SEC Form 10-Q filed by Syros Pharmaceuticals Inc.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37813

SYROS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware		45-3772460
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
35 CambridgePark Drive, 4th Floor Cambridge, Massachusetts		02140
(Address of Principal Executive Offices)		(Zip Code)

(617) 744-1340

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock, $0.001 par value		SYRS		Nasdaq Global Select Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐				Accelerated filer	☐
Non-accelerated filer	☑				Smaller reporting company	☑
					Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Number of shares of the registrant’s common stock, $0.001 par value, outstanding on October 24, 2024: 26,832,457

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TABLE OF CONTENTS

	Page
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	5
Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	5
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	6
Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2024 and 2023	7
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2024 and 2023	8
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	10
Notes to Condensed Consolidated Financial Statements	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	36
Part II – OTHER INFORMATION
Item 1A. Risk Factors	38
Item 5. Other Information	40
Item 6. Exhibits	41
Signatures	41

 

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Cautionary Note Regarding Forward-Looking Statements and Industry Data

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward‑looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward‑looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward‑looking statements, although not all forward‑looking statements contain these identifying words. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. The forward‑looking statements and opinions contained in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These forward‑looking statements include, among other things, statements about:

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We may not actually achieve the plans, intentions or expectations disclosed in our forward‑looking statements, and you should not place undue reliance on our forward‑looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward‑looking statements we make. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward‑looking statements contained in this Quarterly Report.

Our forward‑looking statements also do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

This report also includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties as well as our own estimates. All of the market data used in this report involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for tamibarotene or any future product candidate include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that the statistical and other industry and market data included in this Quarterly Report is based on reasonable assumptions, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed in the "Risk Factors" section included in this Quarterly Report. These and other factors could cause results to differ materially from those expressed in the estimates and observations made by the independent parties or by us.

You should read this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward‑looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

		September 30,				December 31,
		2024				2023
Assets
Current assets:
Cash and cash equivalents		$	58,275			$	139,526
Prepaid expenses and other current assets			5,656				5,454
Total current assets			63,931				144,980
Property and equipment, net			6,308				7,298
Other long-term assets			1,366				1,592
Restricted cash			2,119				2,119
Right-of-use asset – operating lease			11,271				12,185
Total assets		$	84,995			$	168,174
Liabilities and stockholders' (deficit) equity
Current liabilities:
Accounts payable		$	9,646			$	11,544
Accrued expenses and other current liabilities			16,162				16,146
Operating lease obligation, current portion			2,584				2,324
Debt, current portion			—				6,667
Total current liabilities			28,392				36,681
Operating lease obligation, net of current portion			16,561				18,528
Warrant liabilities			10,084				61,747
Debt, net of debt discount, net of current portion			41,081				34,556
Commitments and contingencies (See Note 9)
Stockholders' (deficit) equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2024 and December 31, 2023; 0 shares issued and outstanding at September 30, 2024 and December 31, 2023			—				—
Common stock, $0.001 par value; 140,000,000 and 70,000,000 shares authorized at September 30, 2024 and December 31, 2023, respectively; 26,832,457 and 26,448,678 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively			27				26
Additional paid-in capital			745,088				739,443
Accumulated deficit			(756,238	)			(722,807	)
Total stockholders' (deficit) equity			(11,123	)			16,662
Total liabilities and stockholders' equity		$	84,995			$	168,174

See accompanying notes to unaudited condensed consolidated financial statements.

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SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

		Three Months Ended							Nine Months Ended
		September 30,							September 30,
		2024			2023				2024				2023
Revenue		$	—		$	3,762			$	—			$	9,550
Operating expenses:
Research and development			20,527			28,280				67,134				86,650
General and administrative			5,655			7,764				17,383				22,394
Restructuring (See Note 12)			—			2,354				—				2,354
Total operating expenses			26,182			38,398				84,517				111,398
Loss from operations			(26,182	)		(34,636	)			(84,517	)			(101,848	)
Interest income			793			1,633				3,424				5,533
Interest expense			(1,312	)		(1,303	)			(4,001	)			(3,798	)
Change in fair value of warrant liabilities			20,305			(5,837	)			51,663				(77	)
Net loss applicable to common stockholders		$	(6,396	)	$	(40,143	)		$	(33,431	)		$	(100,190	)
Net loss per share applicable to common stockholders - basic and diluted		$	(0.16	)	$	(1.43	)		$	(0.85	)		$	(3.59	)
Weighted-average number of common shares used in net loss per share applicable to common stockholders - basic and diluted			39,335,772			27,990,558				39,194,933				27,915,951

See accompanying notes to unaudited condensed consolidated financial statements.

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SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2024				2023				2024				2023
Net loss		$	(6,396	)		$	(40,143	)		$	(33,431	)		$	(100,190	)
Other comprehensive loss:
Unrealized holding loss on marketable securities, net of tax			—				(49	)			—				(102	)
Comprehensive loss		$	(6,396	)		$	(40,192	)		$	(33,431	)		$	(100,292	)

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the three months ended September 30, 2024 and 2023

(in thousands, except share data)

(unaudited)

 

 

