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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 June 30, 2021

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 July 31, 2021: 61,930,800

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

Page

Part I – FINANCIAL INFORMATION

 

 

Item 1.    Financial Statements (unaudited)

5

 

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

5

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020

6

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020

7

Condensed Consolidated Statements of Stockholder’s Equity for the Three and Six Months Ended June 30, 2021 and 2020

8

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

10

Notes to Condensed Consolidated Financial Statements

11

 

 

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

30

 

 

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

43

 

 

Item 4.    Controls and Procedures

43

 

 

Part II – OTHER INFORMATION

 

 

Item 1A. Risk Factors

44

 

 

Item 5.    Other Information

46

 

 

Item 6.    Exhibits

48

 

 

Signatures

49

 

2


 

 

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:

 

our plans to initiate and expand clinical trials of our product candidates and our expectations for the timing, quantity and quality of information to be reported from our clinical trials of tamibarotene (formerly known as SY‑1425), SY-2101 and SY‑5609;

 

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 discover and develop compounds suitable for clinical development and the timing for designation of future development candidates;

 

our ability to replicate in any clinical trial of one of our product candidates the results we observed in preclinical or earlier clinical studies of 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 a drug candidate will be nominated to enter investigational new drug application-enabling studies under our sickle cell disease collaboration with Global Blood Therapeutics, Inc., or GBT, whether GBT will exercise its option to exclusively license intellectual property arising from the collaboration, whether and when any option exercise fees, milestone payments or royalties under the collaboration agreement with GBT will ever be paid, and whether we exercise our U.S. co-promotion option under the GBT agreement;

 

whether our target discovery 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;

3


 

 

 

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 and cash equivalents 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. In particular, the extent to which the COVID-19 pandemic continues to impact our operations and those of the third parties on which we rely will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the pandemic, additional or modified government actions, and the actions that may be required to contain the virus or treat its impact. The COVID-19 pandemic has and may continue to adversely impact our operations and workforce, including our discovery research, supply chain and clinical trial operations activities, which in turn could have an adverse impact on our business and financial results.

 

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 our drug candidates 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 our internal assumptions are reasonable, no independent source has verified such assumptions.

 

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.

4


 

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)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

160,915

 

 

$

173,984

 

Marketable securities

 

 

21,114

 

 

 

 

Accounts receivable

 

 

 

 

 

7

 

Contract assets

 

 

2,177

 

 

 

2,324

 

Prepaid expenses and other current assets

 

 

2,001

 

 

 

2,242

 

Total current assets

 

 

186,207

 

 

 

178,557

 

Property and equipment, net

 

 

13,784

 

 

 

14,213

 

Marketable securities - noncurrent

 

 

13,264

 

 

 

 

Other long-term assets

 

 

2,442

 

 

 

1,966

 

Restricted cash

 

 

3,086

 

 

 

3,086

 

Right-of-use asset – operating lease

 

 

14,484

 

 

 

14,831

 

Right-of-use assets – financing leases

 

 

467

 

 

 

597

 

Total assets

 

$

233,734

 

 

$

213,250

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,671

 

 

$

3,603

 

Accrued expenses

 

 

9,963

 

 

 

11,084

 

Deferred revenue, current portion

 

 

12,123

 

 

 

12,209

 

Financing lease obligations, current portion

 

 

278

 

 

 

265

 

Operating lease obligation, current portion

 

 

1,588

 

 

 

1,463

 

Total current liabilities

 

 

27,623

 

 

 

28,624

 

Deferred revenue, net of current portion

 

 

4,851

 

 

 

9,877

 

Financing lease obligations, net of current portion

 

 

214

 

 

 

356

 

Operating lease obligation, net of current portion

 

 

23,747

 

 

 

24,578

 

Warrant liability

 

 

7,430

 

 

 

19,711

 

Debt, net of debt discount, long term

 

 

39,892

 

 

 

39,551

 

Commitments and contingencies (See Note 9)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2021 and December 31, 2020; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized at June 30, 2021 and December 31, 2020; 61,920,250 and 56,222,746 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

 

61

 

 

 

56

 

Additional paid-in capital

 

 

543,674

 

 

 

467,518

 

Accumulated other comprehensive loss

 

 

(19

)

 

 

 

Accumulated deficit

 

 

(413,739

)

 

 

(377,021

)

Total stockholders' equity

 

 

129,977

 

 

 

90,553

 

Total liabilities and stockholders' equity

 

$

233,734

 

 

$

213,250

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

5,162

 

 

$

3,188

 

 

$

9,989

 

 

$

5,566

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

25,786

 

 

 

