SYROS PHARMACEUTICALS, INC. 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 and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 that we filed with theSecurities and Exchange Commission , orSEC , onMarch 15, 2022 , or the 2021 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 2021 10-K and in this Quarterly Report on Form 10-Q. 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 specifically required by law and the rules of theSEC , 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 seeking to redefine the power of small molecules to control the expression of genes. Based on our unique ability to elucidate regulatory regions of the genome, we aim to develop medicines that provide a profound benefit for patients with diseases that have eluded other genomics-based approaches. We are currently focused on developing treatments for cancer and diseases resulting from mutations of a single gene, also known as monogenic diseases, and building a clinical stage pipeline of gene control medicines.
Our clinical-stage product candidates are:
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tamibarotene, a selective retinoic acid receptor alpha, or RAR?, 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, and for which we are conducting SELECT-AML-1, a randomized Phase 2 clinical trial evaluating tamibarotene in combination with venetoclax and azacitidine in a genomically defined subset of newly diagnosed patients with acute myeloid leukemia, or AML, who are not suitable candidates for standard intensive chemotherapy;
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SY-2101, a novel oral form of arsenic trioxide, or ATO, which we are evaluating in a dose confirmation study to enable the conduct of a Phase 3 clinical trial in patients with newly diagnosed acute promyelocytic leukemia, or APL; and
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SY-5609, a highly selective and potent oral inhibitor of cyclin-dependent kinase 7, or CDK7, that we are evaluating in combination with chemotherapy in pancreatic cancer patients in an expansion cohort of our existing Phase 1 clinical trial, which is being evaluated in combination with atezolizumab, a PD-L1 inhibitor, in BRAF-mutant colorectal cancer in an arm of a Phase 1/1b clinical trial sponsored byF. Hoffmann-La Roche AG , or Roche, which is now actively enrolling. We also have multiple preclinical and discovery programs in oncology, including programs targeting the inhibition of CDK12, CDK11, and WRN. InJuly 2022 , we advanced our oral, potent, and selective CDK12 inhibitor, SY-12882, to development candidate. Preclinical data presented at theAmerican Association for Cancer Research (AACR) annual meeting inApril 2022 demonstrated that selective CDK12 inhibition resulted in strong anti-tumor activity as a single agent and in combination with a DNA damaging agent and in combination with a poly adenosine diphosphate-ribose polymerase, or PARP, inhibitor in models of breast, lung, and ovarian cancer. We are seeking partnerships for our oncology discovery programs, including CDK12. 32 -------------------------------------------------------------------------------- InDecember 2019 , we entered into a collaboration with Global Blood Therapeutics, Inc., now a subsidiary of Pfizer Inc., or GBT, to discover, develop and commercialize novel therapies for sickle cell disease and beta thalassemia. We also use our gene control platform in collaboration with third parties to identify and validate targets in diseases beyond our current areas of focus. To this end, we entered into a target discovery, research collaboration and option agreement with Incyte Corporation, or Incyte, inJanuary 2018 under which we are using our platform to identify novel therapeutic targets with a focus on myeloproliferative neoplasms.
Tamibarotene
At the 62ndAmerican Society of Hematology Annual Meeting and Exposition held inDecember 2020 , or ASH 2020, we presented data from our fully enrolled Phase 2 clinical trial evaluating the safety and efficacy of tamibarotene in combination with azacitidine in newly diagnosed AML patients who are not suitable candidates for standard chemotherapy, as well as in relapsed or refractory, or R/R, AML patients who have been prospectively selected using our proprietary RARA, the gene that codes for RAR?, biomarker. As of anOctober 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, the overall response rate, or ORR, was 67%, with a composite complete response rate of 61%, with 50% of patients achieving complete response, or CR, and 11% achieving a complete response with incomplete blood count recovery, or CRi. The median time to initial response was 1.2 months, the median duration of response was 10.8 months, and the median overall survival, or OS, among patients who achieved a CR or CRi was 18 months. As of the data cut-off, of the 28 patients without RARA overexpression that were evaluable for clinical response, the ORR was 43%, with a composite complete response rate of 32%, with 25% of patients achieving CR and 7% achieving CRi. The median time to initial response was 3.0 months, and the median duration of response was 10.3 months. We also presented translational data demonstrating that most newly diagnosed unfit AML patients with RARA overexpression enrolled in our Phase 2 study had a monocytic disease phenotype that is associated with resistance to venetoclax. These data suggest that the RARA biomarker not only selects for patients who are more likely to respond to treatment with tamibarotene but also for patients who may be less likely to benefit from treatment with venetoclax. Approximately 25,000 patients are diagnosed with unfit AML inthe United States andEurope annually and we expect the overall total addressable market opportunity for all AML patients to grow to approximately$6.6 billion by 2025. Based on these data 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. HR-MDS is a hematologic malignancy