		Common Stock												Accumulated
										Additional				Other
		Number of				Par				Paid-In				Comprehensive				Accumulated				Stockholders’
		Shares				Value				Capital				Gain				Deficit				Equity (Deficit)
Balance at June 30, 2023			20,708,356			$	20			$	691,450			$	49			$	(618,280	)		$	73,239
Vesting of restricted stock units			12,091				1				(1	)			—				—				—
Stock-based compensation expense			—				—				3,255				—				—				3,255
Other comprehensive loss			—				—				—				(49	)			—				(49	)
Net loss			—				—				—				—				(40,143	)			(40,143	)
Balance at September 30, 2023			20,720,447			$	21			$	694,704			$	—			$	(658,423	)		$	36,302
Balance at June 30, 2024			26,809,764			$	26			$	743,464			$	—			$	(749,842	)		$	(6,352	)
Vesting of restricted stock units			22,693				1				(1	)			—				—				—
Stock-based compensation expense			—				—				1,625				—				—				1,625
Net loss			—				—				—				—				(6,396	)			(6,396	)
Balance at September 30, 2024			26,832,457			$	27			$	745,088			$	—			$	(756,238	)		$	(11,123	)

 

 

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the nine months ended September 30, 2024 and 2023

(in thousands, except share data)

(unaudited)

 

		Common Stock												Accumulated
										Additional				Other
		Number of				Par				Paid-In				Comprehensive				Accumulated				Stockholders’
		Shares				Value				Capital				Gain				Deficit				Equity (Deficit)
Balance at December 31, 2022			20,263,116			$	20			$	685,847			$	102			$	(558,233	)		$	127,736
Vesting of restricted stock units			132,418				1				(1	)			—				—				—
Issuance of shares under Employee Stock Purchase Plan			54,082				—				144				—				—				144
Exercise of pre-funded warrants			246,831				—				—				—				—				—
Issuance of restricted stock awards			24,000				—				—				—				—				—
Stock-based compensation expense			—				—				8,714				—				—				8,714
Other comprehensive loss			—				—				—				(102	)			—				(102	)
Net loss			—				—				—				—				(100,190	)			(100,190	)
Balance at September 30, 2023			20,720,447			$	21			$	694,704			$	—			$	(658,423	)		$	36,302
Balance at December 31, 2023			26,448,678			$	26			$	739,443			$	—			$	(722,807	)		$	16,662
Vesting of restricted stock units			329,532				1				(1	)			—				—				—
Issuance of shares under Employee Stock Purchase Plan			26,247				—				115				—				—				115
Issuance of restricted stock awards			28,000				—				—				—				—				—
Stock-based compensation expense			—				—				5,531				—				—				5,531
Net loss			—				—				—				—				(33,431	)			(33,431	)
Balance at September 30, 2024			26,832,457			$	27			$	745,088			$	—			$	(756,238	)		$	(11,123	)

 

See accompanying notes to unaudited condensed consolidated financial statements.

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SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

		Nine Months Ended
		September 30,
		2024				2023
Operating activities
Net loss		$	(33,431	)		$	(100,190	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			990				1,900
Impairment			—				373
Gain on disposal of property and equipment			(125	)			—
Non-cash lease expense			—				73
Stock-based compensation expense			5,531				8,714
Change in fair value of warrant liabilities			(51,663	)			77
Net amortization of premiums and discounts on marketable securities			(302	)			(1,314	)
Amortization of debt-discount and accretion of deferred debt costs			420				424
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			(202	)			463
Unbilled receivable			—				29
Other long-term assets			226				3,235
Accounts payable			(1,898	)			(3,556	)
Accrued expenses and other current liabilities			(207	)			3,523
Deferred revenue			—				(4,191	)
Operating lease right-of-use-asset and liabilities			(793	)			(705	)
Net cash used in operating activities			(81,454	)			(91,145	)
Investing activities
Purchases of property and equipment			—				(234	)
Proceeds from the disposition of asset-held-for-sale			125				—
Purchases of marketable securities			(30,591	)			(50,968	)
Proceeds from the sale or maturities of marketable securities			30,893				87,017
Net cash provided by investing activities			427				35,815
Financing activities
Payments on financing lease obligations			—				(62	)
Proceeds from the issuance of common stock through Employee Stock Purchase Plan			115				144
Payment of issuance cost related to underwritten registered direct offering and at-the-market facility			(339	)			—
Net cash (used in) provided by financing activities			(224	)			82
Net decrease in cash, cash equivalents and restricted cash			(81,251	)			(55,248	)
Cash, cash equivalents and restricted cash (See reconciliation in Note 6)
Beginning of period			141,645				170,553
End of period			60,394				115,305
Supplemental disclosure of cash flow information:
Cash paid for interest		$	4,052			$	3,323

See accompanying notes to unaudited condensed consolidated financial statements.

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SYROS PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 that we filed with the Securities and Exchange Commission, or SEC, on March 27, 2024, or the 2023 10-K. Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.

The following information and any forward-looking statements should also be considered in light of risks identified under the caption “Risk Factors” in the 2023 10-K and in this Quarterly Report. We caution you not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

 

We are a biopharmaceutical company committed to developing new standards of care for the frontline treatment of patients with hematologic malignancies. Driven by the motivation to help patients with blood disorders that have largely eluded other targeted approaches, we are advancing tamibarotene, a selective retinoic acid receptor alpha, or RARa, agonist for which we are conducting SELECT-MDS-1, a Phase 3 clinical trial evaluating tamibarotene in combination with azacitidine in a genomically defined subset of patients with higher-risk myelodysplastic syndrome, or HR-MDS.

