Differentiated Antifungal Potentially Meeting A Clear Medical Need: Initiating BUY/$14 TP

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1 SCYNEXIS, Inc November 17, 2016 BUY (SCYX, $3.53) Differentiated Antifungal Potentially Meeting A Clear Medical Need: Initiating BUY/$14 TP Jonathan Aschoff, Ph.D jaschoff@opnresearch.com We are initiating coverage of SCYNEXIS, Inc. with a Buy rating and a 12-month target price of $14. SCY-078 is SCYNEXIS leading novel antifungal compound in development as both an intravenous and oral agent for the treatment of invasive candidiasis (IC) and invasive aspergillosis (IA). Oral SCY-078 succeeded in Phase 2 in IC and vulvovaginal candidiasis (VVC), and Phase 3 should start by YE16. We project SCY-078 launch in the US and EU in 2019 and 2020, respectively. Phase 2 success in both IC and VVC sets SCYNEXIS up for pivotal trials with oral SCY-078. SCYNEXIS plans to meet with the FDA during 4Q16 or 1Q17 and the EMA in 1Q17, and initiate an open label Phase 3 trial in refractory fungal infections in 4Q16, and a Phase 2 trial in IC in 1Q17, which could potentially be an adaptive Phase 2/3 pending FDA discussion. SCYNEXIS also will release Phase 1 data of the IV formulation of SCY-078 in 4Q16, specifically safety, tolerability and pharmacokinetics of single and multiple escalating doses in healthy volunteers. Global invasive fungal infection treatment exceeds $3 billion annually, with limited competition. In the US, there are approximately 46,000 confirmed cases of healthcare-associated IC annually, according to the CDC. VVC is an indication with an estimated annual US incidence of 6 million. Approximately 75% of adult women will have at least one episode of VVC, and 10-20% of women will develop complicated VVC and require special treatment. The FDA granted SCYNEXIS Fast Track and Qualified Infectious Disease Product (QIDP) Designation for both the IV and oral forms of SCY-078 for the indications of IC and IA. QIDP allows SCY-078 to have Priority Review and an additional five years of market exclusivity in the US. SCYNEXIS novel antifungal compound, SCY-078, noncompetitively inhibits the synthesis of fungal cell wall polymer β-(1,3)- glucan, which is critical for fungal growth, and if successful, could become the first approved glucan synthase inhibitor. Current antifungal standard of care is to inhibit this process with echinocandins, which are only available in an IV form and require a prolonged hospital stay. SCY-078 in both IV and oral forms would enable critically ill patients to start IV treatment and step down to oral therapy with the same drug. Resistance rates to common species are likely to grow exponentially as the more susceptible species are being eradicated; we thus expect a differentiated product such as SCY-078 to compete well in the antifungal market if clinically successful. Resistance has become an increasingly pressing issue for fungal infections. Broad use of azoles is generating resistance in both Candida and Aspergillus infections. Echinocandins have been recommended in both the US and EU clinical guidelines as first-line treatment for candidemia; however, they are only available in an IV form. With echinocandins being prescribed more often and generic echinocandins starting to become available, an increasing reservoir of patients is being generated for SCY-078. Rev ($M) 2015A 2016E 2017E Ticker SCYX 1Q A - Last Price $3.53 2Q A - Mkt Cap ($M) $83 3Q A - Fiscal YE 31-Dec 4Q E - 50d ADV (000) 668 Annual E 0.3E Short int (M) 1.8 S/O (M) 23.4 EPS 2015A 2016E 2017E Annual Hi $7.29 1Q A - Annual Lo $1.74 2Q A - Cash ($M) $58 3Q A - 4Q E - Source: Big Charts Annual E -1.76E Please see pages for Important Disclosures 1

2 Exhibit 1: Product Pipeline Source: Company documents Valuation We derive our target price of $14 through a DCF analysis, assuming a 12% discount rate that is applied to all cash flows and the terminal value, which is based on a 4 multiple of our projected 2022 EBITDA of $69 million. We base our valuation for SCYNEXIS on revenue from SCY-078 for invasive candidiasis (IC), invasive aspergillosis (IA), and vulvovaginal candidiasis (VVC). We believe that SCYNEXIS intends to market SCY-078 in the US on its own, upon potential FDA approval. Our valuation assumes US approval and launch of SCY-078 for the indication of IC and IA in 2019, and EU approval and launch for IC and IA in We then estimate the approval and launch of SCY-078 for the indication of VVC in the US and EU in We project an annual US treatment cost of $5,500, assuming SCYNEXIS will price SCY- 078 at a slight premium to the major currently available branded drugs such as caspofungin and micafungin, which are approximately $5,000 per course. In the US, there are approximately 46,000 confirmed cases of healthcare-associated invasive (HAI) candidiasis annually according to the CDC, and SCYNEXIS believes that confirmed cases of HAI account for only 25-33% of all patients receiving Candida treatments. We more conservatively assume for modelling purposes that about 80,000 patients in the US received systemic antifungal treatments for IC in We then adopt a growth rate of 3% per year given the infection rate statistics (Alangaden GJ, 2011). Similarly, for the indication of IA, we estimate that about 20,000 patients in the US received antifungals for IA in 2014, and the number increases by 3% annually. For the indication of VVC, we are modeling the addressable patient population to be approximately 300,000 in the US. We forecast first-year sales of about $3.2 million in 2019 in the US that gradually grow to about $111 million in 2022, and view this to be conservative, especially given that resistance to currently available antifungals can expand exponentially as the drugs become generic and thus more broadly used. Outside the US, SCYNEXIS will collaborate with commercial partners to develop and distribute SCY-078. We estimate SCYNEXIS will receive a 20-25% royalty on ex-us sales, and therefore assume royalties of about $1.3 million in 2020 and $14.1 million in Potential approvals for drug candidates such as SCY-635, which was out-licensed by the company, offer potential upside to our valuation. SCY-078: Potential New Antifungal Treatment SCY-078 Background SCY-078 is in a novel class of antifungal compounds produced by chemical modification of enfumafungins, which are derived from endophytic fungi. Enfumafungins prevent the assembly of the fungal cell wall and the growth of certain clinically meaningful fungal species. SCY-078 is the lead product candidate of SCYNEXIS and is under development as both an intravenous and oral agent for the treatment of invasive candidiasis and aspergillosis. SCY-078 noncompetitively inhibits the synthesis of fungal cell wall polymer β-(1,3)- glucan (see Exhibit 2). The synthesis of glucan polymers is critical for fungal growth and the standard of care for fungal infection is to inhibit this process via the echinocandin class of drugs, which are only available in an IV form and require a prolonged hospital stay. Regarding safety, no direct human cell toxicity is expected since human cells do not contain β-(1,3)-glucan. In in vitro and in vivo studies, SCY-078 has demonstrated strong antifungal activity against a broad range of clinically important fungi. SCY-078 has also been shown to be well tolerated in multiple human Phase 1 trials at clinically relevant dose levels in about 100 healthy volunteers, work that was November 17,