that is closely related to AML, and we believe that approximately 50% of HR-MDS patients overexpress RARA. We believe that approximately 21,000 patients are diagnosed with HR-MDS inthe United States andEurope annually and we expect the total addressable market opportunity for MDS patients of all risk groups to grow to approximately$3.3 billion by 2026. We plan to enroll approximately 190 newly diagnosed HR-MDS patients with RARA overexpression in the double-blind placebo-controlled trial, randomized 2:1 to receive tamibarotene in combination with azacitidine or placebo with azacitidine, respectively. The primary endpoint of the trial will be the CR rate. The trial is designed with 90% power and a one-sided alpha of 0.025 to detect a difference in CR rates between the experimental and control arms. We are currently dosing patients in SELECT-MDS-1, and we expect to report data from the SELECT-MDS-1 trial in the fourth quarter of 2023 or first quarter of 2024, with a potential submission to theU.S. Food and Drug Administration , or FDA, of a new drug application, or NDA, expected in 2024. In addition, we are advancing tamibarotene in combination with venetoclax and azacitidine in newly diagnosed unfit AML patients with RARA overexpression. The trial, which we refer to as SELECT-AML-1, is designed with a single-arm safety lead-in of approximately 15 patients to confirm the dosing regimen of the triplet to be used in the randomized portion of the Phase 2 clinical trial, which will evaluate the safety and efficacy of tamibarotene in combination with venetoclax and azacitidine compared to venetoclax and azacitidine in approximately 80 patients randomized 1:1. The primary endpoint of the trial will be the composite CR rate. The trial will also evaluate the triplet as a salvage strategy for patients in the control arm who do not respond to venetoclax and azacitidine. We have begun dosing patients in the SELECT AML-1 trial and expect to report clinical activity data from the safety lead-in portion of the ongoing trial at the 64th Annual Meeting of theAmerican Society of Hematology onSaturday, December 10, 2022 . We expect to report data from the randomized portion of the trial in 2023 or 2024. 33 -------------------------------------------------------------------------------- InMarch 2022 , we entered into an agreement withQIAGEN Manchester Limited , or QIAGEN, under which QIAGEN agreed to develop and commercialize an assay as a companion diagnostic test to determine the expression level of our proprietary RARA biomarker for use with tamibarotene in newly diagnosed higher-risk MDS patients. QIAGEN will also be responsible for obtaining and maintaining regulatory approvals for the commercial diagnostic test.
SY-2101
InDecember 2020 , we acquired fromOrsenix, LLC , or Orsenix, a novel oral form of ATO, which we refer to as SY-2101. SY-2101 is in development for the treatment of APL, a subtype of AML defined by a fusion of the RARA and promyelocytic leukemia, or PML, genes. APL represents approximately 10% of all AML cases, and approximately 2,000 patients are diagnosed with APL inthe United States andEurope annually. An intravenously administered, or IV, formulation of ATO is approved for use in combination with All-Trans-Retinoic-Acid, or ATRA, in patients with newly diagnosed low-risk APL and, while curative in more than 80% of patients, its administration requires up to 140 two- to four-hour infusions over the typical course of induction and consolidation treatment. If SY-2101 demonstrates comparable efficacy toIV ATO in our clinical studies, we believe it has the potential to become the standard-of-care frontline therapy for APL by providing a substantially more convenient option that reduces the treatment burden on patients, improving access, and lowering costs to the healthcare system. In a Phase 1 clinical trial, SY-2101 demonstrated bioavailability, pharmacokinetic, or PK, exposures similar toIV ATO , and a generally well-tolerated safety profile. We have begun dosing patients in a dose confirmation study of SY-2101. The ongoing dose confirmation study is evaluating the PK, food effect, safety and tolerability of SY-2101 and is expected to enroll between six and 24 adult APL patients undergoing consolidation withIV ATO plus ATRA. Participants receive a single dose of 15 mg of SY-2101 in both the fasted and in the fed state, and a single dose ofIV ATO for PK assessments, with flexibility to allow for other SY-2101 doses to be evaluated. Daily administration of SY-2101 is also being evaluated in a multiple-dose treatment module substituting forIV ATO during consolidation to assess steady state SY-2101 PK and safety. Based on preliminary data available to date, SY-2101 administered at 15 mg achieved comparable PK (AUC and Cmax) exposures toIV ATO at the approved dose of 0.15 mg/kg. Additionally, based on the data available to date, SY-2101 showed high oral bioavailability of approximately 80% and continues to support a favorable tolerability profile. The feedback from a Type C meeting to review our Phase 3 study design with the FDA inNovember 2021 continues to support molecular complete response rate as the primary endpoint for accelerated approval and event free survival as the primary endpoint for full approval, in each case compared to historicIV ATO data. FDA feedback supports the inclusion of patients randomized toIV ATO for comparative safety assessments. In addition, feedback received inJuly 2022 from theEuropean Medicines Agency , or EMA, on the Phase 3 study design also indicated that our proposed Phase 3 clinical trial could support regulatory approval in theEuropean Union . Based on this feedback and following confirmation of a dose that demonstrates comparable PK exposures toIV ATO , we intend to initiate a registration-enabling Phase 3 clinical trial in approximately 215 patients with newly diagnosed APL, randomized 2:1 to receive SY-2101 orIV ATO , in the second half of 2023.