 

At the 62nd American Society of Hematology Annual Meeting and Exposition held in December 2020, or ASH 2020, we presented data from our fully enrolled Phase 2 clinical trial assessing the safety and efficacy of tamibarotene in combination with azacitidine in newly diagnosed patients with acute myeloid leukemia, or AML, who are not suitable candidates for standard intensive chemotherapy, as well as in relapsed or refractory AML patients who have been prospectively selected using our proprietary RARA, the gene that codes for RARa, biomarker. As of an October 1, 2020 data cut-off, 51 newly diagnosed unfit AML patients, including patients with and without RARA gene overexpression, were eligible for a safety analysis. Among these patients, tamibarotene in combination with azacitidine was generally well-tolerated, with no evidence of increased toxicity relative to either as a single agent, including rates of myelosuppression that were comparable to single agent azacitidine. As of the data cut-off, of the 18 patients with RARA overexpression that were evaluable for clinical response, 50% of patients achieved complete response, or CR, and 11% achieved a complete response with incomplete blood count recovery, or CRi, for a total CR/CRi rate of 61%. The median time to initial CR/CRi response was 1.2 months, the median duration of CR/CRi response was 10.8 months, and the median overall survival, or OS, among patients who achieved a CR or CRi was 18.0 months. As of the data cut-off, of the 28 patients without RARA overexpression that were evaluable for clinical response, the overall response rate was 43%, with a CR/CRi rate of 32%, with 25% of patients achieving CR and 7% achieving CRi. The median time to initial CR/CRi response was 3.0 months, and the median duration of CR/CRi response was 10.3 months.

 

HR-MDS is a hematologic malignancy for which disease-related cytopenias result in significant morbidity and mortality, with more than half of HR-MDS patients progressing to AML, and we believe that approximately 50% of HR-MDS patients overexpress RARA. Based on the data presented at ASH 2020 and our assessment of ongoing areas of high unmet need, we advanced tamibarotene in combination with azacitidine into a registration-enabling Phase 3 clinical trial in newly diagnosed HR-MDS patients with RARA overexpression, which we refer to as SELECT-MDS-1. We believe that approximately 9,000 HR-MDS patients are diagnosed in the United States each year. We expect that the total market opportunity for HR-MDS therapeutics in the United States will be approximately $1.6 billion by 2029, and that the total United States market opportunity for tamibarotene in HR-MDS patients with RARA overexpression will be over $800 million by 2029. The SELECT-MDS-1 trial is evaluating newly diagnosed HR-MDS patients with RARA overexpression in a double-blind placebo-controlled study design, randomized 2:1 to receive tamibarotene in combination with azacitidine, or placebo in combination with azacitidine, respectively. The primary efficacy endpoint is based on 190 patients to provide over 90% power to detect a difference in CR rates between the experimental and

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control arms with a one-sided alpha of 0.025. The United States Food and Drug Administration, or FDA, has expressed that the CR rate is an acceptable efficacy endpoint for either full or accelerated approval for treatment of newly diagnosed HR-MDS with supporting data on durability of remission. Informed by feedback from the FDA, we amended the SELECT-MDS-1 clinical trial protocol in March 2023 to include a total of approximately 550 patients to enable us to assess OS as a key secondary endpoint, which could allow the trial to serve as a confirmatory study if needed to convert an accelerated approval to a full approval in the future. The amended clinical trial protocol is designed with 80% power to detect a difference in OS rates for the key secondary endpoint between the experimental and control arms, also with a one-sided alpha of 0.025. In January 2023, the FDA granted Fast Track Designation to tamibarotene in combination with azacitidine for the treatment of adults with newly diagnosed HR-MDS who are positive for RARA overexpression. In the first quarter of 2024, we completed enrollment of the 190 patients necessary to support the CR primary endpoint analysis. In addition, the SELECT-MDS-1 trial passed a pre-specified interim futility analysis of the primary endpoint based on an analysis, blinded to us, in the initial 50% of the enrolled patients. The analysis was conducted by an independent data monitoring committee, who also noted that there were no concerning safety signals and recommended that the trial continue without modification. We expect to report pivotal CR data from the SELECT-MDS-1 trial in mid-November of 2024.

 

In August 2024, we announced our decision to discontinue enrollment in the SELECT-AML-1 Phase 2 clinical trial evaluating the triplet regimen of tamibarotene in combination with venetoclax and azacitidine compared to the doublet regimen of venetoclax and azacitidine in newly diagnosed, unfit patients with AML and RARA gene overexpression, based on the results of a prespecified interim analysis of the trial.

 

As part of our launch preparation activities for tamibarotene, we have engaged a leading provider of testing services to develop and validate a laboratory-developed test based on our existing clinical trial assay to provide RARA overexpression testing at launch, and we continue to evaluate multiple approaches to the development of a commercial companion diagnostic. We are also partnered with Qiagen Manchester Limited to develop a kit-based testing solution for future commercialization.

Financings

 

On December 21, 2023, we issued and sold an aggregate of 4,939,591 shares of our common stock at a price of $4.42 per share, and, in lieu of our common stock to certain investors who so chose, pre-funded warrants to purchase an aggregate of 5,242,588 shares of our common stock at a price of $4.419 per pre-funded warrant, in an underwritten offering resulting in gross proceeds of approximately $45.0 million, before deducting underwriting fees and other transaction costs of approximately $3.2 million. The offering was made pursuant to an underwriting agreement between us and Cowen and Company, LLC, or Cowen, and Piper Sandler & Co. on December 18, 2023. Pursuant to the underwriting agreement, the underwriters purchased the shares of common stock from us at a price of $4.1548 per share and the pre-funded warrants from us at a price of $4.15386 per share underlying each pre-funded warrant. The shares of common stock and the pre-funded warrants were issued, and any shares of common stock issuable upon exercise of the pre-funded warrants will be issued, pursuant to a shelf registration statement on Form S-3 that was filed with the SEC on April 6, 2023 and declared effective by the SEC on April 28, 2023.

Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future. We did not recognize any revenue during the three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, we recognized revenue of $3.8 million and $9.6 million, respectively, related to our collaboration with Global Blood Therapeutics, or GBT. The collaboration with GBT was terminated in October 2023 and we do not expect to recognize collaboration revenue from GBT following that date.

Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including the preclinical and clinical development of our product candidates, which include:

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Research and development costs are expensed as incurred. Nonrefundable advance payments made to vendors for goods or services that will be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development, until related goods or services are provided.

We typically use our employee, consultant and infrastructure resources across our research and development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or certain external consultant costs to specific product candidates or development programs.

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three and nine months ended September 30, 2024 and 2023 (in thousands):

			Three Months Ended									Nine Months Ended
			September 30,									September 30,
			2024				2023					2024				2023
Tamibarotene external costs			$	13,763			$	14,435				$	44,977			$	42,771
SY-5609 program external costs				1				173					70				2,516
SY-2101 program external costs				(62	)			999					718				4,007
Other research program external costs				491				2,507					1,435				6,239
Employee-related expenses, excluding stock-based compensation				4,531				6,865					13,858				21,644
Stock-based compensation				518				1,586					2,227				4,236
Facilities and other expenses				1,285				1,715					3,849				5,237
Total research and development expenses			$	20,527			$	28,280				$	67,134			$	86,650

We expect to incur significant research and development expenses for the foreseeable future as we seek to advance the clinical development of tamibarotene. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of tamibarotene or any future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of any product candidates. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

 

 

 

 

 

 

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Any changes in the outcome of any of these variables with respect to the development of our product candidates could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, information technology and administrative functions. Other significant costs include corporate facility costs not otherwise included in research and development expenses, legal fees related to patent and corporate matters, and fees for accounting and consulting services.

Restructuring Costs

Restructuring costs consist primarily of severance, post-employment benefit, outplacement services, impairment charges and any other expenses that we incur related to the realignment of our strategy and cost reduction measures.

Interest Income

Interest income consists of interest income on our cash, cash equivalents and investments in marketable securities, including the related amortization of premiums and discounts.

Interest Expense

Interest expense consists of interest, amortization of debt discount, and amortization of deferred financing costs associated with our loans payable, and interest on finance lease arrangements.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities is the result of the remeasurement of the fair value of our warrant liabilities at each reporting period end.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors

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that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of the change in estimates.

We believe that our most critical accounting policies are those relating to revenue recognition, accrued research and development expenses and stock-based compensation. There have been no significant changes to our critical accounting policies as discussed in our 2023 10-K.

Results of Operations

Comparison of three months ended September 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023, together with the changes in those items in dollars (in thousands):

		Three Months Ended September 30,
		2024				2023				Dollar Change				% Change
Statements of Operations Data:
Revenue		$	—			$	3,762			$	(3,762	)			(100	)	%
Operating expenses:
Research and development			20,527				28,280				(7,753	)			(27	)	%
General and administrative			5,655				7,764				(2,109	)			(27	)	%
Restructuring costs			—				2,354				(2,354	)			(100	)	%
Total operating expenses			26,182				38,398				(12,216	)			(32	)	%
Loss from operations			(26,182	)			(34,636	)			8,454				(24	)	%
Interest income			793				1,633				(840	)			(51	)	%
Interest expense			(1,312	)			(1,303	)			(9	)			1		%
Change in fair value of warrant liabilities			20,305				(5,837	)			26,142				(448	)	%
Net loss		$	(6,396	)		$	(40,143	)		$	33,747				(84	)	%

Revenue

We did not recognize any revenue during the three months ended September 30, 2024. For the three months ended September 30, 2023, we recognized $3.8 million of revenue, all of which was attributable to our collaboration with GBT.

Research and Development Expense

Research and development expense decreased by approximately $7.8 million, or 27%, from $28.3 million for the three months ended September 30, 2023 to $20.5 million for the three months ended September 30, 2024. The following table summarizes our research and development expenses for the three months ended September 30, 2024 and 2023, together with the changes to those items in dollars (in thousands):

		Three Months Ended September 30,
		2024				2023				Dollar Change				% Change
External research and development		$	13,175			$	16,730			$	(3,555	)			(21	)	%
Employee-related expenses, excluding stock-based compensation			4,531				6,865				(2,334	)			(34	)	%
Stock-based compensation			518				1,586				(1,068	)			(67	)	%
Consulting, licensing and professional fees			1,018				1,384				(366	)			(26	)	%
Facilities and other expenses			1,285				1,715				(430	)			(25	)	%
Total research and development expenses		$	20,527			$	28,280			$	(7,753	)			(27	)	%

 

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The change in research and development expense was primarily attributable to activities associated with advancing our clinical programs, including the following:

General and Administrative Expense

General and administrative expense decreased by approximately $2.1 million, or 27%, from $7.8 million for the three months ended September 30, 2023 to $5.7 million for the three months ended September 30, 2024. The change in general and administrative expense was primarily attributable to a decrease in facilities expenses, consulting and a reduction of headcount associated with the restructuring of our operations in the fourth quarter of 2023.

Restructuring Costs

Restructuring costs for the three months ended September 30, 2023 consist primarily of severance, post-employment benefit, outplacement services, impairment charges and any other expenses that we incur related to the realignment of our strategy and cost reduction measures.

Interest Income

Interest income was derived generally from our investments in cash, cash equivalents, and marketable securities. The decrease in interest income during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was due to a lower average cash balance during the three months ended September 30, 2024 compared to the same period in 2023.