3 completed by Merck (MRK, Not Rated). SCYNEXIS was originally hired by Merck to design SCY-078, and all rights related to SCY-078 were later returned to SCYNEXIS, with modest milestone payments of up to $20 million and tiered middle to high single-digit royalties on future sales owed to Merck in exchange. We believe that Merck s returning of the drug to SCYNEXIS was due to a shift in Merck s pipeline prioritization. In January 2016, the FDA granted SCYNEXIS Fast Track and Qualified Infectious Disease Product (QIDP) Designation for the IV form of SCY- 078 for the indications of IC and IA. The QIDP status, provided under the 2012 US Generating Antibiotic Incentives Now (GAIN) Act, allows SCY-078 to have Priority Review and an additional five years of market exclusivity in the US, in addition to requiring only one Phase 3 trial for approval in those indications. SCY-078 was also granted Orphan Drug Designation for IC in 1Q16 and for invasive Aspergillus in 3Q16. SCYNEXIS initiated a Phase 1 trial of the IV form of SCY-078 in November 2015 to evaluate the safety, tolerability, and pharmacokinetics of single escalating doses in healthy volunteers, and we expect results in November The FDA granted QIDP status for the oral form of SCY-078 for the treatment of IC and IA in January 2014 and granted Fast Track designation for the oral form in January Oral SCY- 078 has completed two Phase 2 trials for the treatment of IC and VVC, with positive data from both trials released in 2Q16, 3Q16, and 4Q16. Exhibit 2: SCY-078 mechanism of action Source: Company documents Invasive Fungal Infections Healthcare-associated infections (HAIs) have been an increasing concern of the CDC, with Candida and Aspergillus species being responsible for approximately 85% of all invasive fungal infections in the US and Europe (Peres-Bota, D et al, 2004), among which Candida accounts for 70-90% and Aspergillus for 10-20%. Infections caused by Candida rank as the fourth-most-common hospital-acquired bloodstream infections in the US, and mortality rates due to IC have remained unacceptably high at 27-40% (with treatment), depending on the immune status of the patient, for the past two decades (Pfaller, M and Diekema, D, 2007). More than 17 species of Candida have been found to be associated with human infections; however, more than 90% of them are due to 1) C. albicans (62.3%), 2) C. glabrata (12%), 3) C. parapsilosis (7.5%), 4) C. tropicalis (7.3%), and 5) C. krusei (2.7%) (Pfaller, M and Diekema, D, 2007). Aspergillus species are molds found in the environment, which are normally inhaled, with Aspergillus fumigatus making up 90% of IA infections. After 8-12 weeks of IV azole treatment, the mortality rate is still 40-50%, according to a study commissioned from IMS Consulting Group by SCYNEXIS in 2015, and the extended hospital stay itself is undesirable. Invasive fungal infections are currently treated with three major classes of antifungals (azoles, polyenes, and echinocandins) and a few smaller players. Their mechanisms of actions are depicted in Exhibit 3. November 17,

4 Exhibit 3: Mechanisms of actions of antifungals Source: Spampinato, C and Leonardi, D, Candida Infections, Causes, Targets, and Resistance Mechanisms: Traditional and Alternative Antifungal Agents, BioMed Research International Volume 2013 Market opportunity for SCY-078 There are three major classes of antifungals, 7 of which generated over $3.2 billion in global sales treating invasive fungal infections, with azoles garnering the largest share of sales in 2014, followed by echinocandins and polyenes (see Exhibit 4). There are some other classes of antifungals such as flucytosine, which is rarely administered as a single agent since it often leads to the development of resistance in IC. Each antifungal class has its distinctive advantages and disadvantages, which we will detail below. Most patients with IC were treated with fluconazole (48%) and the echinocandins (34%) while most patients with IA were treated with voriconazole (46%) (Azie, N et al, 2012). November 17,

5 voriconazole fluconazole posaconazole caspofungin micafungin anidulafungin amphoterin B Opus National Capital Markets Exhibit 4: The invasive fungal infection market 2014 WW sales in millions $800 $700 $756 $681 $600 $500 $400 $300 $200 $274 $452 $355 $193 $524 $100 $0 Azoles Echinocandins Polyenes Source: EvaluatePharma 1. Azoles The azole class is available in both IV and oral form. It includes fluconazole, itraconazole, voriconazole, and pasaconazole. Azoles disrupt the fungal cell membrane by inhibiting the cytochrome P450 dependent enzyme lanosterol 14-α-demethylase, which synthesizes ergosterol, the fungal counterpart of cholesterol. Azoles are the most frequently and broadly used class of antifungals, and have also been used for prevention and unconfirmed cases of fungal infection (about two-thirds of antifungal dollar volume/90% unit volume). Fluconazole has become the standard of care for oropharyngeal, esophageal, and vaginal candidiasis. Resistance to azoles, however, is going up substantially (see Exhibit 5). Fluconazole resistance, in particular, has escalated for almost all major Candida species (Pfaller, MA and Diekema, DJ, 2007). From 2001 to 2010, the percentage resistant to fluconazole almost doubled, reaching 30% regarding C. glabrata in 2010 (see Exhibit 6). Azoles are also major players in treating and preventing IA. Fluconazole (available in oral and IV) has comparable efficacy to amphotericin B, and voriconazole (available in oral and IV) is superior to amphotericin B in hematology unit patients. Voriconazole is typically used as a step-down oral treatment for C. krusei and those affected by fluconazole-resistant, voriconazole-susceptible C. glabrata. Itraconazole (available oral only) is approved for treating IA but limited to refractory patients. Posaconazole (available oral only) is used as a prophylaxis for immunocompromised patients. In addition to resistance, other limitations associated with the azole class are drug-drug interactions and liver damage. Azoles, in general, inhibit CYP3A4, which is needed to metabolize some other drugs. Cross-resistance is another concern among azoles. Once an azole has failed, another azole can easily fail as well against the same mutation(s). November 17,

6 Exhibit 5: Azole resistance frequency in A. fumigatus from 1997 to 2009 Source: Bueid, A et al. Azole antifungal resistance in Aspergillus fumigatus: 2008 and 2009, Journal of Antimicrobial Chemotherapy: , 2010 Exhibit 6: Antifungal resistance of C. glabrata from 2001 to 2010 fluconazole caspofungi anidulafun micafungin Source: Clin Infect Dis Jun 15; 56(12): Echinocandins The echinocandins class is only available for IV administration, leading to prolonged hospital stays, often followed by a stepdown to an oral drug. This class includes three FDA approved drugs: caspofungin in 2001, micafungin in 2005 and anidulafungin in 2006 for IC. In 2014, global sales for caspofungin, micafungin and anidulafungin were $681 million, $355 million and $193 million, respectively. Echinocandins work by noncompetitive inhibition of β-(1,3)-glucan synthase and, therefore, inhibition of fungal cell wall synthesis. Caspofungin is also used as salvage therapy for the treatment of invasive aspergillosis. Micafungin is used as prophylaxis against Candida infections in hematopoietic stem cell transplantation patients (Sucher, AJ et al, 2009). November 17,