SY-5609
At theEuropean Society for Medical Oncology Congress held inSeptember 2021 , or ESMO 2021, we presented data from the ongoing dose-escalation portion of the Phase 1 multi-center, open-label study of SY-5609 evaluating patients with advanced breast, colorectal, lung, ovarian and pancreatic cancers, as well as patients with solid tumors of any histology harboring Rb pathway alterations. Patients were treated in cohorts exploring continuous daily dosing as well as intermittent dosing regimens, including seven days on treatment and seven days off, or 7d on/7d off, and five days on treatment and two days off, or 5d on/2d off. As of aJuly 6, 2021 data cut-off, 54 patients treated with single-agent SY-5609 in the study were eligible for a safety analysis and 45 patients were evaluable for clinical response. The median age of patients enrolled in the study was 65.5. Patients had been heavily pre-treated with as many as eight prior therapies and a median of four prior therapies. Across all doses and schedules, the majority of adverse events, or AEs, were low-grade and reversible, and there was a low rate of discontinuations due to AEs. The most common treatment-emergent AEs were gastrointestinal (nausea, diarrhea, decreased appetite, abdominal pain, vomiting), fatigue, thrombocytopenia, and anemia. Tolerability was optimized with the 7d on/7d off schedule, which had the lowest rates of treatment-emergent AEs relative to other regimens, while demonstrating comparable rates of stable disease, or SD, as seen with more dose-intense regimens, supporting the selection of this schedule for further development of SY-5609. The maximum tolerated dose of the 7d on/7d off schedule has not yet been reached as of the data cut-off date. Changes in POLR2A mRNA expression, a pharmacodynamic marker for CDK7 inhibition, were associated with anti-tumor activity and were sustained for at least three days following drug cessation, supporting intermittent dosing. As of the data cut-off date, thirteen response-evaluable patients (29%) had achieved SD, with tumor regressions of up to 20% in six of 34 -------------------------------------------------------------------------------- those patients, across multiple tumor types. The most substantial clinical activity was observed in heavily pre-treated patients with advanced pancreatic cancer, for which five of 13 (39%) evaluable patients achieved SD, with tumor reductions in two of those SD patients. Further, reductions in the CA 19-9 tumor marker, which is used in clinical practice to monitor tumor progression, were observed in three of four pancreatic cancer patients with serial CA 19-9 data, with these reductions ranging from 32% to 72%. Notably, one metastatic pancreatic cancer patient who had failed two prior lines of therapy and relapsed after a third line of treatment experienced prolonged SD of up to ten months. The analysis of clinical activity by tumor type and mutational status supported the mechanistic rationale for SY-5609 in Rb-altered and KRAS-mutant cancers. We also presented preclinical data at ESMO 2021 evaluating the anti-tumor and PD activity of intermittent dosing regimens for SY-5609, as well as preclinical data evaluating SY-5609 as a single agent and in combination with chemotherapy in pancreatic cancer models. Based on these data, we are enrolling patients in an expansion cohort that includes two arms evaluating SY-5609 in combination with chemotherapy for the treatment of pancreatic cancer, one of which is evaluating SY-5609 in combination with gemcitabine in patients in first or second relapse who have progressed following treatment with the chemotherapy regimen known as FOLFIRINOX, and the other is exploring SY-5609 in combination with gemcitabine and nab-paclitaxel in patients following first relapse after FOLFIRINOX. SY-5609 is administered 7d on/7d off at a starting dose of 4 mg in both the gemcitabine combination and triplet combination arms, and the combination agents will be administered at the approved doses. The study is designed to evaluate safety and tolerability, as well as efficacy measures such as progression free survival and disease control rate, or DCR, which is the combined rate of CR, partial response, or PR, and SD. As of aOctober 12, 2022 safety data cut-off, a maximum tolerated dose, or MTD, of single agent SY-5609 administered in a 7 day on/7 day off dosing regimen has not been reached. The 10 mg dose level did not result in any dose limiting toxicities, or DLTs, further supporting the tolerability of the 7 day on/7 day off dosing regimen in which 30 patients have been dosed across five dose levels (4, 5, 6, 7, and 10 mg), with one DLT observed at the 4 mg single agent dose level. PK analyses demonstrated an expected increase in SY-5609 exposure levels, with the 10 mg single-agent dose also supporting a preliminary exposure-response relationship. At the time of theOctober 20, 2022 clinical activity data-cut off, two of three study patients treated at the 10 mg dose level were response evaluable, with two of two response-evaluable patients achieving SD (one with pancreatic ductal