14,796

 

 

 

45,815

 

 

 

29,365

 

General and administrative

 

 

5,520

 

 

 

5,133

 

 

 

11,260

 

 

 

10,282

 

Total operating expenses

 

 

31,306

 

 

 

19,929

 

 

 

57,075

 

 

 

39,647

 

Loss from operations

 

 

(26,144

)

 

 

(16,741

)

 

 

(47,086

)

 

 

(34,081

)

Interest income

 

 

12

 

 

 

32

 

 

 

24

 

 

 

416

 

Interest expense

 

 

(969

)

 

 

(487

)

 

 

(1,937

)

 

 

(757

)

Change in fair value of warrant liability

 

 

4,611

 

 

 

 

 

 

12,281

 

 

 

 

Net loss applicable to common stockholders

 

$

(22,490

)

 

$

(17,196

)

 

$

(36,718

)

 

$

(34,422

)

Net loss per share applicable to common stockholders - basic and diluted

 

$

(0.36

)

 

$

(0.38

)

 

$

(0.59

)

 

$

(0.77

)

Weighted-average number of common shares used in net loss per share applicable to common stockholders - basic and diluted

 

 

62,859,500

 

 

 

45,699,277

 

 

 

62,123,658

 

 

 

44,811,638

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6


 

 

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(22,490

)

 

$

(17,196

)

 

$

(36,718

)

 

$

(34,422

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding loss on marketable securities

 

 

(19

)

 

 

(3

)

 

 

(19

)

 

 

(24

)

Comprehensive loss

 

$

(22,509

)

 

$

(17,199

)

 

$

(36,737

)

 

$

(34,446

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

7


 

 

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

For the six months ended June 30, 2021 and 2020

(in thousands, except share data)

(unaudited)

 

 

Common Stock

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

43,367,801

 

 

$

43

 

 

$

372,100

 

 

$

24

 

 

$

(292,983

)

 

$

79,184

 

Exercise of stock options

 

 

49,100

 

 

 

 

 

 

212

 

 

 

 

 

 

 

 

 

212

 

Vesting of restricted stock units

 

 

103,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares under Employee Stock Purchase Plan

 

 

36,708

 

 

 

 

 

 

223

 

 

 

 

 

 

 

 

 

223

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,186

 

 

 

 

 

 

 

 

 

5,186

 

Issuance of common stock at-the-market, net of issuance costs of $411

 

 

2,201,810

 

 

 

2

 

 

 

11,917

 

 

 

 

 

 

 

 

 

11,919

 

Issuance of warrants

 

 

 

 

 

 

 

 

128

 

 

 

 

 

 

 

 

 

128

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(24

)

 

 

 

 

 

(24

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,422

)

 

 

(34,422

)

Balance at June 30, 2020

 

 

45,758,881

 

 

$

45

 

 

$

389,766

 

 

$

 

 

$

(327,405

)

 

$

62,406

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

56,222,746

 

 

$

56

 

 

$

467,518

 

 

$

 

 

$

(377,021

)

 

$

90,553

 

Exercise of stock options

 

 

20,134

 

 

 

 

 

 

157

 

 

 

 

 

 

 

 

 

157

 

Vesting of restricted stock units

 

 

244,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares under Employee Stock Purchase Plan

 

 

33,058

 

 

 

 

 

 

153

 

 

 

 

 

 

 

 

 

153

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,383

 

 

 

 

 

 

 

 

 

5,383

 

Issuance of common stock in underwritten public offering, net of issuance costs of $5,132

 

 

5,400,000

 

 

 

5

 

 

 

70,463

 

 

 

 

 

 

 

 

 

70,468

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,718

)

 

 

(36,718

)

Balance at June 30, 2021

 

 

61,920,250

 

 

$

61

 

 

$

543,674

 

 

$

(19

)

 

$

(413,739

)

 

$

129,977

 

 

8


 

 

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

For the three months ended June 30, 2021

(in thousands, except share data)

(unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2020

 

 

45,690,718

 

 

$

45

 

 

$

386,704

 

 

$

3

 

 

$

(310,209

)

 

$

76,543

 

Exercise of stock options

 

 

18,505

 

 

 

 

 

 

112

 

 

 

 

 

 

 

 

 

112

 

Vesting of restricted stock units

 

 

12,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares under Employee Stock Purchase Plan

 

 

36,708

 

 

 

 

 

 

223

 

 

 

 

 

 

 

 

 

223

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,727

 

 

 

 

 

 

 

 

 

2,727

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,196

)

 

 

(17,196

)

Balance at June 30, 2020

 

 