7 Although echinocandins also inhibit β-(1,3)-glucan synthesis, they appear to bind to an entirely different site than SCY-078, which therefore has activity against echinocandin resistant strains. Echinocandins cause fewer AEs than azoles and do not have cross-resistance with other antifungals. Due to the high frequency of resistance, the Infectious Diseases Society of America (IDSA) provided new guidance in December 2015 recommending echinocandins as first-line treatment for candidemia. Similarly, the European Society of Clinical Microbiology and Infectious Diseases (ESCMID) provided guidelines in 2012 for candidemia and invasive candidiasis, prioritizing echinocandins as the firstline therapy while moving fluconazole to third-line. Although the overall resistance to echinocandins is still low (around 3%), resistance for C. glabrata has reached an alarming 10-15% (see Exhibit 6). Since oral echinocandins are not available, both IDSA and ESCMID also provided guidelines that patients should step down to an oral azole as soon as possible. Therefore, the patients are faced with re-emergence of infections when they are discharged, thereby creating market opportunities for oral options other than azoles such as SCY Polyenes Polyenes are only available for IV administration and act by binding to ergosterol to disrupt the essential component of the fungal cell wall. Due to severe side effects such as acute renal and heart failure, polyenes are usually reserved for use as the last resort for rare and difficult-to-treat fungal species, including IC and IA infections. Amphotericin B (AmB) is the most commonly used polyene, with annual sales of $524 million in There are other classes of existing antifungals, such as nucleoside analogs. Flucytosine (Ancobon), the most frequently prescribed nucleoside analog, is only available in an oral formulation and rarely administered as a single agent. It has broad antifungal activity against most Candida species via cytosine permease, which converts flucytosine to fluorouracil and subsequently inhibits fungal DNA synthesis. Flucytosine is often used with AmB, but it requires a dosing frequency as often as four times a day due to its short half-life. Resistance has become an increasingly pressing issue for fungal infections. Broad use of azoles is generating resistance in both Candida and Aspergillus infections. Each class of antifungals has a different functional basis for resistance (see Table 1). Given that resistance rates to common species are likely to grow exponentially since the more susceptible species are being eradicated, we expect a differentiated product such as SCY-078 to compete well in the antifungal market if clinically successful. Table 1: Resistance mechanisms of major antifungal classes Source: Spampinato, C and Leonardi, D, Candida Infections, Causes, Targets, and Resistance Mechanisms: Traditional and Alternative Antifungal Agents, BioMed Research International Volume 2013 November 17,

8 SCY-078 Preclinical data SCYNEXIS received back all rights for SCY-078 (formerly known as MK-3118) from Merck in 2013, including all preclinical data, data from seven completed Phase 1 trials, and the active pharmaceutical ingredient (API). Merck is eligible for milestone payments of up to $20 million in aggregate and tiered middle to high single-digit royalties on product sales for up to 10 years from launch, if approved. In preclinical studies, SCY-078 appeared to have strong antifungal activity (fungicidal) against major species of Candida in vitro, using CLSI and EUCAST methods (see Table 2), and demonstrated similar activity to caspofungin. We also note that there were high levels of resistance to caspofungin (0-34.5%) and fluconazole ( %) among the strains tested. Table 2: In vitro activity of SCY-078 (MK-3118) and comparator agents tested against Candida spp Source: Pfaller, M et al, Activity of MK-3119, a new oral glucan synthase inhibitor, tested against Candida spp. By two international methods (CLSI and EUCAST), Journal of Antimicrobial Chemotherapy 2013; 68; In another in vitro study by Jimenez-Ortigosa et al, SCY-078 demonstrated strong efficacy against the wild-type and echinocandinresistant Candida species (see Table 3) and Aspergillus species compared to caspofungin, measured by lower MICs and MECs for Candida and Aspergillus species, respectively. SCY-078 was deemed active against both azole and echinocandin resistant Candida strains, and further development of this agent was therefore justified. Table 3: MIC distribution of Caspofungin and SCY-078 for the wild-type (WT) or echinocandin-resistant (ER) isolate population Source: Jimenez-Ortigosa, C et al, Enfumafungin Derivative MK-3118 Shows Increased In Vitro Potency against Clinical Echinocandin-Resistant Candida Species and Aspergillus Species Isolates, Antimicrobial Agents and Chemotherapy 2014; 58; p November 17,

9 Echinocandins are typically used against azole-resistant infections; however, they are only available for IV administration, leading to prolonged hospital stays. In the fluconazole-resistant study, in vitro MIC values were used to measure SCY-078 activity against multiple Candida strains, including 174 C. glabrata, 34 C. albicans, 4 C. parapsilosis, 5 C. tropicalis, all with fluconazole resistance, as well as wildtype (WT) as a control, tested by three independent labs. Overall, there were no significant differences between the MICs of SCY-078 against fluconazole resistant strains and WT (see Exhibit 7). SCY-078 was potent against 93% (202/217) of the fluconazole resistant strains, demonstrated by MIC values similar to WT. Resistance to SCY-078 (defined as MIC > 4x that of WT) was observed in only 8/174 C. glabrata, 5/34 C. albicans, 0/5 C. parapsilosis, and 2/4 C. tropicalis strains (see Exhibit 8). These results further support our belief that SCY-078 has the potential to become the first orally bioavailable glucan synthase inhibitor for the treatment of azole-resistant Candida infections. SCY-078 also demonstrated superior activity versus echinocandins against C. glabrata isolates with fks mutations (see Exhibit 9). Resistance to echinocandins among C. glabrata strains is usually caused by mutations in the fks gene, which is clinically associated with higher rates of treatment failure and mortality. In the echinocandin-resistant study, in vitro susceptibility was measured by MIC values across 48 C. glabrata strains with fks mutations and 105 WT C. glabrata strains as the control group. SCY-078 showed activity against 69% (33/48) of the isolates (defined as MIC >=2 µg/ml), compared to only 21% (10/48) with caspofungin and 44% (11/25) with micafungin, respectively. SCY-078 showed strong efficacy against echinocandin-resistant Candida species, consistent with previous results from Jimenez-Ortigosa et al. Furthermore, SCY-078 demonstrated significant in-vitro activity against multi drug resistant Candida strains, defined as strains resistant to both fluconazole and an echinocandin. Researchers analyzed MIC data for caspofungin, micafungin and fluconazole across 2 independent studies of over 400 Candida strains, and identified 8 C. albicans and 17 C. glabrata strains that met MDR criteria. SCY-078 was active against 75% (6/8) of the MDR C. albicans and 71% (12/17) C. glabrata strains (see Exhibit 10). These results show that SCY-078 can be a cure for complicated infections caused by both azole and echinocandin resistant strains. Exhibit 7: SCY-078 displayed similar MIC across WT and fluconazole-resistant (FLU-R) Candida spp. Source: Poster The First Orally Bioavailable, Glucan Synthase Inhibitor, Demonstrates Potent in vitro Activity Against Azole-resistant Candida spp. at 13 TH ASM Conference on Candida and Candidiasis November 17,

10 Exhibit 8: SCY-078 demonstrated potent activity against FLU-R Candida spp. Source: Poster The First Orally Bioavailable, Glucan Synthase Inhibitor, Demonstrates Potent in vitro Activity Against Azole-resistant Candida spp. at 13 TH ASM Conference on Candida and Candidiasis Exhibit 9: SCY-078 demonstrated superior activity compared to echinocandins against isolates with fks mutations across 3 studies Source: Poster SCY-078 Displays Potent in vitro Activity Against Candida glabrata Isolates with Mutations in fks Gene at 13 TH ASM Conference on Candida and Candidiasis November 17,