adenocarcinoma, or PDAC, and one with colorectal cancer, or CRC), with the PDAC patient experiencing a 10% tumor reduction. As of the safety data cut-off, an MTD for either the doublet or the triplet has not been reached in the 7 day on/7 day off dosing regimen, with dosing of SY-5609 up to 5 mg in the doublet and up to 4 mg in the triplet regimen, respectively. SY-5609 has been safely combined with gemcitabine and with gemcitabine plus nab-paclitaxel, with no new safety signals identified and the majority of AEs being low grade and reversible. The most common related AEs in the cohort with SY-5609 and gemcitabine, where the highest SY-5609 doses were evaluated in combination with chemotherapy, included fatigue, nausea, decreased appetite and decreased platelet count (all low grade), with one patient experiencing a DLT of grade 3 diarrhea at the 5 mg SY-5609 dose level. No DLTs were reported in patients treated with SY-5609 in combination with gemcitabine/nab-paclitaxel. As of the clinical activity data cut-off, initial doublet activity of SY-5609 plus gemcitabine in PDAC included a confirmed PR by Response Evaluation Criteria in Solid Tumors, or RECIST, accompanied by a 98% reduction in the CA 19-9 tumor marker from a baseline of 60,357 U/mL to 968 U/mL, in one of four response evaluable patients treated at the 4 mg SY-5609 dose level, corresponding to a 25% DCR, and SD in three of four response evaluable patients treated at the 5 mg SY-5609 dose level, corresponding to a 75% DCR, for an overall DCR of 50% (four out of eight) in response evaluable patients. There is preliminary evidence for an exposure-response relationship, with the responding patient who achieved a confirmed PR demonstrating higher-than-average exposure relative to other patients at that dose. Two of three patients treated at the 4 mg dose level in the triplet regimen cohort were response evaluable, including one with SD. We intend to continue dose escalation in the single agent cohort for select solid tumors to a dose of 15mg and in the doublet combination cohort in PDAC patients to a dose of 10 mg of SY-5609 plus gemcitabine. In parallel, we plan to seek a partnership for the further development of SY-5609. InAugust 2021 , we announced entry into a clinical supply agreement with Roche, pursuant to which we agreed to supply SY-5609 for a combination dosing cohort with atezolizumab in Roche's ongoing Phase 1/1b INTRINSIC trial, which is evaluating multiple targeted therapies or immunotherapy, including atezolizumab, as single agents or in rational specified combinations in molecularly defined subsets of colorectal cancer patients. SY-5609 is being evaluated in combination with atezolizumab in patients with BRAF-mutant disease, and this arm of the trial is now actively enrolling. Under the terms of the agreement, Roche will sponsor and conduct the Phase 1/1b study to evaluate the safety, tolerability and preliminary efficacy of the combination of SY-5609 and atezolizumab and will assume all costs 35 -------------------------------------------------------------------------------- associated with the study. In exchange for providing SY-5609, we will receive access to the data on SY-5609 in combination with atezolizumab. We retain all rights to SY-5609. Strategic Financing OnJuly 3, 2022 , we entered into an Agreement and Plan of Merger, or the Merger Agreement, withTack Acquisition Corp. , aDelaware corporation and a wholly-owned subsidiary of us, or the Merger Sub, andTyme Technologies, Inc. , aDelaware corporation, or Tyme, providing for the merger of the Merger Sub with and into Tyme, with Tyme surviving the merger as our wholly-owned subsidiary, or the Merger. In connection with the closing of the Merger onSeptember 16, 2022 , and in accordance with the terms of the Merger Agreement, we acquired net cash, cash equivalents and marketable securities of approximately$62.6 million . Also onJuly 3, 2022 , immediately prior to the execution and delivery of the Merger Agreement, we entered into a Securities Purchase Agreement with certain accredited investors, pursuant to which the investors agreed to purchase shares of our common stock and/or pre-funded warrants to purchase shares of our common stock, and accompanying warrants to purchase additional shares of our common stock (or pre-funded warrants in lieu thereof), or the PIPE Financing. OnSeptember 16, 2022 , the PIPE Financing closed concurrently with the Merger. At the closing of the Merger, we issued an aggregate of 7,546,014 shares of our common stock to Tyme stockholders. In the PIPE Financing, we issued an aggregate of 6,387,173 shares of our common stock and, in lieu of shares to certain investors, pre-funded warrants to purchase an aggregate of 7,426,739 shares of common stock, and, in each case, accompanying warrants to purchase an aggregate of up to 13,813,912 additional shares of common stock (or pre-funded warrants to purchase common stock in lieu thereof). We received aggregate gross proceeds from the PIPE Financing of$130 million , before deducting estimated offering expenses payable by us not inclusive of any exercise of the warrants.