Interest Expense

Interest expense was related to our credit facility with Oxford Finance LLC, or Oxford. Interest expense increased slightly during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 due to a higher effective interest rate during the three month period ended September 30, 2024 compared to the same period in 2023.

Change in Fair Value of Warrant Liabilities

The gain from the change in fair value of warrant liabilities during the three months ended September 30, 2024 was primarily driven by the decrease in the price of our common stock from June 30, 2024 to September 30, 2024. The loss from the change in fair value of warrant liabilities during the three months ended September 30, 2023 was primarily driven by the increase in the price of our common stock from June 30, 2023 to September 30, 2023.

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Comparison of nine months ended September 30, 2024 and 2023

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023, together with the changes in those items in dollars (in thousands):

		Nine Months Ended September 30,
		2024				2023				Dollar Change				% Change
Statements of Operations Data:
Revenue		$	—			$	9,550			$	(9,550	)		$	(100	)	%
Operating expenses:
Research and development			67,134				86,650				(19,516	)			(23	)	%
General and administrative			17,383				22,394				(5,011	)			(22	)	%
Restructuring costs			—				2,354				(2,354	)			(100	)	%
Total operating expenses			84,517				111,398				(26,881	)			(24	)	%
Loss from operations			(84,517	)			(101,848	)			17,331				(17	)	%
Interest income			3,424				5,533				(2,109	)			(38	)	%
Interest expense			(4,001	)			(3,798	)			(203	)			5		%
Change in fair value of warrant liabilities			51,663				(77	)			51,740				(67,195	)	%
Net loss		$	(33,431	)		$	(100,190	)		$	66,759			$	(67	)	%

Revenue

We did not recognize any revenue during the nine months ended September 30, 2024. For the nine months ended September 30, 2023, we recognized $9.6 million of revenue, all of which was attributable to our collaboration with GBT.

Research and Development Expense

Research and development expense decreased by approximately $(19.5) million, or 23%, from $86.7 million for the nine months ended September 30, 2023 to $67.1 for the nine months ended September 30, 2024. The following table summarizes our research and development expenses for the nine months ended September 30, 2024 and 2023, together with the changes to those items in dollars (in thousands):

		Nine Months Ended September 30,
		2024				2023				Dollar Change				% Change
External research and development		$	43,659			$	49,186			$	(5,527	)			(11	)	%
Employee-related expenses, excluding stock-based compensation			13,858				21,644				(7,786	)			(36	)	%
Stock-based compensation			2,227				4,236				(2,009	)			(47	)	%
Consulting, licensing and professional fees			3,541				6,347				(2,806	)			(44	)	%
Facilities and other expenses			3,849				5,237				(1,388	)			(27	)	%
Total research and development expenses		$	67,134			$	86,650			$	(19,516	)			(23	)	%

The change in research and development expense was primarily attributable to activities associated with advancing our clinical programs, including the following:

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General and Administrative Expense

General and administrative expense decreased by approximately $5.0 million, or 22%, from $22.4 million for the nine months ended September 30, 2023 to $17.4 million for the nine months ended September 30, 2024. The change in general and administrative expense was primarily attributable to a decrease in facilities expenses, consulting and professional fees and a reduction of headcount associated with the restructuring of our operations in the fourth quarter of 2023.

Interest Income

Interest income was derived generally from our investments in cash, cash equivalents and marketable securities. The decrease in interest income during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was due to a lower average cash balance during the nine months ended September 30, 2024 compared to the same period in 2023.

Interest Expense

Interest expense was related to our credit facility with Oxford. Interest expense increased from the nine months ended September 30, 2023 to the nine months ended September 30, 2024 due to a higher effective interest rate during the nine months ended September 30, 2024 compared to the same period in 2023.

Change in Fair Value of Warrant Liabilities

The gain from the change in fair value of warrant liabilities during the nine months ended September 30, 2024 was primarily driven by the decrease in the price of our common stock from December 31, 2023 to September 30, 2024. The loss from the change in fair value of warrant liabilities during the nine months ended September 30, 2023 was primarily driven by the increase in the price of our common stock from December 31, 2022 to September 30, 2023.

Liquidity and Capital Resources

Sources of Liquidity

We funded our operations from inception through September 30, 2024, primarily through the issuance of equity securities, through license and collaboration agreements, and through the credit facility with Oxford.

On February 12, 2020, we entered into a Loan and Security Agreement with Oxford. Pursuant to the Loan Agreement, term loans of up to an aggregate principal amount of $60.0 million were originally made available to us. A $20.0 million term loan was funded on February 12, 2020, and another $20.0 million term loan was funded on December 23, 2020. On July 3, 2022, we entered into an amendment to the Loan Agreement with Oxford, or the First Loan Amendment. Pursuant to the First Loan Amendment, Oxford agreed to modify the Loan Agreement in order to, among other things, extend the interest only period from March 1, 2023 to March 1, 2024 and extend the maturity date from February 1, 2025 to February 1, 2026, and upon the achievement of certain milestones and subject to the payment of certain fees, further extend the interest only period to September 1, 2024 and maturity date to August 1, 2026. On May 9, 2024, we entered into a further amendment to the Loan Agreement with Oxford, or the Fourth Loan Amendment. Under the Fourth Loan Amendment, Oxford agreed to modify the Loan Agreement in order to, among other things, (i) increase the aggregate amount of term loans available to us to from $40.0 million to $100.0 million, with term loans totaling $40.0 million in the aggregate becoming available to us upon achievement of certain clinical development, regulatory and equity-raising milestones, and $20.0 million becoming available at Oxford's discretion; (ii) extend the interest only period from September 1, 2024 to November 1, 2025 with further extensions to as late as November 1,