11 Exhibit 10: SCY-078 retains activity against the majority of MDR clinical isolates Source: Poster SCY-078 Displays Significant in vitro Activity Against Multi Drug Resistant (MDR) Candida albicans and Candida glabrata Isolates at 13 TH ASM Conference on Candida and Candidiasis Clinical trials with SCY-078 SCY-078 Phase 1 trials Seven Phase 1 safety and pharmacokinetic trials have been completed for oral SCY-078 in over 100 healthy volunteers. SCY-078 was generally well tolerated at oral doses of up to 1,800 mg in one day and up to 800 mg/day for 28 consecutive days. The adverse effects are primarily graded mild-to-moderate, with the most frequently reported AEs being GI events and only one subject discontinued from the trial due to GI events. Another subject experienced significant LFT increases after one dose and withdrew. The AE and discontinuance were deemed drug-related; however, elevated ALT and AST levels were already present before the administration of SCY-078 in this patient. Oral administration of SCY-078 reached therapeutically effective blood concentration ranges determined from preclinical PK/PD studies, with a half-life of about 20 hours. Drug concentrations also increased proportionally with doses up to the maximum dose tested. SCYNEXIS initiated its Phase 1 trial evaluating the safety, tolerability and pharmacokinetics of single escalating IV SCY-078 in healthy volunteers in November 2015, with results expected in November The availability of SCY-078 in both IV and oral form will enable critically ill patients to start IV treatment and step down to oral therapy with the same agent. If successful, SCY-078 could become the first glucan synthase inhibitor available both orally and intravenously, potentially exposing patients to less risk, drug-interaction, and cross-resistance. Healthy volunteers are being randomized to a single ascending dose or multiple ascending doses of IV SCY-078. Importantly, SCYNEXIS is using a new, well-tolerated citrate salt for the IV formulation in this trial. All previous studies have been done with the phosphate salt prior to November 2015, which was appropriate for the oral formulation, but not ideal for the IV formulation because of its suboptimal water solubility properties. Furthermore, SCYNEXIS developed an oral formulation with the new citrate salt, which was demonstrated to be comparable to the phosphate salt oral formulation in a biocomparison study completed in 4Q15. SCYNEXIS will use the citrate salt for all future clinical trials. SCYNEXIS also conducted preclinical and clinical drug-drug interaction (DDI) trials, emphasizing the favorable safety profile of SCY-078. Invasive fungal infection often occurs in immuno-compromised patients that are treated for long durations with multiple therapies for underlying conditions. Therefore, there is a high potential for DDIs in these patients, which has led to labeling restrictions for azoles, and thus a potential area of differentiation for SCY-078. In vitro studies conducted with a broad range of CYP enzymes demonstrated that SCY-078 had minimal interference with most enzymes, either as a direct inhibitor or inducer, including CYP3A enzymes, a pathway by which many drugs are metabolized. Also, CYP2C8 enzyme was shown to be the enzyme with a higher risk of being inhibited by SCY-078, yet a DDI rosiglitazone clinical study to evaluate CYP2C8 inhibition showed that this antidiabetic medication, which is highly sensitive to November 17,

12 inhibition of CYP2C8, was unimpacted by SCY-078. Additionally, a DDI tacrolimus clinical study showed that SCY-078 had a minimal effect on tacrolimus levels, whereas azoles increase tacrolimus blood levels about from 2- to 4-fold, resulting in toxicity that frequently limits azole use. Such favorable results allow SCYNEXIS to enroll a broad patient population in its upcoming registration trials, which in turn could allow for favorable drug labeling relative to azoles. SCY-078 Phase 2 trials SCY-078 has been evaluated in two Phase 2 trials in IC and VVC, with positive top-line data from both trials reported in 2Q16, 3Q16, and 4Q16. In in 3Q16, SCYNEXIS reported positive results from its randomized, open-label Phase 2 trial, evaluating the safety and PK of two different doses of oral SCY-078 vs. standard of care following an IV echinocandin in the treatment of IC (see Exhibit 11). SCYNEXIS plans to meet with the FDA during 4Q16 or 1Q17 and the EMA in 1Q17, and initiate an open label Phase 3 trial in refractory fungal infections in 4Q16, and a Phase 2 trial in IC in 1Q17, which could be an adaptive Phase 2/3 pending FDA discussion. We believe that the results from both of these Phase 2 trials de-risk SCY-078, which is now the most advanced novel agent in a new antifungal class having the potential to address the increasing issue of resistance. Exhibit 11: Phase 2 design in IC Source: Company documents Phase 2 IC trial In 3Q16, SCYNEXIS announced interim results from its Phase 2 trial of oral SCY-078 invasive Candida (IC) infection. This randomized, multicenter, open-label trial evaluated the PK, safety and tolerability of SCY-078 as an oral step-down following 3-10 days of IV echinocandin treatment. 27 patients with IC were enrolled, and 22 were randomized and treated in one of three arms for up to 28 days: 1) SCY mg QD with a 1,000 mg loading dose (n=7), 2) SCY mg QD with a 1,250 mg loading dose (n=7), or 3) standard of care fluconazole 400 mg QD with a 800 mg loading dose (n=7), with one fluconazole-resistant patient receiving micafungin IV 100 mg QD. SCY mg QD was identified as a safe and well tolerated dose that achieved target exposure at steady state in more than 80% of IC patients (the primary endpoint). The interim results also confirmed the clinically meaningful antifungal activity previously demonstrated in the Phase 2 acute VVC trial. Regarding safety, the frequency of AEs was similar across all treatment arms, with the most commonly reported AEs being GI events including diarrhea, abdominal pain, nausea and vomiting, consistent with previous trials. 2/7 patients receiving 750 mg SCY-078 reported GI events, compared with 3/7 treated with fluconazole (29% vs. 43%). These AEs were all mild or moderate in nature and did not result in any discontinuation. SCYNEXIS also evaluated interim efficacy measured by the global response (defined as the resolution of IC infection and mycological eradication symptoms). Global response rates were similar across all treatment arms (5/7, 5/7 and 6/7 in the SCY mg group, the SCY mg group, and the fluconazole group, respectively. This trial is early stage and small in size, but the near-term identification of an optimal IV formulation should allow SCYNEXIS to start its registration program as planned in late 4Q16 (the refractory invasive fungal infection trial) and 1Q17 (the IC trial). In early 4Q16, SCYNEXIS announced the complete results of its Phase 2 IC trial, demonstrating that there was no microbiological failure or relapse in the 7 patients receiving 750 mg of SCY-078 compared to two infection-related failures (one fungemia and one abdominal sepsis) in the 7 patients receiving 400 mg of fluconazole. During the 6-week follow up period after the initial results reported in August, November 17,