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. For the three months endedSeptember 30, 2022 and 2021, we recognized$3.9 million and$5.7 million of revenue, respectively, of which$3.7 million and$5.6 million was related to our collaboration with GBT and$0.2 million and$0.1 million to our collaboration with Incyte, respectively. For the nine months endedSeptember 30, 2022 and 2021, we recognized$15.6 million and$15.7 million of revenue, respectively, of which$14.4 million and$12.9 million was related to our collaboration with GBT and$1.2 million and$2.8 million to our collaboration with Incyte, respectively. Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including development of our gene control platform and the development of our product candidates, which include:
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employee-related expenses including salaries and benefits;
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stock-based compensation expense;
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external costs of funding activities performed by third parties that conduct research and development on our behalf and of purchasing supplies used in designing, developing and manufacturing preclinical study and clinical trial materials;
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consulting, licensing and professional fees related to research and development activities; and
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facilities costs, depreciation and amortization and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other operating costs.
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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, 2022 and 2021 (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Tamibarotene external costs $ 9,363 $ 8,464 $ 31,310 $ 22,028
SY-5609 and other CDK7 program external
costs 1,233 2,650 5,290 8,576
SY-2101 program external costs 498 1,277 3,227 3,035
Other research and platform program
external costs 3,654 5,564 11,505 12,797
Employee-related expenses, including
stock-based compensation 9,174 7,515 27,133 21,596
Facilities and other expenses 1,837 1,792 5,565 5,045
Total research and development expenses $ 25,759 $ 27,262 $
84,030
We expect our research and development expenses will increase for the foreseeable future as we seek to advance our programs. 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 our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our 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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successful completion of preclinical studies, including activities related to preparation of investigational new drug applications, or INDs, and minimally efficacious dose studies in animals, where applicable and required, under the requirements of the FDA or another regulatory authority;
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approval of INDs for our product candidates to commence planned or future clinical trials;
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successful enrollment in, and completion of, clinical trials;
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successful data from our clinical programs that support an acceptable benefit-risk profile of our product candidates in the intended populations;
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successful development, and subsequent clearance or approval, of companion diagnostic tests for use in identifying potential patients;
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receipt of regulatory approvals from applicable regulatory authorities;
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establishment of arrangements with third-party manufacturers for clinical supply and commercial manufacturing and, where applicable, commercial manufacturing capabilities;
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establishment and maintenance of patent and trade secret protection or regulatory exclusivity for our product candidates;
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commercial launch of our product candidates, if and when approved, whether alone or in collaboration with others;
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enforcement and defense of intellectual property rights and claims;
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maintenance of a continued acceptable safety profile of the product candidates following approval;
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retention of key research and development personnel; and
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the continuing impact of the COVID-19 pandemic.
Any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development 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 planned 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 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. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates.
Transaction Related Expenses
Transaction related expenses primarily consist of incurred costs allocated to the warrants issued in connection with the PIPE Financing that were accounted for as liabilities, and severance paid to former Tyme employees.
Interest Income
Interest income consists of interest income on our cash, cash equivalents and investments in marketable securities, including the related amortization of premium 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 Liability
Change in fair value of warrant liability is the result of the remeasurement of the fair value of our warrant liability 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 withU.S. generally accepted accounting principles, orU.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 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 discussed in our 2021 10-K. 38 --------------------------------------------------------------------------------
Results of Operations
Comparison of three months ended
The following table summarizes our results of operations for the three months endedSeptember 30, 2022 and 2021, together with the changes in those items in dollars (in thousands): Three Months Ended September 30, 2022 2021 Dollar Change % Change Statements of Operations Data: Revenue$ 3,891 $ 5,697 $ (1,806 ) (32 ) % Operating expenses: Research and development 25,759 27,262 (1,503 ) (6 ) % General and administrative 8,076 5,346 2,730 51 % Transaction related expenses 9,510 - 9,510 - % Total operating expenses 43,345 32,608 10,737 33 % Loss from operations (39,454 ) (26,911 ) (12,543 ) 47 % Interest income 392 32 360 1,125 % Interest expense (1,051 ) (984 ) (67 ) 7 % Change in fair value of warrant liability 9,860 1,836 8,024 437 % Net loss$ (30,253 ) $ (26,027 ) $ (4,226 ) 16 % Revenue For the three months endedSeptember 30, 2022 , revenue was$3.9 million , of which$3.7 million was attributable to our collaboration with GBT and$0.2 million was attributable to our collaboration with Incyte. For the three months endedSeptember 30, 2021 , revenue was$5.7 million , of which$5.6 million was attributable to our collaboration with GBT and$0.1 million was attributable to our collaboration with Incyte.
