Company: SCYX
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0000950170-25-038044
Chunk: 135

Company: SCYNEXIS INC
Filing Date: 2025-03-12
Form: 10-K
Item: Item 1B
Chunk 135
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 to freight and destruction charges for recalled products and costs incurred by third party vendors. These expenses are recorded within selling, general, and administrative expenses within the Company’s consolidated statement of operations as they are in excess of the initial revenue recognized. These estimates are updated and reevaluated each period and the related reserves are adjusted when these factors indicate that the recall reserves are either insufficient to cover or exceed the estimated product recall expenses. Significant changes in the assumptions used to develop estimates for product recall reserves could affect key financial information, including inventory, accrued liabilities, net sales, gross profit, and net (loss) income. As of December 31, 2024 and 2023, the Company maintained a products recall reserve of $0.6 million and $1.9 million, respectively, specifically for the voluntary recall of certain lots of BREXAFEMME. The Company reviews the product recall reserve for adequacy and adjusts the product recall accrual, if necessary, based on actual experience and estimated costs to be incurred.Cost of Product RevenuesThe cost of product revenues consists primarily of inventory impairment expense, distribution, freight costs, royalty costs, and other manufacturing costs.  In September 2023, the Company announced after becoming aware of a risk of potential cross-contamination during the manufacture of ibrexafungerp, the Company was recalling BREXAFEMME from the market and placing a temporary hold on the clinical studies of ibrexafungerp.  In December 2023, the Company and GSK entered into a Binding MOU for amendment to the GSK License Agreement.  The GSK License Agreement was being amended in connection with the delay in the commercialization of BREXAFEMME and further clinical development of ibrexafungerp associated with this event.  

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In evaluating the recoverability of the Company's raw material inventory on hand as of December 31, 2023 given the product recall and Binding MOU, the Company considered the likelihood that revenue will be obtained from the future sale of the related inventory, discussions with regulatory agencies, and other information currently available to the Company.  For the year ended December 31, 2023, the Company recognized an impairment loss on the recoverability of its raw material inventory of approximately $14.6 million given the Company does not believe the inventory can be sold for commercial or development activities.  The $14.6 million impairment expense has been recognized in cost of product revenue in the accompanying statement of operations.Warrant LiabilitiesThe Company accounts for the