13 there were no relapses in patients treated with SCY-078. There continued to be no discontinuations due to adverse events and no related serious adverse events. The most common adverse events were gastrointestinal and they occurred at comparable rates among the trial arms. The complete results underscore the ability of SCY-078 to penetrate tissue and achieve target exposure in invasive candidiasis. Phase 2 VVC trial In June 2016, SCYNEXIS reported initial positive results (day 24) from its Phase 2 VVC proof-of-concept trial of SCY-078. In this 1:1:1 randomized, multicenter, evaluator-blinded trial, 96 patients with moderate to severe VVC were treated in one of three arms: 1) oral SCY- 078 loading dose of 1,250 mg on day 1 followed by 750 mg QD for 2 days, 2) oral SCY-078 of 1,250 mg on day 1 followed by 750 mg QD for 4 days, or 3) standard of care 150 mg oral single dose fluconazole. Safety and efficacy (proportion of patients achieving therapeutic cure) were evaluated at the test of cure visit (day 24 +/-3 days) as the primary endpoint. Patients were then followed up for 4 months and assessed on day 60, 90 and 120 or anytime there was recurrence or clinical failure, and even more highly positive 120 day results were reported in October Given the positive VVC results released, (i.e., non-inferiority to fluconazole), SCYNEXIS will meet with the FDA, likely in early 2017, to discuss the next clinical step for VVC. In the Phase 2 VVC trial, both SCY-078 arms reached the regulatory goal of non-inferiority compared to fluconazole regarding the primary efficacy endpoint of the proportion of patients achieving therapeutic cure (defined as achieving both a clinical cure and a mycological eradication) evaluated at the test of cure visit (day 24 +/-3 days, see Table 3). In the ITT population, the combined SCY-078 group achieved a 78% clinical cure rate compared to 66% in the active control group. Mycological eradication in the combined SCY-078 group was 70% (vs. 69% for fluconazole). The integrated therapeutic cure rates in patients dosed with SCY-078 and fluconazole were similar at 56%. Of note, the 3-day and 5-day regimens of SCY-078 achieved comparable results, with the 5-day dose not providing a clinically meaningful difference. Therefore, it is entirely possible that a shorter duration of treatment is sufficient for efficacy while at the same time leading to a more favorable safety profile. Furthermore, the therapeutic cure rate in the fluconazole arm is consistent with the fluconazole label (56% in this Phase 2 trial vs. 55% in the label), which is based on more than 400 patients, validating the efficacy data from this trial. Regarding safety, there were no SAEs in any of the three arms and no discontinuations. The most commonly reported AEs were GI events including diarrhea, nausea, vomiting and abdominal pain. No clinically meaningful changes in vital signs, physical exam findings or other parameters were noted. A considerably higher incidence of GI events in patients treated with SCY-078 was observed compared to fluconazole (exact numbers not disclosed but overall mild/moderate AE difference was 88% vs. 13% for SCY-078 vs fluconazole), but these AEs were all mild or moderate in nature. The majority of GI events with SCY-078 occurred on day 1 and lasted for a day or less, suggesting they could be triggered by the higher loading dose. The per protocol (PP) population accounted for about 73% of the ITT population, and results from the PP population were consistent with ITT. We believe that the current SCY-078 regimens will allow room to explore optimal doses that normalize the GI adverse effects while maintaining efficacy. The company will consider different dosages as well as a different administration duration, and plans to start a dose-finding Phase 2 trial in VVC in a larger patient population to address the high rate of GI events. Table 3: ITT population efficacy results at day 24 (therapeutic cure is the primary endpoint) Combined SCY-078 (n=64) Fluconazole (n=32) Clinical cure 78.1 % 65.6 % Mycological eradication 70.3 % 68.8 % Therapeutic cure 56.3 % 56.3 % Source: Company documents November 17,

14 In early 4Q16, SCYNEXIS announced the complete per protocol (70 out of 96 ITT patient population) results from its Phase 2 VVC trial, which includes data out to day 120, showing that SCY-078 resulted in significantly better clinical cure rates and fewer recurrences of VVC compared to standard of care oral fluconazole. At day 120, the clinical cure rate for SCY-078 was 88% versus 65% for fluconazole, and by contrast to the initial ITT observation at day 24, this difference is statistically significant (p=0.04), despite the trial lacking the appropriate statistical power. As of 2Q16, clinical cure is now the FDA s preferred primary endpoint in VVC, which plays to the benefit of SCYNEXIS, given the clearly greater delta over standard of care in clinical cure versus therapeutic cure. Also, during the 120 day observation period, SCY-078 led to a lower recurrence rate (4%) versus fluconazole (15%), which was defined as a symptomatic VVC episode requiring additional antifungal therapy. There continued to be no discontinuations due to adverse events and no related serious adverse events, with all 70 patients evaluable at day 120. We note that over 300 healthy volunteers and patients have now been exposed to SY-078, allowing for an extensive safety profile characterization. Clinical next step We believe that the next Phase 2 acute VVC trial is straightforward, with the main difference being that the company will test several doses to define the minimal effective dose, given that the initial trial tested relatively high doses to ensure efficacy. Minimizing toxicity with a low dose is key when competing products are OTC and generic, and the condition is not life threatening. Gastrointestinal side effects such as nausea and diarrhea were seen with SCY-078 in the first Phase 2 VVC trial, but they were self-limiting and did not cause any discontinuations. Acute VVC is not as much the target market for SCY-078 as is recurrent VVC (defined as 4 or more infections per year and constituting 5 to 8% of the acute market), but acute trials are so much easier to enroll, thus enabling a shorter time to market while continuing to assess the drug's potential in recurrent VVC. Approval in the acute setting would also allow for use after a few infections are not sufficiently treated by fluconazole. Since there are no approved drugs for recurrent VVC, the path to approval requires more FDA discussion. Off label fluconazole is currently given chronically (weeks to months), for recurrent VVC, but symptoms usually recur within 8-10 weeks after stopping treatment, and SCY-078 will have to beat fluconazole in this indication in order to compete outside of the fluconazole resistant segment. We believe that fungicidal SCY-078 should be able to beat fungistatic fluconazole in recurrent VVC in just a few doses. The FDA could potentially ask for two acute and two recurrent VVC trials, but we believe that the agency will require one of each with a worst case scenario being two acute and one recurrent. Upon delivering positive PK data from the Phase 2 IC trial in July, SCYNEXIS will meet with the FDA regarding the IC indication during 4Q16 or 1Q17 and the EMA in 1Q17. We emphasize that SCY-078 efficacy could not be ascertained in Phase 2 IC trial given that IV echinocandin therapy was given for 3-10 days prior to the step down to oral SCY-078, and thus the first therapy had essentially resolved the infection. These patients must be treated with an effective therapy initially because of how sick they are given their cancer or bone marrow transplant. The relapse rate for echinocandins is only 2-3% so there would not be enough even of those to judge SCY-078 versus fluconazole. We expect an open-label Phase 3 refractory infection (Candida mostly, Aspergillus less so) trial to begin enrolling patients in 4Q16, costing about $10-20 million. SCYNEXIS also plans to initiate an open label Phase 2 trial in IC in 1Q17, which could be an adaptive Phase 2/3 pending FDA discussion. This trial could suffice for Accelerated Approval if early indications of efficacy are seen, especially given the enrollment of MDR strains and the fact that almost half of invasive aspergillosis patients die, as do about 90% of those that are azole resistant. SCY-078 achieves tissue concentrations that are 5 to 10-fold higher than blood concentrations, so the drug should be ideal for invasive infections. SCY-078 was made at SCYNEXIS and there are follow on compounds as well that could potentially serve to treat patients resistant to SCY-078. Substantial resistance would actually be a high class problem because it would indicate that there is meaningful market uptake of the drug. Invasive fungal infections are treated mostly at a hospital setting, so we believe that SCYNEXIS can sell SCY-078 with a small hospital sales force in the US and would partner ex-us. We note that the EU is an important territory, especially given how caspofungin is $250/day in the US and $400 Euros in the EU. SCYNEXIS would clearly file only for recurrent VVC (as well as IC) in the EU because it would allow for preservation of that $400 Euro price range, by contrast to acute VVC resulting in a price much closer to generic fluconazole in the EU. In the US, we project SCY-078 to be priced at $250 daily as an IV and at $150 daily as an oral. Competitive landscape for SCY-078 Globally, invasive fungal infection treatment exceeds $3 billion annually when just considering 7 major antifungals. In the US, there are approximately 46,000 confirmed cases of healthcare-associated invasive candidiasis annually according to the CDC. Azoles were a revolution in antifungal treatment in the 1980s and we believe that SCY-078, with its likely more favorable safety profile, can have the November 17,