Research and Development Expense
Research and development expense decreased by approximately$1.5 million , or 6%, from$27.3 million for the three months endedSeptember 30, 2021 to$25.8 million for the three months endedSeptember 30, 2022 . The following table summarizes our research and development expenses for the three months endedSeptember 30, 2022 and 2021, together with the changes to those items in dollars (in thousands): Three Months Ended September 30, 2022 2021 Dollar Change % Change External research and development$ 12,796 $ 15,907 $ (3,111 ) (20 ) % Employee-related expenses, excluding stock-based compensation 7,678 6,030 1,648 27 % Stock-based compensation 1,496 1,485 11 1 % Consulting, licensing and professional fees 1,952 2,048 (96 ) (5 ) % Facilities and other expenses 1,837 1,792 45 3 % Total research and development expenses$ 25,759 $ 27,262 $ (1,503 ) (6 ) % The decrease in research and development expense was primarily attributable to the decrease in clinical trials' start-up costs and activities associated with our preclinical programs, including the following:
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a decrease of approximately
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an increase of approximately
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a decrease of approximately$0.1 million , or 5%, for consulting, licensing and professional fees, primarily related to decreases in costs associated with our pre-clinical programs and SY-5609.
General and Administrative Expense
General and administrative expense increased by approximately$2.8 million , or 51%, from$5.3 million for the three months endedSeptember 30, 2021 to$8.1 million for the three months endedSeptember 30, 2022 . The change in general and administrative expense was primarily attributable to an increase in employee-related expenses, and an increase in recruiting fees.
Transaction Related Expenses
Transaction related expenses primarily consist of incurred costs allocated to the warrants issued in connection with the PIPE Financing that were accounted for as liabilities, and severance paid to former Tyme employees.
Interest Income
Interest income was derived generally from our investments in cash, cash equivalents and marketable securities. The increase in interest income during the three months endedSeptember 30, 2022 as compared to the three months endedSeptember 30, 2021 was due to the higher interest rate during the three month period endedSeptember 30, 2022 compared to the same period in 2021.
Interest Expense
Interest expense was related to our credit facility with Oxford and equipment financing arrangements. Interest expense increased slightly from the three months endedSeptember 30, 2021 to the three months endedSeptember 30, 2022 due to a higher average outstanding credit facility balance during the three month period endedSeptember 30 2022 .
Change in Fair Value of Warrant Liability
The change in fair value of warrant liability during the three months endedSeptember 30, 2022 as compared to the three months endedSeptember 30, 2021 was a result of the remeasurement of the fair value of warrants issued in connection with theSeptember 2022 andDecember 2020 private placements.
Comparison of nine months ended
The following table summarizes our results of operations for the nine months endedSeptember 30, 2022 and 2021, together with the changes in those items in dollars (in thousands): Nine Months Ended September 30, 2022 2021 Dollar Change % Change Statements of Operations Data: Revenue$ 15,634 $ 15,686 $ (52 ) (0 ) % Operating expenses: Research and development 84,030 73,077 10,953 15 % General and administrative 21,970 16,606 5,364 32 % Transaction related expenses 9,510 - 9,510 - % Total operating expenses 115,510 89,683 25,827 29 % Loss from operations (99,876 ) (73,997 ) (25,879 ) 35 % Interest income 539 56 483 863 % Interest expense (3,008 ) (2,921 ) (87 ) 3 % Change in fair value of warrant liability 12,465 14,117 (1,652 ) (12 ) % Net loss$ (89,880 ) $ (62,745 ) $ (27,135 ) 43 % Revenue 40
-------------------------------------------------------------------------------- For the nine months endedSeptember 30, 2022 , revenue was$15.6 million , of which$14.4 million was attributable to our collaboration with GBT and$1.2 million was attributable to our collaboration with Incyte. For the nine months endedSeptember 30, 2021 , revenue was$15.7 million , of which$12.9 million was attributable to our collaboration with GBT and$2.8 million was attributable to our collaboration with Incyte.