45,758,881

 

 

$

45

 

 

$

389,766

 

 

$

-

 

 

$

(327,405

)

 

$

62,406

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

61,849,642

 

 

$

61

 

 

$

541,068

 

 

$

 

 

$

(391,249

)

 

$

149,880

 

Vesting of restricted stock units

 

 

37,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares under Employee Stock Purchase Plan

 

 

33,058

 

 

 

 

 

 

153

 

 

 

 

 

 

 

 

 

153

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,453

 

 

 

 

 

 

 

 

 

2,453

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,490

)

 

 

(22,490

)

Balance at June 30, 2021

 

 

61,920,250

 

 

$

61

 

 

$

543,674

 

 

$

(19

)

 

$

(413,739

)

 

$

129,977

 

 

 

 

9


 

 

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(36,718

)

 

$

(34,422

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,350

 

 

 

1,370

 

Amortization of right-of-use asset

 

 

130

 

 

 

130

 

Stock-based compensation expense

 

 

5,383

 

 

 

5,186

 

Change in fair value of warrant liability

 

 

(12,281

)

 

 

 

Net amortization of premiums and discounts on marketable securities

 

 

20

 

 

 

(49

)

Amortization of debt-discount and accretion of deferred debt costs

 

 

341

 

 

 

117

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

241

 

 

 

376

 

Accounts receivable

 

 

7

 

 

 

19,998

 

Contract assets

 

 

147

 

 

 

(1,451

)

Other long-term assets

 

 

(726

)

 

 

(378

)

Accounts payable

 

 

(6

)

 

 

(2,152

)

Accrued expenses

 

 

(861

)

 

 

(1,653

)

Deferred revenue

 

 

(5,112

)

 

 

(1,556

)

Proceeds for tenant improvement incentive from landlord

 

 

 

 

 

2,035

 

Operating lease asset and liabilities

 

 

(359

)

 

 

264

 

Net cash used in operating activities

 

 

(48,444

)

 

 

(12,185

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(690

)

 

 

(2,785

)

Purchases of marketable securities

 

 

(34,417

)

 

 

 

Maturities of marketable securities

 

 

 

 

 

50,000

 

Net cash (used in) provided by investing activities

 

 

(35,107

)

 

 

47,215

 

Financing activities

 

 

 

 

 

 

 

 

Payments on financing and capital lease obligations

 

 

(129

)

 

 

(118

)

Proceeds from issuance of common stock through employee benefit plans

 

 

157

 

 

 

212

 

Proceeds from the issuance of common stock through employee stock purchase plan

 

 

153

 

 

 

223

 

Proceeds from issuance of common stock through at-the-market sales agreement, net of issuance costs

 

 

 

 

 

11,896

 

Proceeds from term loan, net of issuance costs

 

 

 

 

 

19,700

 

Proceeds from issuance of common stock in public offering, net of issuance costs

 

 

70,337

 

 

 

 

Payment of issuance cost related to out of period offering

 

 

(36

)

 

 

 

Net cash provided by financing activities

 

 

70,482

 

 

 

31,913

 

Net Increase (decrease) in cash, cash equivalents and restricted cash

 

 

(13,069

)

 

 

66,943

 

Cash, cash equivalents and restricted cash (See reconciliation in Note 6)

 

 

 

 

 

 

 

 

Beginning of period

 

 

177,070

 

 

 

44,817

 

End of period

 

$

164,001

 

 

$

111,760

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,585

 

 

$

642

 

Cash paid for tax

 

$

 

 

$

7

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Property and equipment received but unpaid as of period end

 

$

113

 

 

$

301

 

Offering costs incurred but unpaid as of period end

 

$

10

 

 

$

176

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

10


 

 

SYROS PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Nature of Business

 

Syros Pharmaceuticals, Inc. (the "Company"), a Delaware corporation formed in November 2011, is a biopharmaceutical company seeking to redefine the power of small molecules to control the expression of genes.

 

The Company is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals; risks inherent in the development and commercialization of medicines to treat human disease; competition from other companies, many of which are larger and better capitalized; risks relating to obtaining and maintaining necessary intellectual property protection; and the need to obtain adequate additional financing to fund the development of its product candidates and discovery activities. If the Company is unable to raise capital when needed or on favorable terms, it would be forced to delay, reduce, eliminate or out-license certain of its research and development programs or future commercialization rights to its product candidates.

 

On January 22, 2021, the Company issued and sold an aggregate of 5,400,000 shares of its common stock in an underwritten public offering at a public offering price of $14.00 per share, resulting in gross proceeds of $75.6 million before deducting underwriting discounts and commissions and other transaction expenses of approximately $5.1 million.