15 same impact. There are a limited number of antifungals and SCY-078 is the most advanced new class in development. There are other late stage candidates like CD101 from CDTX, but it is within the echinocandin class, and other new classes are still in preclinical development. We note that there are no step-down orals for azole-resistant strains and echinocandins have not lent themselves to oral formulation even in the hands of Merck and Pfizer. A new step down oral would not only save money by releasing a patient from the hospital sooner, but it would also reduce the likelihood of nosocomial infection. If successful, SCY-078 will be competing with generics and branded drugs such as voriconazole, posaconazole, caspofungin, micafungin, amphotericin B, anidulafungin and the recently approved isavuconazole. Based on the size of the market, competition from other drug candidates in development is limited (see Table 4). Table 4: Antifungal competition Sponsor Drug Mechanism Indication Status Comment Viamet V-1161 CYP51 inhibitor onychomycosis, RVVC Phase 2 ongoing Target at different markets compared to SCY-078 NovaDigm Therapeutics NDV-3A Immunotherapy RVVC Phase 1b/2a ongoing Target at different markets compared to SCY-078 F2G Ltd. F New class orotomide IA Phase 1 completed; small 4Q16 Phase 2 start; pivotal IA trial starts in 2017 Good potential to treat Aspergillus infections, IV and oral formulations under development Amplyx APX001 Anti-GWT1 IC Phase 1 started in 3Q16 Amplyx believes it inhibits GWT1, which would be a new MOA Cidara Therapeutics (CDTX) Source: Clinicaltrials.gov CD101 Echinocandin IC (IV) & acute VVC (topical) Phase 2s ongoing in IC and VVC (2Q16 starts for both) Novel echinocandin, long half-life may allow weekly dosing; IV & topical formulations VVC is an indication with an estimated annual incidence of 6 million in the US. According to the CDC, approximately 75% of adult women will have at least one episode of VVC, and 10-20% of women will develop complicated VVC and require special treatment. 5-9% of women may have recurrent VVC (RVVC), which is characterized by having at least four episodes a year and is usually hard to treat. Current treatments for uncomplicated VVC include topical and oral antifungals such as fluconazole, which indicates a cure rate of 55% on its label. RVVC, on the other hand, has no currently approved treatment % of women with RVVC are infected by non-albicans Candida species, which do not respond to conventional antimycotic therapies as well as C. albicans species. We believe SCYNEXIS has identified a large market with a limited number of effective treatment options, and clearly an unmet need for a new oral treatment. SCY-078 should be able to differentiate itself from existing antifungal treatments and those in development based on the following factors: 1. SCY-078 represents a novel class of antifungal compounds produced by chemical modification of enfumafungins, which prevent assembly of the fungal cell wall and the growth of certain clinically meaningful fungal species. It works similar to the echinocandin class of drugs, which are standard of care for fungal infection, but it is a different class altogether. Preclinical studies have shown antifungal activity against strains resistant to the azoles and echinocandins. These results are clinically meaningful given that resistance against azoles and echinocandins is on the rise, and a new anti-fungal treatment is clearly needed. 2. SCY-078 could also provide a better safety profile than currently available treatments. Azoles are commonly associated with drug-drug interactions, liver damage and cross-resistance. The polyene class is known for severe side effects such as acute kidney and heart failure and thus is prescribed with great caution. The safety profile of SCY-078 so far compares favorably to both azoles and polyenes, and could prove to be advantageous over echinocandins. November 17,

16 3. The availability of SCY-078 in both IV and oral form will also enable critically ill patients to start treatment and step down to oral therapy with the same agent. Echinocandins have been recommended in both the US and EU clinical guidelines as first-line treatment for candidemia; however, they are only available in an IV form and therefore require a prolonged hospital stay. IV SCY-078 provides a solution for echinocandin-resistant strains, and oral SCY-078 could be a complement to any IV echinocandin and thus allow patients to complete their entire therapy with glucan synthase inhibitors. After meetings with regulatory agencies, SCYNEXIS plans to conduct a Phase 2 trial in IC to evaluate the safety and efficacy of IV to oral SCY-078 step-down versus standard of care, followed by a Phase 3 trial, but future discussion with the FDA could potentially allow for one adaptive Phase 2/3 to suffice for SCY-078 registration. 4. IV and oral SCY-078 could potentially minimize hospital stay, providing savings for both patients and the healthcare system. SCY-078 may well justify slightly premium pricing compared to branded standard of care, in our opinion. However, the reduced hospital stay itself should enable a significant amount of savings to hospitals to offset any premium. Earlier hospital discharge also means a reduced potential for HAIs, and, therefore, a reduced risk of recurrent infections. 5. Based on SCY-078 s efficacy in a broad range of Candida and Aspergillus species, we believe SCY-078 has the potential to be used for both primary and salvage therapy. Furthermore, it potentially could be developed into a prophylactic. There is clearly an unmet need in the antifungal treatment field, as the mortality rates due to IC have remained unacceptably high at 27-40% with currently available treatment, and the mortality rate due to IA is still 40-50%. The confirmed cases of Candida infection account for only 25-33% of all patients receiving Candida treatments. The number of patients developing resistance to current standard of care is expected to increase exponentially, with echinocandins being prescribed more often and generic echinocandins starting to become available, thereby generating an increasing reservoir of patients for SCY-078. SCY-635 and SC-641: Cyclophilin inhibitor platform SCYNEXIS has produced two clinical stage compounds, SCY-635 and SCY-641, from its proprietary cyclophilin inhibitor platform. Cyclophilins are a family of key enzymes, and inhibiting cyclophilins might have clinical benefit for a variety of diseases. SCYNEXIS lead cyclophilin inhibitor compound, SCY-635, has demonstrated clinical activity against HCV, one of the most widespread infections. In October 2014, SCYNEXIS granted Waterstone Pharmaceutical HK Limited exclusive global rights to develop and commercialize SCY-635 in exchange for potential milestones and royalties. SCY-635 is still in the early stage of its development, and we will assess its potential to add to our valuation upon future updates from the program. SCY-641, another novel cyclophilin inhibitor, has similar clinical activity and significantly better water solubility compared to cyclosporine, the active ingredient in currently approved dry eye disease products Restasis and Optimmune, for humans and dogs, respectively. SCYNEXIS had previously outlicensed the animal right to develop SCY-641 to Dechra Ltd., however, the right is to be returned to SCYNEXIS later this year. SCYNEXIS is currently assessing the animal data generated by Dechra, before deciding the path forward for this compound. In 3Q16, SCYNEXIS entered into an Asset Purchase agreement with UK-based Cypralis Limited for the sale of its cyclophilin inhibitor assets, allowing SCYNEXIS to focus on SCY-078. Cypralis acquired all patents, patent applications and know-how related to the acquired portfolio, and financial terms were not disclosed. SCYNEXIS is eligible to receive milestone payments upon the successful progression of Cypralis clinical candidates into later stage clinical trials and royalties on any sales. SCYNEXIS may repurchase the assets from Cypralis if abandoned or deprioritized. Intellectual property As of March 7, 2016, SCYNEXIS had 12 issued patents in the US and 102 issued ex-us patents with claims to composition of matter, formulation, methods of use and manufacturing. The company is also pursuing several other patent applications. The patents and patent applications include those initially co-invented with Merck, which subsequently transferred all of its rights relating to SCY-078 to SCYNEXIS. SCYNEXIS received QIDP Designation for both the IV and oral form of SCY-078 from the FDA, for the indications of IC and IA. The QIDP status, provided under the 2012 US Generating Antibiotic Incentives Now (GAIN) Act, allows SCY-078 to have Priority Review and an additional five years of market exclusivity in the US. Given the QIDP status, the issued composition of matter patent relating to SCY-078 is expected to expire in the mid-2030s. SCYNEXIS recently filed a patent for the new citrate salt, which could extend the composition-of-matter patent exclusivity in the US to 2035, before considering potential patent extensions. Outside the US, the terms of issued composition of matter patents relating to SCY-078 in other jurisdictions including Australia, Colombia, Europe, Indonesia, Japan, November 17,