Research and Development Expense
Research and development expense increased by approximately$11.0 million , or 15%, from$73.1 million for the nine months endedSeptember 30, 2021 to$84.0 million for the nine months endedSeptember 30, 2022 . The following table summarizes our research and development expenses for the nine months endedSeptember 30, 2022 and 2021, together with the changes to those items in dollars (in thousands): Nine Months Ended September 30, 2022 2021 Dollar Change % Change External research and development$ 46,678 $ 41,726 $ 4,952 12 % Employee-related expenses, excluding stock-based compensation 22,809 17,336 5,473 32 % Stock-based compensation 4,324 4,260 64 2 % Consulting, licensing and professional fees 4,654 4,710 (56 ) (1 ) % Facilities and other expenses 5,565 5,045 520 10 %
Total research and development expenses
$ 10,953 15 % The increase in research and development expense was primarily attributable to activities associated with advancing our clinical and preclinical programs as well as enhancing our internal capabilities, including the following:
•
an increase of approximately$5.0 million , or 12%, for external research and development costs, primarily due to an increase in costs associated with the continued advancement of our clinical trials of tamibarotene, offset by a decrease in costs associated with our preclinical programs;
•
an increase of approximately
•
an increase of approximately
General and Administrative Expense
General and administrative expense increased by approximately$5.4 million , or 32%, from$16.6 million for the nine months endedSeptember 30, 2021 to$22.0 million for the nine months endedSeptember 30, 2022 . The change in general and administrative expense was primarily attributable to an increase in employee-related expenses, recruiting fees, and software costs.
Transaction Related Expenses
Transaction related expenses primarily consist of incurred costs allocated to the warrants issued in connection with the PIPE Financing that were accounted for as liabilities, and severance paid to former Tyme employees.
Interest Income
Interest income was derived generally from our investments in cash, cash equivalents and marketable securities. The increase in interest income during the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was due to a higher interest rate in marketable securities during the nine months endedSeptember 30, 2022 compared to the same period in 2021. Interest Expense Interest expense was related to our credit facility with Oxford and equipment financing arrangements. Interest expense for the nine months endedSeptember 30, 2022 has slightly increased compared to the interest expense for the 41 --------------------------------------------------------------------------------
nine months ended
Change in Fair Value of Warrant Liability
The change in fair value of warrant liability during the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was a result of the remeasurement of the fair value of warrants issued in connection with theSeptember 2022 andDecember 2020 private placements.
Liquidity and Capital Resources
Sources of Liquidity
We funded our operations from inception throughSeptember 30, 2022 , primarily through the sale of equity securities, through license and collaboration agreements, including those with Incyte and GBT, and through the credit facility with Oxford. OnJuly 3, 2022 , we entered into the Merger Agreement with Tyme. Also onJuly 3, 2022 , immediately prior to the execution and delivery of the Merger Agreement, we entered into the Securities Purchase Agreement with certain accredited investors. In connection with the closing of the Merger onSeptember 16, 2022 , and in accordance with the terms of the Merger Agreement, we acquired net cash, cash equivalents and marketable securities of approximately$67.1 million . The PIPE Financing closed concurrently with the Merger onSeptember 16, 2022 , pursuant to which we received aggregate gross proceeds of$129.9 million , before deducting offering expenses payable by us, and not inclusive of any exercise of the warrants issued in the PIPE Financing. OnFebruary 12, 2020 , we entered into a Loan and Security Agreement, or the Loan Agreement, with Oxford. Pursuant to the Loan Agreement, a term loan of up to an aggregate principal amount of$60.0 million is available to us. A$20.0 million term loan was funded onFebruary 12, 2020 , and another$20.0 million term loan was funded onDecember 23, 2020 . OnJuly 3, 2022 , we entered into an amendment, or the Loan Amendment, to the Loan Agreement with Oxford. Pursuant to the Loan Amendment, Oxford has agreed to modify the Loan Agreement in order to, among other things, extend the interest only period fromMarch 1, 2023 toMarch 1, 2024 and extend the maturity date fromFebruary 1, 2025 toFebruary 1, 2026 , and (iii) upon the achievement of certain milestones and subject to the payment of certain fees, further extend the interest only period toSeptember 1, 2024 and maturity date toAugust 1, 2026 . As ofSeptember 30, 2022 ,$20.0 million remains available under the Loan Agreement at the sole discretion of Oxford. OnJune 12, 2020 , we filed a universal shelf registration statement on Form S-3 with theSEC to register for sale from time to time up to$300.0 million of common stock, preferred stock, debt securities, warrants and/or units in one or more registered offerings. The registration statement was declared effective onJune 22, 2020 . Further, inJune 2020 , we entered into an at-the-market sales agreement, or the sales agreement, withCowen & Co. , or Cowen, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to$75.0 million through Cowen pursuant to the registration statement. InJanuary 2021 , we issued shares of our common stock in an underwritten public offering resulting in gross proceeds of$75.6 million , before deducting underwriting discounts and commissions and other transaction expenses of approximately$5.1 million , pursuant to the Form S-3 that was filed with theSEC onJune 12, 2020 .
