamix are included in the comparative prior periods. See “Note 3 – Business Combination” for more information on the Merger. Reverse stock split and recasting of per-share amounts On February 10, 2021, the Company's Board of Directors approved a one-for-four reverse stock split of its outstanding shares of common stock. The reverse stock split was effected on February 12, 2021, at 5:00 p.m. Eastern time. At the effective time, every four issued and outstanding shares of the Company's common stock were converted into one share of common stock. No fractional shares were issued in connection with the reverse stock split, and in lieu thereof, each stockholder holding fractional shares was entitled to receive a cash payment (without interest or deduction) from the Company's transfer agent in an amount equal to such stockholder's respective pro rata shares of the total net proceeds from the Company's transfer agent sale of all fractional shares at the then-prevailing prices on the open market. In connection with the reverse stock split, the number of authorized shares of the Company's common stock was also reduced on a one-for-four basis, from 300 million shares to 75 million shares. The par value of each share of common stock remained unchanged. A proportionate adjustment was also made to the maximum number of shares issuable under the Company's 2019 Equity Incentive Plan, 2018 Omnibus Incentive Plan and 2019 Employee Share Purchase Plan. Unless otherwise noted, all common shares and per share amounts contained in the unaudited interim condensed consolidated financial statements have been retroactively adjusted to reflect the reverse stock split. Topical Minocycline Franchise In January 2020, the Company launched AMZEEQ®, a once-daily topical antibiotic for the treatment of inflammatory lesions of non-nodular moderate-to-severe acne vulgaris in patients 9 years of age and older. On May 28, 2020, the U.S. Food and Drug Administration (the "FDA") approved ZILXI® for the treatment of inflammatory lesions of rosacea in adults. ZILXI became available in pharmacies nationwide in October 2020. AMZEEQ and ZILXI are the first topical minocycline products approved by the FDA for any condition. AMZEEQ and ZILXI utilize the Company’s proprietary Molecule Stabilizing Technology (MST)™ that is also being used in the development of the Company’s product candidate FCD105, a topical foam comprising minocycline and adapalene for the treatment of acne vulgaris. On June 2, 2020, the Company announced positive results from a Phase II clinical trial evaluating the preliminary safety and efficacy of FCD105 (3% minocycline / 0.3% adapalene foam), the first ever topical minocycline-based combination product, for the treatment of moderate-to-severe acne vulgaris. The Company held an end-of-Phase II meeting with the FDA in the fourth quarter of 2020. Serlopitant Additionally, the Company was developing serlopitant, a small molecule inhibitor of the neurokinin 1 receptor, or NK1-R, given as a once-daily, oral tablet, for the treatment of pruritus, or itch, associated with various conditions including prurigo nodularis, or PN. On April 6, 2020, the Company announced top line results from two Phase III clinical trials evaluating the safety and efficacy of once-daily oral serlopitant for the treatment of pruritus (itch) associated with PN, studies MTI-105 and MTI-106. Neither study met their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based on a 4-point improvement responder analysis. The Company does not currently intend to further pursue the development of serlopitant. As a result, in the second quarter of 2020, the Company recorded a full impairment charge related to the IPR&D and Goodwill assets in its unaudited condensed consolidated statement of operations and comprehensive loss. See "Note 3 - Business Combination" for more information. Liquidity and Capital Resources The Company launched AMZEEQ in the United States in January 2020 and commenced generating product revenues in the first quarter of 2020. The Company also launched ZILXI in the United States in October 2020 and commenced generating revenues in the fourth quarter of 2020. The Company’s activities prior to the commercial launches of AMZEEQ and ZILXI had primarily consisted of raising capital, developing product candidates, and performing research and development activities. Since inception, the Company has incurred recurring losses and negative cash flows from operations. For the six months ended June 30, 2021, the Company incurred a net loss of $40.5 million and used $28.8 million of cash in operations. As of June 30, 2021, the Company had cash, cash equivalents, restricted cash and investments of $104.0 million and an accumulated deficit of $606.7 million. The Company's outstanding debt under its Amended and Restated Credit Agreement at June 30, 2021 was $35.0 million. On August 11, 2021, the Company prepaid the entirety of its outstanding indebtedness, including a prepayment premium and accrued but unpaid interest, for a total amount of approximately $36.5 million. The COVID-19 pandemic and government measures taken in response to the pandemic have had a negative impact on the Company's operations. Access to healthcare providers has been limited, which has negatively impacted sales and the Company's ability to execute its commercial strategy with respect to AMZEEQ and ZILXI. In addition, the commercial launches of both AMZEEQ and ZILXI have been negatively impacted by unfavorable payor decisions in March 2021 on product pricing. These conditions have impaired the Company's ability to generate revenue consistent with internal forecasts, which has had a negative impact on its financial condition and liquidity. The Company and its lenders discussed revenue expected to be generated for the trailing twelve month period ended June 30, 2021, the revenue targets included in the Amended and Restated Credit Agreement and the Company’s strategic transition discussed above. Following such discussions, the Company determined to prepay its outstanding indebtedness in addition to a 4% prepayment fee and accrued but unpaid interest in the total amount of approximately $36.5 million on August 11, 2021. Following the prepayment, the Amended and Restated Credit Agreement has been terminated and the security interests thereunder will be terminated. As a result of the above, the Company determined that its projected cash flows from operations, combined with its cash balance after the debt prepayment, would not provide sufficient resources to fund its existing operations, for at least the next twelve months from the issuance of these financial statements. As discussed above, the Company completed a strategic review of its business and has determined to initiate a process to explore a sale or license of its minocycline franchise, including AMZEEQ, ZILXI, FCD105 and the underlying MST platform. The Company will refocus its resources on its immuno-inflammatory pipeline and intends to support the FMX114 and the BETi development programs. Research and development activities for these programs, including preclinical and clinical testing of the Company’s drug candidates, will require significant additional financing. The future viability of the Company is dependent on its ability to successfully pivot to its research and development business strategy and develop commercially viable drug candidates and raise additional capital to finance its operations. The Company’s ability to continue as a going concern is contingent on its ability to sell or license its minocycline franchise, develop future commercially viable products and/or to raise sufficient working capital through either debt or equity financing. There is no assurance the Company will be able to achieve these objectives under acceptable terms or at all. In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that its unaudited condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is expected to be impacted by the outcome of the plans outlined above, including the successful sale or license of its minocycline franchise, positive results from clinical trials for FMX114, and the successful development and positive results from clinical trials for the BETi programs. Based on current plans and assumptions, the Company believes that absent sufficient proceeds received from a sale or license of the minocycline franchise, business development transactions or financing transactions, which are all beyond its control, it will not have sufficient cash and cash equivalents to fund its operations beyond one year from the issuance of these financial statements. Accordingly, the Company will, over the course of the next twelve months, require significant additional financing to continue its operations. Each of these factors are subject to uncertainty, and therefore, raise substantial doubt about the Company’s ability to continue as a going concern. Failure to successfully complete a sale or license of the minocycline franchise, develop the noted assets, and receive additional financing will require the Company to delay, scale back or otherwise modify its business and its research and development activities and other operations. The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

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