17 Mexico, New Zealand, Russia, Singapore, South Africa, Taiwan, etc., are expected to expire in 2029 at the earliest, with the potential for patent term extensions in individual countries. SCYNEXIS is the exclusive licensee from Aventis Pharma regarding 2 issued US patents and 8 issued ex-us patents covering SCY-635, which was exclusively licensed to Waterstone. The issued US composition of matter patent relating to SCY-641 is set to expire in 2019 and the method of use patents will expire in , with potential extension for up to five years under the Hatch-Waxman Act. Outside the US, the issued SCY-641 composition of matter patents and method of use patents and patent applications are expected to expire from , with the potential for patent term extensions in individual countries. This entire patent estate was licensed to Cypralis Ltd. In 3Q16. Financials Revenue. Our projected revenue stems from SCY-078 sales in both the US and ex-us territories. We expect SCYNEXIS to commercialize SCY-078 in the US itself and partner SCY-078 in other major countries of the world. We project the approval and launch of SCY-078 for IC and IA in the US in 2019, followed by approval and launch for the indication of VVC in With an assumed annual treatment cost of $5,500 given the current course price of other available drugs, we project SCY-078 to generate about $111 million in US sales in Outside the US, we assume the approval and launch of SCY-078 for all indications in We model SCYNEXIS to receive a 20% royalty initially and then 25% royalty on SCY-078 ex-us sales. With an assumed average annual ex-us treatment cost of $4,500, we project SCY- 078 to generate approximately $14 million in royalties for SCYNEXIS in Expense. We assume SCYNEXIS to bear all expenses related to SCY-078 in the US, as the company plans to develop and commercialize SCY-078 in the US on its own. We project COGS for the small molecule drug SCY-078 to be 10% initially in 2019 and gradually decrease to 8% as sales increase. We project a continued increase in R&D expense from 2016 to 2018, given the ongoing and upcoming clinical trials with SCY-078, and expect R&D expense to decline after pivotal trials are completed. We project SG&A expense to substantially increase in 2019, as SCYNEXIS prepares for the US launch of SCY-078. Bottom Line. We project SCYNEXIS to be profitable in 2021, due primarily to SCY-078 sales in the US. The 2021 diluted share count takes into consideration 1.8 million outstanding stock options, Series C-1 warrants which can be converted into 14,033 common shares, and warrants that can be converted into 4.3 million common shares. As of November 4, 2016, SCYNEXIS had about 24 million shares of common stock. Finally, we are projecting a 5% income tax rate in 2024 and a 35% income tax rate in 2025 and thereafter, given the consumption of NOLs. Balance Sheet. SCYNEXIS had about $58.4 million in cash as of September 30, 2016, which should be sufficient to support its activities into early 2018, according to our projections. The recent $15 million loan is for 4 years and interest only payments may be made at least until April , at an interest rate of LIBOR plus 8.49%. Beyond the potential for any future standard equity raise, there is an ATM in place on which remains the large majority of the initial $40 million, and the potential for BARDA grants. November 17,

18 Risks Clinical risk. SCY-078 could fail to deliver statistically significant results in late-stage clinical trials, substantially reducing the value of SCYNEXIS product candidate and therefore our target price. Our expectation is built on pre-clinical, Phase 1, and Phase 2 clinical data; however, pivotal trial results could fail to support further development. Regulatory risk. SCY-078, even if successful in the clinic, could fail to be approved by domestic and/or foreign regulatory bodies, which would reduce SCYNEXIS value and therefore our target price. Financing risk. SCYNEXIS had about $58.4 million in cash and cash equivalents as of September 30, 2016 (includes recent $15 million loan), which should be sufficient to support its activities into early SCYNEXIS will need additional capital to fund its operations, and thus is reliant on obtaining additional outside funding, which could be substantially dilutive to existing investors. If additional capital cannot be obtained, SCYNEXIS may have to reduce its R&D or SG&A expenses, which could limit the development and potential launching efforts regarding SCY-078. Competitive risk. Even if SCY-078 is approved, it may not be well adopted in a competitive marketplace. SCY-078 will face competition from currently available generic and branded drugs such as voriconazole, posaconazole, caspofungin, micafungin, amphotericin B, anidulafungin and isavuconazole. There are also other drug candidates in development which may be approved. The competition in the future antifungal market could adversely affect SCYNEXIS value and therefore our target price. Commercial risk. SCYNEXIS could fail to sell SCY-078 effectively in the US or fail to contract with an established partner in ex-us territories and therefore hinder its effort to reach our ex-us sales projection. Further, rates of resistance could fail to rise exponentially, which could substantially reduce one of the unique values of SCY-078. High stock price volatility. This issue is common among small-cap biotechnology companies with relatively low trading volumes. November 17,

19 SCYNEXIS, Inc. Income Statement Fiscal Year ends December (in $000, except per share items) 2012A 2013A 2014A 1Q15 2Q15 3Q15 4Q A 1Q16A 2Q16A 3Q16A 4Q16E 2016E 2017E 2018E 2019E 2020E 2021E 2022E Revenue SCY-078 US sales 3,188 33,986 66, ,612 SCY-078 royalties - 1,290 7,627 14,141 Other revnue 16,837 16,857 1, Total Revenue 16,837 16,857 1, ,444 35,531 73, ,009 Cost of revenue 14,364 16, ,229 5,945 9,402 R&D 8,927 4,363 8,287 3,787 3,282 3,458 5,913 16,440 4,743 6,659 4,890 6,846 23,138 30,079 34,591 25,943 23,349 25,684 26,968 SG&A 4,742 4,381 7,616 2,210 3,275 4,143 2,538 12,166 2,533 1,673 1,880 2,068 8,154 10,193 11,721 16,410 18,051 18,953 19,333 Other expense (3,412) (988) - Total Operating Expenses 24,621 24,061 15,903 5,997 6,557 7,601 8,451 28,606 7,276 8,332 6,770 8,914 31,292 40,272 46,313 42,672 44,629 50,582 55,703 Operating income (EBIT) (7,784) (7,204) (14,647) (5,932) (6,493) (7,537) (8,387) (28,349) (7,212) (8,268) (6,706) (8,850) (31,036) (40,016) (46,057) (39,228) (9,097) 23,354 69,306 Amort. def. fin. cost and debt disc. (2,918) (3,485) (755) interest income (interest expense) (972) (11,886) (48) (28) (39) (48) 5 (110) (50) (45) (20) Derivative fair value adjustment 185 (7,886) 10,080 Other income (expense) 12 (1,399) (101) 4,522 4,421 Total other income (expense) (3,693) (23,257) 7, (28) (140) 4, ,311 (50) (45) (20) Net income (pretax) from cont. ops. (11,477) (30,461) (6,769) (5,931) (6,492) (7,529) (8,386) (28,338) (7,184) (8,128) (11,180) (8,855) (26,725) (40,066) (46,102) (39,248) (9,077) 23,374 69,326 Income tax expense (benefit) (1,166) Net income from cont. ops. (11,477) (30,461) (5,603) (5,931) (6,492) (7,529) (8,386) (28,338) (7,184) (8,128) (11,180) (8,855) (26,725) (40,066) (46,102) (39,248) (9,077) 23,374 69,326 Income from disc.ops. 1,369 (453) (3,005) (826) (1) (4,285) Div. & accretion of conv. pref. stk. (16,348) (1,633) Net income (loss), GAAP (11,477) (46,809) (5,867) (6,384) (9,497) (8,355) (8,387) (32,623) (7,184) (8,128) (11,180) (8,855) (26,725) (40,066) (46,102) (39,248) (9,077) 23,374 69,326 EPS basic (35.25) (139.47) (1.04) (0.75) (0.78) (0.60) (0.60) (2.68) (0.52) (0.56) (0.48) (0.37) (1.41) (1.76) (1.84) (1.49) (0.33) EPS diluted, GAAP (35.25) (139.47) (2.69) (0.75) (0.78) (0.60) (0.60) (2.68) (0.52) (0.56) (0.48) (0.37) (1.41) (1.76) (1.84) (1.49) (0.33) Basic shares outstanding ,663 8,516 12,249 13,904 13,984 12,164 13,906 14,591 23,425 24,011 18,983 22,780 25,058 26,311 27,100 27,371 27,645 Diluted shares outstanding ,937 8,516 12,249 13,904 13,984 12,164 13,906 14,591 23,425 24,011 18,983 22,780 25,058 26,325 27,114 33,408 33,682 Source: Company reports, Opus National Capital Markets estimates November 17,