As of
As of
As of
42
--------------------------------------------------------------------------------Cash Flows
The following table provides information regarding our cash flows for the nine
months ended
Nine Months
Ended
2022 2021
Net cash provided by (used in): Operating activities$ (91,982 ) $ (76,571 ) Investing activities 29,464 (52,408 ) Financing activities 141,748 70,415
Net increase (decrease) in cash, cash equivalents and restricted cash
$ 79,230
Net cash used in operating activities for the nine months ended
Net cash used in operating activities was$92.0 million during the nine months endedSeptember 30, 2022 compared to$76.6 million for the nine months endedSeptember 30, 2021 . The increase in net cash used in operating activities during the nine months endedSeptember 30, 2022 was primarily due to an increase of$27.1 million loss from operations offset by a$5.0 million transaction cost allocated to warrants issued in connection with the PIPE Financing and a$4.0 million change in the net operating assets balances during the nine months endedSeptember 30, 2022 .
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities was$29.5 million during the nine months endedSeptember 30, 2022 compared to net cash used in investing activities of$52.4 million during the nine months endedSeptember 30, 2021 . The net cash provided by investing activities was primarily due to the maturity of marketable securities of$30.0 million , offset by the purchase of$0.5 million of property and equipment during the nine months endedSeptember 30, 2022 . The net cash used in investing activities was due to the$1.0 million purchase of property and equipment and the$51.4 million investments in marketable securities during the nine months endedSeptember 30, 2021 .
Net Cash Provided by Financing Activities and Merger
Net cash provided by financing activities was$141.8 million during the nine months endedSeptember 30, 2022 compared to$70.4 million for the nine months endedSeptember 30, 2021 . Cash provided by financing activities for the nine months endedSeptember 30, 2022 was primarily due to$128.1 million of proceeds from the issuance of common stock and accompanying 2022 Warrants and 2022 Pre-Funded Warrants in the PIPE Financing, net of issuance costs and$14.2 million of proceeds from the Merger (recapitalization), net of issuance costs, partially offset by the payment of$0.3 million to Oxford related to an amendment to our Loan and Security Agreement, and$0.2 million of payments made under our financing lease. In comparison, the cash provided by financing activities for the nine months endedSeptember 30, 2021 was primarily due to net proceeds of$70.3 million from a public offering of shares of our common stock,$0.2 million of proceeds from the issuance of common stock under our employee stock purchase plan, and$0.2 million of proceeds from the exercise of stock options, offset by$0.2 million of payments made under our financing lease.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities,
particularly as we continue to advance our clinical trials of tamibarotene,
SY-2101 and SY-5609, seek to develop companion diagnostic tests for use with our
product candidates, initiate new research and preclinical development projects
and seek marketing approval for any product candidates that we successfully
develop. In addition, if we obtain marketing approval for any of our product
candidates, 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 research and development programs or future
commercialization rights to our product candidates.
43
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We believe that our cash, cash equivalents and marketable securities as of
September 30, 2022 , will enable us to fund our planned operating expense and
capital expenditure requirements into 2025. Our future funding requirements,
both short-term and long-term, will depend on many factors, including:
•
the scope, progress, timing, costs and results of clinical trials of tamibarotene, SY-2101 and SY-5609 and any associated companion diagnostic tests;
•
research and preclinical development efforts for any future product candidates that we may develop;
•
the number of future product candidates that we pursue and their development requirements;
•
our ability to enter into, and the terms and timing of, any collaborations, licensing 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 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 ourU.S. co-promotion option under the GBT agreement;
•
whether our target discovery collaboration with 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 collaboration agreement with Incyte will ever be paid;
•
the outcome, timing and costs of seeking regulatory approvals;
•
the costs of commercialization activities for any of our product candidates that receive marketing approval to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;
•
the costs of acquiring potential new product candidates or technology;
•
the costs of any physician education programs relating to selecting and treating genomically defined patient populations;
•
the timing and amount of milestone and other payments due to licensors for
patent and technology rights used in our gene control platform or to
•
the timing and amount of milestone payments due to Orsenix associated with the development and commercialization of SY-2101;
•
revenue received from commercial sales, if any, of our current and future product candidates;
•
our headcount growth and associated costs as we advance our clinical pipeline and establish a commercial infrastructure;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and
•
the continuing impact of the COVID-19 pandemic.
Identifying potential product candidates and conducting preclinical studies and
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,
our product candidates, if approved, may not achieve commercial success.
Accordingly, we will need to continue to rely on
44
--------------------------------------------------------------------------------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 sale 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.
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