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2026 upon achievement of certain milestones; and (iii) extend the maturity date from August 1, 2026 to February 1, 2028. In consideration for this Fourth Loan Amendment, we have agreed to, among other things, certain cash covenants and revenue performance covenants, and that the failure to satisfy the primary endpoint for the SELECT-MDS-1 trial, the termination of the SELECT-MDS-1 trial for safety reasons, or the failure to obtain FDA approval for tamibarotene for the treatment of newly diagnosed HR-MDS patients with RARA overexpression by May 31, 2026, would each constitute events of default under the Loan Agreement. In addition, upon drawing any further loans under the Loan Agreement we have agreed to grant Oxford, to the extent permitted under existing agreements and applicable law, a security interest in all intellectual property owned by us. As of September 30, 2024, term loans totaling $40.0 million in the aggregate remain available under the Loan Agreement upon the achievement of certain clinical development, regulatory and equity-raising milestones, and a $20.0 million term loan remains available under the Loan Agreement at the sole discretion of Oxford.

On April 6, 2023, we filed a universal shelf registration statement on Form S-3, or the 2023 Registration Statement, with the SEC to register for sale from time to time up to $250.0 million of common stock, preferred stock, debt securities, warrants and/or units in one or more registered offerings. The 2023 Registration Statement was declared effective on April 28, 2023. Further, in April 2023, we entered into an at-the-market sales agreement, or the 2023 sales agreement, with Cowen, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million through Cowen pursuant to the 2023 Registration Statement. During the year ended December 31, 2023, we issued and sold 350,000 shares of common stock pursuant to the 2023 sales agreement for gross proceeds of $1.4 million, before deducting underwriting fees.

Upon entry into the 2023 sales agreement, we terminated our prior at-the-market program pursuant to the original sales agreement dated July 12, 2020. At the time of such termination, the entire $75.0 million available under such agreement remained unsold.

In December 2023, we issued shares of our common stock and, in lieu of common stock to certain investors, pre-funded warrants to purchase our common stock, pursuant to the 2023 Registration Statement, in an underwritten offering resulting in gross proceeds of $45.0 million, before deducting underwriting fees and other transaction costs of approximately $3.2 million.

As of September 30, 2024, $48.6 million of our common stock remained available for future issuance under the 2023 sales agreement.

As of September 30, 2024, $203.6 million of securities remained available for future issuance under the 2023 Registration Statement.

As of September 30, 2024, we had cash and cash equivalents of approximately $58.3 million.

Cash Flows

The following table provides information regarding our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

		Nine Months Ended September 30,
		2024				2023
Net cash (used in) provided by:
Operating activities		$	(81,454	)		$	(91,145	)
Investing activities			427				35,815
Financing activities			(224	)			82
Net decrease in cash, cash equivalents and restricted cash		$	(81,251	)		$	(55,248	)

Net Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2024 and 2023 resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

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Net cash used in operating activities was $81.5 million during the nine months ended September 30, 2024 compared to $91.1 million for the nine months ended September 30, 2023. The decrease in net cash used in operating activities during the nine months ended September 30, 2024 was primarily due to a decrease in the loss from operations of $17.3 million, partially offset by a decrease in stock-based compensation of $3.2 million, an increase in the change of net operating assets and liabilities of $1.7 million, a decrease in depreciation and impairment of property and equipment of $1.3 million, a decrease in interest income of $1.1 million (excluding amortization of premiums and discounts), and an increase in interest expense of $0.2 million.

Net Cash Provided By Investing Activities

Net cash provided by investing activities was $0.4 million during the nine months ended September 30, 2024 compared to net cash provided by investing activities of $35.8 million during the nine months ended September 30, 2023. The net cash provided by investing activities during the nine months ended September 30, 2024 was primarily due to the proceeds from the sale or maturities of marketable securities of $30.9 million and proceeds from disposal of property and equipment of $0.1 million, partially offset by the purchase of marketable securities of $30.6 million during the nine months ended September 30, 2024. In comparison, the net cash provided by investing activities during the nine months ended September 30, 2023 was primarily due to the maturity of marketable securities of $87.0 million, partially offset by the purchases of marketable securities of $51.0 million during the nine months ended September 30, 2023.

Net Cash (Used In) Provided By Financing Activities

Net cash used in financing activities was $0.2 million during the nine months ended September 30, 2024 compared to the net cash provided by financing activities of $0.1 million for the nine months ended September 30, 2023. Cash used in financing activities for the nine months ended September 30, 2024 was primarily due to the payments of issuance costs related to our underwritten registered direct offering and our at-the-market facility during the year ended December 31, 2023 of $0.3 million, partially offset by the proceeds from the issuance of shares of our common stock pursuant to our employee stock purchase plan. In comparison, the cash provided by financing activities for the nine months ended September 30, 2023 was primarily due to proceeds from the issuance of shares of our common stock pursuant to our employee stock purchase plan.

Funding Requirements and Going Concern

We expect to incur significant expenses in connection with our ongoing activities, particularly as we continue to advance the clinical development of tamibarotene, seek to develop diagnostic tests for use with tamibarotene, and seek marketing approval for tamibarotene or any future product candidates that we successfully develop. In addition, if we obtain marketing approval for tamibarotene or any other product candidate, we expect to incur significant commercialization expenses related to establishing sales, marketing, distribution and other commercial infrastructure to commercialize such products. We will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on favorable terms, we would be forced to delay, reduce, eliminate, or out-license our development programs or future commercialization rights to our product candidates.