 

The Company has incurred significant annual net operating losses in every year since its inception. It expects to continue to incur significant and increasing net operating losses for at least the next several years. The Company’s net losses were $84.0 million, $75.4 million and $62.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of June 30, 2021, the Company had an accumulated deficit of $413.7 million. The Company has not generated any revenues from product sales, has not completed the development of any product candidate and may never have a product candidate approved for commercialization. The Company has financed its operations to date primarily through the sale of equity securities, license and collaboration agreements and term debt. The Company has devoted substantially all of its financial resources and efforts to research and development and general and administrative activities to support such research and development. The Company’s 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 the Company’s stockholders' equity and working capital. The Company believes that its cash, cash equivalents and marketable securities of $195.3 million as of June 30, 2021 will be sufficient to allow the Company to fund its current operating plan for a period of at least 12 months past the issuance date of these unaudited interim condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation

 

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these financial statements should be read in conjunction with the financial statements as of and for the year ended December 31, 2020 and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 4, 2021. 

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of June 30, 2021, the results of its operations, statements of cash flows and statements of stockholders’ equity for the three and six months ended June 30, 2021 and 2020. Such adjustments are of a normal and recurring nature. The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021, or for any future period.

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Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Syros Pharmaceuticals, Inc. and its wholly owned subsidiaries, Syros Securities Corporation, a Massachusetts corporation formed by the Company in December 2014 to exclusively engage in buying, selling and holding securities on its own behalf, and Syros Pharmaceuticals (Ireland) Limited, an Irish limited liability company formed by the Company in January 2019. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Management considers many factors in selecting appropriate financial accounting policies and in developing the estimates and assumptions that are used in the preparation of the financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, which include, but are not limited to, expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates and whether historical trends are expected to be representative of future trends. Management’s estimation process may yield a range of potentially reasonable estimates and management must select an amount that falls within that range of reasonable estimates. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimates related to revenue recognition, warrant liability, stock-based compensation expense, accrued expenses and income taxes. Actual results may differ from those estimates or assumptions. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, reserves and allowances, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat it.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company's chief operating decision maker is the Chief Executive Officer. The Company and the chief operating decision maker view the Company's operations and manage its business in one operating segment. The Company operates only in the United States.

Cash and Cash Equivalents

The Company considers all highly liquid instruments that have original maturities of three months or less when acquired to be cash equivalents. Cash equivalents, which generally consist of money market funds that invest in U.S. Treasury obligations, as well as overnight repurchase agreements and corporate debt securities, are stated at fair value. The Company maintains its bank accounts at one major financial institution.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurement (“ASC 820”), established a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are those that reflect the Company’s assumption about the inputs that market participants would use in pricing the asset or liability. These are developed based on the best information available under the circumstances.

ASC 820 identified fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 established a three-tier fair value hierarchy that distinguishes between the following:

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Level 1—Quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

Level 3—Unobservable inputs developed using estimates or assumptions developed by the Company, which reflect those that a market participant would use.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, prepaid expenses, other current assets, restricted cash, accounts payable, accrued expenses and deferred revenue approximate their respective fair values due to their short-term nature.

Amortization of Debt Discount and Issuance Costs

Long-term debt is initially recorded at its allocated proceeds, net of discounts and issuance costs. Debt discount and issuance costs, consisting of legal fees, fair value of the warrant at its issuance date and other issuance fees directly related to the debt, are offset against the initial carrying value of the debt and are amortized to interest expense over the estimated life of the debt using the effective interest method.

Revenue Recognition

 

To date the Company’s only revenue has consisted of collaboration and license revenue. The Company has not generated any revenue from product sales and does not expect to generate any revenue from product sales for the foreseeable future.

 

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:

 

 

(i)

identify the contract(s) with a customer;

 

 

(ii)

identify the performance obligations in the contract;

 

 

(iii)

determine the transaction price;

 

 

(iv)

allocate the transaction price to the performance obligations in the contract; and

 

 

(v)

recognize revenue when (or as) the entity satisfies a performance obligation.

 

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. If a contract is determined to be within the scope of ASC 606 at inception, the Company assesses the goods or services promised within such contract, determines which of those goods and services are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, the Company records a contract asset, excluding any amounts presented as accounts receivable. The Company includes unbilled accounts receivable as contract assets on its consolidated balance sheets. The Company records accounts receivable for amounts billed to the customer for which the Company has an unconditional right to consideration. The Company assesses contract assets and accounts receivable for impairment and, to date, no impairment losses have been recorded.