20 IMPORTANT DISCLOSURES: Opus National Capital Markets is a DBA for National Securities Corporation 410 Park Avenue, 14th Floor, New York, NY REG AC ANALYST CERTIFICATION The research analyst named on this report, Jonathan Aschoff, Ph.D., certifies the following: (1) that all of the views expressed in this research report accurately reflect his personal views about any and all of the subject securities or issuers; and (2) that no part of his compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by him in this research report. IMPORTANT DISCLOSURES This publication does not constitute and should not be construed as an offer or the solicitation of any transaction to buy or sell any securities or any instruments or any derivatives of the securities mentioned herein, or to participate in any particular trading strategies. Although the information contained herein has been obtained from recognized services, and sources believed to be reliable, its accuracy or completeness cannot be guaranteed. Opinions, estimates or projections expressed in this report may make assumptions regarding economic, industry, company and political considerations, and constitute current opinions, at the time of issuance, which are subject to change without notice. This report is being furnished for informational purposes only, and on the condition that it will not form a primary basis for any investment decision. Any recommendation(s) contained in this report is/are not intended to be, nor should it / they construed or inferred to be, investment advice, as such investments may not be suitable for all investors. When preparing this report, no consideration to one s investment objectives, risk tolerance and other individual factors was given; as such, as with all investments, purchase or sale of any securities mentioned herein may not be suitable for all investors. By virtue of this publication, neither the Firm nor any of its employees shall be responsible for any investment decisions. Before committing funds to ANY investment, an investor should seek professional advice. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice, or to be used by anyone to provide tax advice. Investors are urged to consult an independent tax professional for advice concerning their particular circumstances. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, either expressed or implied, is made regarding future performance. National Securities Corporation (NSC) and its affiliated companies, shareholders, officers, directors and / or employees (including persons involved with the preparation or issuance of this report) may, from time to time, have long or short positions in, and buy or sell the securities or derivatives (including options) thereof, of the companies mentioned herein. One or more directors, officers, and / or employees of NSC and its affiliated companies, or independent contractors affiliated with NSC may be a director of the issuer of the securities mentioned herein. NSC and / or its affiliated companies may have managed or November 17,

21 co-managed a public offering of, or acted as initial purchaser or placement agent for a private placement of any of the securities of any issuer mentioned in this report within the last three (3) years, or may, from time to time, perform investment banking or other services for, or solicit investment banking business from any company mentioned in this report. This research may be distributed by affiliated entities of National Securities Corporation (NSC). Affiliated entities of NSC may include, but are not limited to, vfinance Investments, Inc., National Asset Management and other subsidiaries of our parent company, National Holdings Corporation. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and the income they produce if any, may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors. Furthermore, NSC may follow emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. This report does not take into account the particular investment objectives, financial situation or needs of individual investors. Before acting on any advice or recommendation in this material, the investor should exercise independent judgment as to whether it is suitable in light of his/her particular circumstances and, if necessary, seek professional advice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Additional information relative to securities, other financial products, or issuers discussed in this report is available upon request. Neither this entire report, nor any part thereof, may be reproduced, copied or duplicated in any form or by any means without the prior written consent of National Securities Corporation. All rights reserved. NSC is a member of both the Financial Industry Regulatory Authority (FINRA) and the Securities Investors Protection Corporation (SIPC). For disclosures inquiries, please call us at and ask for your NSC representative, or write us at National Securities Corporation, Attn. Richard Cohen - Research Department, 410 Park Avenue, 14th Floor, New York, NY 10022, or visit our website at Research Disclosures Legend Relevant Disclosures: 1, 7 & 10 1 National Securities (NSC) is a market-maker in the securities of the subject company 2 In the past twelve (12) month period, NSC and / or its affiliates have received compensation for investment banking for services from the subject company 3 In the past twelve (12) month period, NSC and / or its affiliates have received compensation from the subject company for services other than those related to investment banking 4 In the past twelve (12) month period, NSC was a manager or a co-manager of a public offering of one or more of the securities of the issuer 5 In the past twelve (12) month period, NSC was a member of the selling group of November 17,

22 a public offering of the security (ies) of the issuer 6 One or more directors, officers, and / or employees of NSC and / or its affiliated companies is / are a director (s) of the issuer of the security which is the subject of this report 7 NSC and / or its affiliates expects to receive or intends to seek compensation for investment banking services from the subject company at some point during the next three (3) months 8 A research analyst or a member of his / her household has a financial interest in the securities of the subject company as follows: a) long common stock; b) short common stock; c) long calls; d) short calls; e) long puts; f) short puts; g) long rights; h) short rights; i) long warrants; j) short warrants; k) long futures; l) short futures; m) long preferred stock; n) short preferred stock 9 As of the end of the month immediately preceding the date of publication of this report or the end of the prior month if the publication is within ten (10) days following the end of the month, NSC and / or its affiliates beneficially owned one percent (1%) or more of any class of common equity securities of the subject company. 10 Please see below for other relevant disclosures Shares of this security may be sold to residents of all 50 states, Puerto Rico, Guam, the US Virgin Islands and the District of Columbia. Distribution of Ratings Investment Banking* Rating # % # % BUY % % NEUTRAL % 3 5.9% SELL 1 2.0% 0 0.0% *Investment banking services provided in the previous 12 months MEANING OF RATINGS: BUY: the stock is likely to generate a total return of at least 10% over the next 12 months and should outperform relative to the industry. NEUTRAL: the stock is likely to perform in-line with the industry over the next 12 months. SELL: the stock is likely to underperform (from a total return perspective) relative to the industry over the next 12 months. NR: Not Rated SP: Suspended November 17,

23 Charts SCYX Source: Big Charts SCYX Date Rating Price Target Initiation November 17, 2016 BUY $14 November 17,