syrs-10q_20190930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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, 2019

☐	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.)

620 Memorial Drive, Suite 300 Cambridge, Massachusetts		02139
(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, par value $0.001	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 31, 2019: 42,441,227

TABLE OF CONTENTS

	Page
Part I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)	5

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	5
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018	6
Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018	7
Condensed Consolidated Statements of Stockholder’s Equity for the Three and Nine Months Ended September 30, 2019 and 2018	8
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018	10
Notes to Condensed Consolidated Financial Statements	11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3. Quantitative and Qualitative Disclosures About Market Risk	38

Item 4. Controls and Procedures	38

Part II – OTHER INFORMATION

Item 1A. Risk Factors	39

Item 6. Exhibits	49

Signatures	50

Cautionary Note Regarding Forward-Looking Statements

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:

•

our plans to initiate and expand clinical trials of our product candidates and our expectations for the timing, quantity and quality of data to be reported from our clinical trials of SY‑1425;

•

our plans to progress SY-5609 through investigational new drug application, or IND, enabling preclinical studies by the end of 2019 and to initiate clinical development in the first quarter of 2020;

•

planned clinical trials for our product candidates, whether conducted by us or by any future collaborators, including the timing of these trials and of the anticipated results;

•

our ability to replicate in any clinical trial of one of our product candidates the results we observed in preclinical or earlier clinical studies with such product candidate;

•

our plans to research, develop, seek approval for, manufacture and commercialize our current and future product candidates;

•

our plans to develop and seek approval of companion diagnostic tests for use in identifying patients who may benefit from treatment with our products and product candidates;

•

our expectations regarding the potential benefits of our gene control platform and our approach;

•

our ability to enter into, and the terms and timing of, any collaborations, license agreements, or other arrangements;

•

whether our collaboration with Incyte Corporation, or Incyte, will yield any validated targets, whether Incyte will exercise any of its options to exclusively license intellectual property directed to such targets, and whether and when any of the target validation fees, option exercise fees, milestone payments or royalties under the Incyte collaboration will ever be paid;

•

the potential benefits of any future collaboration;

•

developments relating to our competitors and our industry;

•

the impact of government laws and regulations;

•

the timing of and our ability to file new drug applications and obtain and maintain regulatory approvals for our product candidates;

•

the rate and degree of market acceptance and clinical utility of any products for which we receive marketing approval;

•

our commercialization, marketing and manufacturing capabilities and strategy;

•

our intellectual property position and strategy;

•

our ability to identify additional products or product candidates with significant commercial potential;

•

our expectations related to the use of our current cash, cash equivalents and marketable securities and the period of time in which such capital will be sufficient to fund our planned operations; and

•

our estimates regarding expenses, future revenue, capital requirements and need for additional financing.

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. We have included important factors in the cautionary statements included in this Quarterly Report, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward‑looking statements that we make. Our forward‑looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into. 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.

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,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	33,364		$	49,886
Marketable securities		74,774			49,793
Prepaid expenses and other current assets		2,244			1,417
Restricted cash, current portion		638			638
Total current assets		111,020			101,734
Property and equipment, net		11,147			3,861
Other long-term assets		933			881
Restricted cash, net of current portion		3,376			290
Right-of-use assets – operating leases		16,496			—
Right-of-use asset – financing lease		859			—
Total assets	$	143,831		$	106,766
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	8,043		$	3,309
Accrued expenses		11,204			13,893
Deferred revenue, current portion		1,114			1,926
Deferred rent, current portion		—			392
Financing and capital lease obligations, current portion		231			9
Operating lease obligations, current portion		1,978			—
Total current liabilities		22,570			19,529
Deferred rent, net of current portion		—			353
Deferred revenue, net of current portion		7,614			8,276
Financing and capital lease obligations, net of current portion		648			22
Operating lease obligations, net of current portion		18,425			—
Commitments and contingencies (See Note 8)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2019 and December 31, 2018; 666 and 0 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively (equivalent to 666,000 shares of common stock upon conversion)		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2019 and December 31, 2018; 42,441,227 and 33,765,864 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		43			34
Additional paid-in capital		367,764			296,100
Accumulated other comprehensive gain (loss)		21			(3	)
Accumulated deficit		(273,254	)		(217,545	)
Total stockholders' equity		94,574			78,586
Total liabilities and stockholders' equity	$	143,831		$	106,766

See accompanying notes to unaudited condensed consolidated financial statements.