We believe that our cash and cash equivalents as of September 30, 2024, will enable us to fund our planned operating expense and capital expenditure requirements into the third quarter of 2025. Our future funding requirements, both short-term and long-term, will depend on many factors, including:

 

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Identifying potential product candidates and conducting clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, tamibarotene or any future product candidate, if approved, may not achieve commercial success. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the issuance of equity or convertible debt securities, 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 funds through additional collaborations, strategic alliances or licensing 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. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We have incurred significant net operating losses in every year since our inception. We expect to continue to incur significant and increasing net operating losses for at least the next several years. As of September 30, 2024, we had cash and cash equivalents of $58.3 million and an accumulated deficit of $756.2 million. We have not generated any revenues from product sales, have not completed the development of any product candidate and may never have a product candidate approved for commercialization. We have financed our operations to date primarily through a credit facility, the issuance of equity securities and through license and collaboration agreements. We have devoted substantially all of our financial resources and efforts to research and development and general and administrative activities to support such research and development. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital.

As discussed in Note 1 of the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, under ASC Topic 205-40, Presentation of Financial Statements - Going Concern, management is

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required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.

 

Based on our current operating plan, we anticipate that our cash and cash equivalents of $58.3 million as of September 30, 2024 will allow us to meet our liquidity requirements into the third quarter of 2025. Our history of significant losses, our negative cash flows from operations, our limited liquidity resources currently on hand, and our dependence on our ability to obtain additional financing to fund our operations after the current resources are exhausted, about which there can be no certainty, have resulted in our assessment that there is substantial doubt about our ability to continue as a going concern for a period of at least 12 months from the issuance date of the condensed consolidated financial statements included in this Quarterly Report. We have plans in place to mitigate this risk, which primarily consist of raising additional capital through a combination of equity or debt financings, business development transactions, including the potential sale of SY-2101-related assets, and reducing cash expenditures. There is no guarantee that we will be successful in any capital raising or business development efforts, in which case we may not be able to continue our development programs as planned.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments, including cash equivalents, are in the form of money market funds and are invested in U.S. treasury or government obligations. However, because of the short-term nature of the duration of our portfolio and the low-risk profile of our investments, we believe an immediate 10% change in market interest rates would not be expected to have a material impact on the fair market value of our investment portfolio or on our financial condition or results of operations.

We are also exposed to market risk related to changes in foreign currency exchange rates. We contract with vendors that are located in Asia and Europe and certain invoices are denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these arrangements. We do not currently hedge our foreign currency exchange rate risk. As of September 30, 2024, we did not have significant liabilities denominated in foreign currencies.

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the nine months ended September 30, 2024 and 2023.

Item 4. Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

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Our management, with the participation of our Chief Executive Officer, who serves as our Principal Executive Officer, and our Chief Financial Officer, who serves as our Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024, the end of the period covered by this Quarterly Report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1A. Risk Factors

 

The following information updates, and should be read in conjunction with, the risk factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, or the 2023 10-K. Any of the risk factors contained in this Quarterly Report and the 2023 10-K could materially affect our business, financial condition or future results, and such risk factors may not be the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

 

Risks Related to Our Financial Position and Need for Additional Capital

We will need substantial additional funding to execute our operating plan and continue to operate as a going concern, and if we are unable to raise capital, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

Developing pharmaceutical products, including conducting clinical trials, is a time consuming, expensive and uncertain process. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

We believe that our cash and cash equivalents as of September 30, 2024 will enable us to fund our planned operating expense and capital expenditure requirements into the third quarter of 2025. These funds may not be sufficient to fund operations for at least the next 12 months from the date of issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report, which raises substantial doubt about our ability to continue as a going concern. Our future viability beyond one year from the date of issuance of these condensed consolidated financial statements is dependent on our ability to raise additional capital to finance our operations. Our estimate as to how long we expect our existing cash and cash equivalents to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. In any event, our existing cash and cash equivalents will not be sufficient to fund all of the efforts that we plan to undertake or to fund the completion of development of our product candidates. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. Although management plans to pursue additional funding, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, or at all.

Our future funding requirements will depend on many factors, including those discussed in Part I, Item 1A, "Risk Factors" in the 2023 10-K under “Risks Related to Our Financial Position and Need for Additional Capital - We have incurred significant losses since inception, expect to incur significant losses for at least the next several years, and may never achieve or maintain profitability.” Our future funding requirements may also depend on:

 

The terms of our loan and security agreement place restrictions on our operating and financial flexibility.

 

In February 2020, we entered into a loan and security agreement with Oxford Finance LLC, or Oxford, which is secured by substantially all of our currently owned or later acquired personal property other than our intellectual property (but including the right to payments and proceeds of intellectual property), which is subject to a negative pledge. We borrowed $20.0 million upon execution of the loan and security agreement and borrowed an additional $20.0 million term loan advance in December 2020.

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On May 9, 2024, we entered into an amendment, or the Loan Amendment, to the loan and security agreement with Oxford. We refer to the loan and security agreement with Oxford, as amended by the Loan Amendment, as the Loan Agreement. Pursuant to the Loan Amendment, in its capacity as lender and agent, Oxford agreed to modify the terms of the loan and security agreement to, among other things: (i) increase the aggregate amount of term loans available to us from $40.0 million to $100.0 million, with tranches totaling $40.0 million in the aggregate becoming available to us upon achievement of certain clinical development, regulatory and equity-raising milestones, and $20.0 million becoming available at Oxford's discretion; (ii) extend the interest only period from September 1, 2024 to November 1, 2025 with further extensions to as late as November 1, 2026 upon achievement of certain milestones; and (iii) extend the maturity date from August 1, 2026 to February 1, 2028.