 

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From time to time, the Company may enter into agreements that are within the scope of ASC 606. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, up-front license fees or prepaid research and development services; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products. Each of these payments results in license and collaboration revenues, except for revenues from royalties on net sales of licensed products, which will be classified as royalty revenues.

 

The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”), to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606. For those elements of the arrangement that are accounted for pursuant to ASC 606, the Company applies the five-step model described above.

Research and Development

Expenditures relating to research and development are expensed in the period incurred. Research and development expenses consist of both internal and external costs associated with the development of the Company’s gene control platform and product candidates. Research and development costs include salaries and benefits, materials and supplies, external research, preclinical and clinical development expenses, stock-based compensation expense and facilities costs. Facilities costs primarily include the allocation of rent, utilities, depreciation and amortization.

In certain circumstances, the Company is required to make nonrefundable advance payments to vendors for goods or services that will be received in the future for use in research and development activities. In such circumstances, the nonrefundable advance payments are deferred and capitalized, even when there is no alternative future use for the research and development, until related goods or services are provided.

The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the work being performed, including the phase or completion of the event, invoices received and costs. Significant judgements and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates.

The Company may in-license the rights to develop and commercialize product candidates. For each in-license transaction the Company evaluates whether it has acquired processes or activities along with inputs that would be sufficient to constitute a “business” as defined under U.S. GAAP. A “business” as defined under U.S. GAAP consists of inputs and processes applied to those inputs that have the ability to create outputs. Although businesses usually have outputs, outputs are not required for an integrated set of activities to qualify as a business. When the Company determines that it has not acquired sufficient processes or activities to constitute a business, any up-front payments, as well as milestone payments, are immediately expensed as acquired research and development in the period in which they are incurred.

 

Warrants

The Company accounts for issued warrants either as a liability or equity in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480-10”) or ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (“ASC 815-40”). Under ASC 480-10, warrants are considered a liability if they are mandatorily redeemable and they require settlement in cash, other assets, or a variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the warrants should be classified as a liability or as equity. Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting period. Any change in the fair value of the warrants after the issuance date is recorded in the consolidated statements of operations as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.

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Stock-Based Compensation Expense

 

The Company accounts for its stock-based compensation awards in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees and directors, including grants of restricted stock units and stock option awards, to be recognized as expense in the consolidated statements of operations based on their grant date fair values. Consistent with the grants for employees and directors, grants of restricted stock units and stock option awards to other service providers, referred to as non-employees, are measured based on the grant-date fair value of the award and expensed in the Company’s condensed consolidated statement of operations over the vesting period. The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. Prior to June 30, 2016, the Company was a private company and, therefore, lacks Company-specific historical and implied volatility information. As a result, the Company determines its expected volatility by using a blend of its historical experience and a weighted average of selected peer companies. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options to non-employees can be determined using either the contractual term of the option award or the “simplified” method. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The Company uses the value of its common stock to determine the fair value of restricted stock units.

 

The Company expenses the fair value of its stock-based awards to employees and non-employees on a straight-line basis over the associated service period, which is generally the vesting period. The Company accounts for forfeitures as they occur instead of estimating forfeitures at the time of grant. Ultimately, the actual expense recognized over the vesting period will be for only those options that vest.

 

Compensation expense for discounted purchases under the employee stock purchase plan is measured using the Black-Scholes model to compute the fair value of the lookback provision plus the purchase discount and is recognized as compensation expense over the offering period.

 

For stock-based awards that contain performance-based milestones, the Company records stock-based compensation expense in accordance with the accelerated attribution model. Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions as of the reporting date. For certain performance-based awards, notwithstanding any vesting in accordance with the achievement of performance-based milestones, such awards vest in full on the sixth anniversary of the vesting commencement date. Compensation expense for such awards is recognized over the six-year vesting period unless management determines that the achievement of any performance-based milestones is probable, in which case expense is accelerated.

Net Loss per Share

Basic net earnings per share applicable to common stockholders is calculated by dividing net earnings applicable to common stockholders by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net earnings per share applicable to common stockholders is calculated by adjusting the weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method and the if-converted method. For purposes of the calculation of dilutive net loss per share applicable to common stockholders, stock options, unvested restricted stock units, and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share applicable to common stockholders, as their effect would be anti-dilutive; therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.

As of June 30, 2021, pre-funded warrants to purchase 1,000,000 shares of common stock that were issued in connection with the December 2020 private placement (refer to Note 10) were included in the basic and diluted net loss per share calculation.

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The following common stock equivalents were excluded from the calculation of diluted net loss per share applicable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

 

 

 

As of June 30,