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,
	2019			2018			2019			2018
Revenue	$	558		$	412		$	1,474		$	1,157
Operating expenses:
Research and development		15,931			12,856			43,968			35,054
General and administrative		5,016			3,876			15,077			11,792
Total operating expenses		20,947			16,732			59,045			46,846
Loss from operations		(20,389	)		(16,320	)		(57,571	)		(45,689	)
Other income, net		596			583			1,862			1,442
Net loss applicable to common stockholders	$	(19,793	)	$	(15,737	)	$	(55,709	)	$	(44,247	)

Net loss per share applicable to common stockholders - basic and diluted	$	(0.47	)	$	(0.47	)	$	(1.42	)	$	(1.37	)
Weighted-average number of common shares used in net loss per share applicable to common stockholders - basic and diluted		42,439,338			33,653,479			39,324,751			32,306,261

See accompanying notes to unaudited condensed consolidated financial statements.

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net loss	$	(19,793	)	$	(15,737	)	$	(55,709	)	$	(44,247	)
Other comprehensive gain (loss):
Unrealized holding gains (losses) on marketable securities		17			(6	)		24			29
Comprehensive loss	$	(19,776	)	$	(15,743	)	$	(55,685	)	$	(44,218	)

See accompanying notes to unaudited condensed consolidated financial statements.

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

For the nine months ended September 30, 2019 and 2018

(in thousands, except share data)

(unaudited)


	Common Stock				Preferred Stock						Accumulated
									Additional		Other
	Number of		Par		Number of		Par		Paid-In		Comprehensive			Accumulated			Stockholders’
	Shares		Value		Shares		Value		Capital		(Loss) Gain			Deficit			Equity
Balance at December 31, 2017		26,423,376	$	26		—	$	—	$	220,606	$	(42	)	$	(155,266	)	$	65,324
Exercise of stock options		103,153		—		—		—		488		—			—			488
Issuance of common stock to Incyte Corporation, net of issuance costs of $100		793,021		1		—		—		7,647		—			—			7,648
Issuance of common stock in underwritten public offering, net of issuance costs of $3,300		4,816,753		6		—		—		42,694		—			—			42,700
Issuance of common stock through private placement		144,505		—		—		—		1,380		—			—			1,380
Issuance of common stock at-the-market, net of issuance costs of $600		1,373,677		1		—		—		16,537		—			—			16,538
Stock-based compensation expense		—		—		—		—		4,977		—			—			4,977
Other comprehensive gain		—		—		—		—		—		29			—			29
Net loss		—		—		—		—		—		—			(44,247	)		(44,247	)
Balance at September 30, 2018		33,654,485	$	34		—	$	—	$	294,329	$	(13	)	$	(199,513	)	$	94,837

Balance at December 31, 2018		33,765,864	$	34		—	$	—	$	296,100	$	(3	)	$	(217,545	)	$	78,586
Exercise of stock options		7,780		—		—		—		51		—			—			51
Issuance of common stock and warrants in underwritten public offering, net of issuance costs of $4,600		8,667,333		9		—		—		60,350		—			—			60,359
Issuance of preferred stock and warrants in underwritten public offering, net of issuance costs of $400		—		—		666		—		4,638		—			—			4,638
Exercise of warrants		250		—		—		—		2		—			—			2
Stock-based compensation expense		—		—		—		—		6,623		—			—			6,623
Other comprehensive gain		—		—		—		—		—		24			—			24
Net loss		—		—		—		—		—		—			(55,709	)		(55,709	)
Balance at September 30, 2019		42,441,227	$	43		666	$	—	$	367,764	$	21		$	(273,254	)	$	94,574