The Loan Agreement contains representations and warranties and affirmative and negative covenants applicable to us and our subsidiaries, as more fully described in the Loan Agreement. The Loan Agreement also includes events of default. In consideration for the Loan Amendment, we agreed that the failure to satisfy the primary endpoint for the SELECT-MDS-1 trial, the termination of the SELECT-MDS-1 trial for safety reasons, or the failure to obtain FDA approval for tamibarotene for the treatment of newly diagnosed HR-MDS patients with RARA overexpression by May 31, 2026, would each constitute events of default under the Loan Agreement. If an event of default were to occur in connection with the pivotal complete response data from the SELECT-MDS-1 trial that we expect to report in mid-November of 2024, or if an event of default were otherwise to occur and continue, the Loan Agreement provides Oxford, as collateral agent, with the right to exercise remedies against us and the collateral securing the loans under the Loan Agreement, including foreclosure against our property securing the Loan Agreement, including our cash, potentially requiring us to renegotiate our agreement on terms less favorable to us, or to immediately cease operations.

Further, if we are liquidated, the lenders’ right to repayment would be senior to the rights of the holders of our common stock to receive any proceeds from the liquidation. Oxford could declare a default upon the occurrence of any event that they interpret as a material adverse change as defined under the Loan Agreement, thereby requiring us to repay the loan immediately or to attempt to reverse the declaration of default through negotiation or litigation. Any declaration by Oxford of an event of default could significantly harm our business, financial condition and prospects and would cause the price of our common stock to decline.

Risks Related to the Development and Commercialization of Product Candidates

We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do.

We expect that we, and any collaborators, will face significant competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to any product candidates that we, or any collaborators, may seek to develop or commercialize in the future. Specifically, there are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of product candidates for the treatment of myelodysplastic syndrome, or MDS, the indication targeted in our SELECT-MDS-1 trial involving tamibarotene.

For example, we are aware of two new drugs approved by the U.S. Food and Drug Administration, or the FDA, since 2020 for the treatment of MDS or patient subsets within MDS (decitabine/cedazuridine and ivosidenib). Tamibarotene may also face competition from other agents currently in clinical development for MDS, including those in late-stage development from AbbVie Inc., Roche Holding AG, and Taiho Oncology, Inc.

Our competitors may succeed in developing, acquiring or licensing technologies and products that are more effective, have fewer side effects or more tolerable side effects, have greater ease of access, or are less costly than any product candidates that we are currently developing or that we may develop, which could render our product candidates obsolete and noncompetitive. In addition, the evolving standard of care for the treatment of patients with acute myeloid leukemia, or AML, may lead to evolution of the standard of care for patient subsets within MDS. Our competitors also may obtain FDA or other marketing approval for their products before we, or any collaborators, are able to obtain approval for ours, which could result in our competitors establishing a strong market position before we, or any collaborators, are able to enter the market.

Many of our existing and potential future competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining marketing

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approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our product candidates.

Risks Related to Our Dependence on Third Parties

Failure of any third-party collaborator to successfully develop or commercialize a diagnostic test for use with tamibarotene to identify patients with RARA overexpression could harm our ability to commercialize tamibarotene.

We do not plan to internally develop a commercial diagnostic test to identify patients with RARA overexpression. As a result, we will be dependent on the efforts of third-party collaborators to successfully develop and commercialize a diagnostic test. As part of our launch preparation activities for tamibarotene, we have engaged a leading provider of testing services to develop and validate a laboratory-developed test based on our existing clinical trial assay to provide RARA overexpression testing at launch, and we continue to evaluate multiple approaches to the development of a commercial companion diagnostic. We are also partnered with Qiagen Manchester Limited to develop a kit-based testing solution for future commercialization.

Our third-party collaborators may not perform their obligations as expected or as required under our agreements with those parties, may encounter production difficulties that could constrain the supply of a diagnostic test, may have difficulties gaining acceptance of the use of a diagnostic test in the clinical community, may not pursue commercialization of a diagnostic test even if they receive any required regulatory approvals, may elect not to continue the development of a diagnostic test based on changes in strategic focus or available funding, or external factors such as an acquisition, that divert resources or create competing priorities, may not commit sufficient resources to the marketing and distribution of a diagnostic test, and may terminate their relationships with us.

If a diagnostic test that is developed for use with tamibarotene fails to gain market acceptance, our ability to derive revenues from sales from tamibarotene would be harmed. If the third parties we engage fail to commercialize a diagnostic test, we may not be able to enter into arrangements with another diagnostic company to obtain supplies of an alternative test for use with tamibarotene or do so on commercially reasonable terms, which could adversely affect and/or delay commercial launch and cause us to fail to realize the full commercial potential of tamibarotene.

 

Item 5. Other Information

(c)

 

None of our directors or officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.

 

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Item 6. Exhibits

 

Exhibit No.		Description of Exhibit
3.1		Restated Certificate of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (File No. 001-37813) filed on July 31, 2024).
3.2		Second Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 (File No. 001-37813) filed on August 5, 2021).
31.1		Certification of principal executive officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2		Certification of principal financial officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1		Certification of principal executive officer pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2		Certification of principal financial officer pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Presentation Linkbase Document
104		Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		Syros Pharmaceuticals, Inc.
Date: October 31, 2024		By:		/s/ Jason Haas
				Jason Haas
				Chief Financial Officer (Principal Financial Officer)

 

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