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

For the three months ended September 30, 2019 and 2018

(in thousands, except share data)

(unaudited)

	Common Stock				Preferred Stock						Accumulated
									Additional		Other
	Number of		Par		Number of		Par		Paid-In		Comprehensive			Accumulated			Stockholders’
	Shares		Value		Shares		Value		Capital		(Loss) Gain			Deficit			Equity
Balance at June 30, 2018		33,621,055	$	34		—	$	—	$	292,461	$	(7	)	$	(183,776	)	$	108,712
Exercise of stock options		96		—		—		—		—		—			—			—
Issuance of common stock at-the-market, net of issuance costs of $10		33,334		—		—		—		330		—			—			330
Stock-based compensation expense		—		—		—		—		1,538		—			—			1,538
Other comprehensive loss		—		—		—		—		—		(6	)		—			(6	)
Net loss		—		—		—		—		—		—			(15,737	)		(15,737	)
Balance at September 30, 2018		33,654,485	$	34		—	$	—	$	294,329	$	(13	)	$	(199,513	)	$	94,837

Balance at June 30, 2019		42,435,497	$	43		666	$	—	$	365,329	$	4		$	(253,461	)	$	111,915
Exercise of stock options		5,480		—		—		—		45		—			—			45
Exercise of warrants		250		—		—		—		2		—			—			2
Stock-based compensation expense		—		—		—		—		2,388		—			—			2,388
Other comprehensive gain		—		—		—		—		—		17			—			17
Net loss		—		—		—		—		—		—			(19,793	)		(19,793	)
Balance at September 30, 2019		42,441,227	$	43		666	$	—	$	367,764	$	21		$	(273,254	)	$	94,574

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended
	September 30,
	2019			2018
Operating activities
Net loss	$	(55,709	)	$	(44,247	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,686			1,172
Amortization of financing right-of-use asset		138			—
Loss on disposal of fixed assets		14			—
Stock-based compensation expense		6,623			4,977
Net amortization of premiums and discounts on marketable securities		(751	)		(334	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(827	)		(758	)
Other long-term assets		(2	)		(45	)
Accounts payable		92			369
Accrued expenses		(2,602	)		1,529
Deferred revenue		(1,474	)		11,095
Operating lease asset and liabilities		3,162			—
Deferred rent and lease incentive		—			(261	)
Net cash used in operating activities		(49,650	)		(26,503	)
Investing activities
Purchases of property and equipment		(4,481	)		(1,189	)
Proceeds from the disposition of property and equipment		—			9
Purchases of marketable securities		(108,206	)		(72,000	)
Maturities of marketable securities		84,000			42,500
Net cash used in investing activities		(28,687	)		(30,680	)
Financing activities
Payments on financing and capital lease obligations		(149	)		(48	)
Proceeds from issuance of common stock through employee benefit plans		51			487
Proceeds from issuance of common stock through exercise of warrants		2			—
Proceeds from issuance of common stock and warrants in public offerings and private placements, net of issuance costs		60,359			68,508
Proceeds from issuance of convertible preferred stock and warrants in public offering, net of issuance costs		4,638			—
Net cash provided by financing activities		64,901			68,947
(Decrease) increase in cash, cash equivalents and restricted cash		(13,436	)		11,764
Cash, cash equivalents and restricted cash (See Note 6)
Beginning of period		50,814			32,688
End of period	$	37,378		$	44,452
Supplemental disclosure of cash flow information:
Cash paid for interest	$	52		$	1
Non-cash investing and financing activities
Property and equipment received but unpaid as of period end	$	4,773		$	77
Assets acquired under financing lease	$	997