10-Q 1 syrs-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2024

OR

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

Commission file number: 001-37813

SYROS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

45-3772460

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

35 CambridgePark Drive, 4th Floor

Cambridge, Massachusetts

 

02140

(Address of Principal Executive Offices)

 

(Zip Code)

(617) 744-1340

(Registrant’s Telephone Number, Including Area Code)

 

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

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange
on Which Registered

Common Stock, $0.001 par value

 

SYRS

 

Nasdaq Global Select Market

 

 

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

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

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

 

Large accelerated filer

 

 

 

Accelerated filer

Non-accelerated filer

 

 

 

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

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

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

Number of shares of the registrant’s common stock, $0.001 par value, outstanding on May 7, 2024: 26,728,337

 


 

TABLE OF CONTENTS

 

Page

Part I – FINANCIAL INFORMATION

 

 

Item 1. Financial Statements (unaudited)

5

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

5

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023

6

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023

7

Condensed Consolidated Statements of Stockholder’s Equity for the Three Months Ended March 31, 2024 and 2023

8

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

9

Notes to Condensed Consolidated Financial Statements

10

 

 

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

25

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

34

 

 

Item 4. Controls and Procedures

35

 

 

Part II – OTHER INFORMATION

 

 

Item 1A. Risk Factors

36

 

 

Item 5. Other Information

37

 

 

Item 6. Exhibits

38

 

 

Signatures

39

 

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 tamibarotene and our expectations for the timing, quantity and quality of information to be reported from our clinical trials of tamibarotene;
our planned clinical trials for tamibarotene or for any other product candidates, whether conducted by us or by any collaborators, including the timing of these trials and of the anticipated results;
our ability to replicate in any clinical trial of a product candidate the results we observed in preclinical or earlier clinical studies of such product candidate;
our ability to replicate in the final results of any clinical trial of one of our product candidates the results we observed in interim results of such clinical trial;
our plans to research, develop, seek approval for, manufacture and commercialize tamibarotene or any 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 tamibarotene or any future product candidates;
our ability to enter into, and the terms and timing of, any collaborations, license agreements, or other arrangements;
the potential benefits of any collaboration;
developments relating to our competitors and our industry;
the impact of government laws and regulations;
the timing of and our ability to file new drug applications and obtain and maintain regulatory approvals for tamibarotene or any future product candidates;
the rate and degree of market acceptance and clinical utility of any products for which we receive marketing approval;
our commercialization, marketing and manufacturing capabilities and strategy;
our intellectual property position and strategy;
our ability to identify additional products or product candidates with significant commercial potential;
our expectations related to the use of our current cash, cash equivalents and marketable securities and the period of time in which such capital will be sufficient to fund our planned operations;
our estimates regarding expenses, future revenue, capital requirements and need for additional financing; and
general economic conditions, including inflation, recession risk and increasing interest rates.

3


 

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

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

This report also includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties as well as our own estimates. All of the market data used in this report involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for tamibarotene or any future product candidate include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that 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)

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

83,523

 

 

$

139,526

 

Marketable securities

 

 

24,781

 

 

 

 

Prepaid expenses and other current assets

 

 

3,898

 

 

 

5,454

 

Total current assets

 

 

112,202

 

 

 

144,980

 

Property and equipment, net

 

 

6,964

 

 

 

7,298

 

Other long-term assets

 

 

1,550

 

 

 

1,592

 

Restricted cash

 

 

2,119

 

 

 

2,119

 

Right-of-use asset – operating lease

 

 

11,893

 

 

 

12,185

 

Total assets

 

$

134,728

 

 

$

168,174

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

11,346

 

 

$

11,544

 

Accrued expenses

 

 

11,881

 

 

 

16,146

 

Operating lease obligation, current portion

 

 

2,409

 

 

 

2,324

 

Debt, current portion

 

 

11,667

 

 

 

6,667

 

Total current liabilities

 

 

37,303

 

 

 

36,681

 

Operating lease obligation, net of current portion

 

 

17,887

 

 

 

18,528

 

Warrant liabilities

 

 

34,773

 

 

 

61,747

 

Debt, net of debt discount, net of current portion

 

 

29,708

 

 

 

34,556

 

Commitments and contingencies (See Note 9)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized at March 31, 2024 and December 31, 2023; 0 shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.001 par value; 70,000,000 shares authorized at March 31, 2024 and December 31, 2023; 26,728,337 and 26,448,678 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

26

 

 

 

26

 

Additional paid-in capital

 

 

741,546

 

 

 

739,443

 

Accumulated deficit

 

 

(726,515

)

 

 

(722,807

)

Total stockholders' equity

 

 

15,057

 

 

 

16,662

 

Total liabilities and stockholders' equity

 

$

134,728

 

 

$

168,174

 

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

 

 

 

 

March 31,

 

 

 

 

2024

 

2023

 

Revenue

 

 

$

 

$

2,954

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

 

24,655

 

 

28,761

 

General and administrative

 

 

 

6,266

 

 

7,405

 

Total operating expenses

 

 

 

30,921

 

 

36,166

 

Loss from operations

 

 

 

(30,921

)

 

(33,212

)

Interest income

 

 

 

1,546

 

 

1,775

 

Interest expense

 

 

 

(1,307

)

 

(1,217

)

Change in fair value of warrant liabilities

 

 

 

26,974

 

 

8,865

 

Net loss applicable to common stockholders

 

 

$

(3,708

)

$

(23,789

)

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

 

 

$

(0.10

)

$

(0.85

)

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

 

 

 

38,978,046

 

 

27,842,218

 

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

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(3,708

)

 

$

(23,789

)

Other comprehensive gain:

 

 

 

 

 

 

Unrealized holding gain on marketable securities, net of tax

 

 

 

 

 

161

 

Comprehensive loss

 

$

(3,708

)

 

$

(23,628

)

See accompanying notes to unaudited condensed consolidated financial statements.

7


 

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the three months ended March 31, 2024 and 2023

(in thousands, except share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Gain

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

20,263,116

 

 

$

20

 

 

$

685,847

 

 

$

102

 

 

$

(558,233

)

 

$

127,736

 

Vesting of restricted stock units

 

 

111,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of pre-funded warrants

 

 

34,991

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,645

 

 

 

 

 

 

 

 

 

2,645

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

161

 

 

 

 

 

 

161

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,789

)

 

 

(23,789

)

Balance at March 31, 2023

 

 

20,409,130

 

 

$

20

 

 

$

688,492

 

 

$

263

 

 

$

(582,022

)

 

$

106,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

 

26,448,678

 

 

$

26

 

 

$

739,443

 

 

$

 

 

$

(722,807

)

 

$

16,662

 

Vesting of restricted stock units

 

 

279,659

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,103

 

 

 

 

 

 

 

 

 

2,103

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,708

)

 

 

(3,708

)

Balance at March 31, 2024

 

 

26,728,337

 

 

$

26

 

 

$

741,546

 

 

$

 

 

$

(726,515

)

 

$

15,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8


 

SYROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(3,708

)

 

$

(23,789

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

334

 

 

 

638

 

Gain on disposal of property and equipment

 

 

(29

)

 

 

 

Non-cash lease expense

 

 

 

 

 

66

 

Stock-based compensation expense

 

 

2,103

 

 

 

2,645

 

Change in fair value of warrant liabilities

 

 

(26,974

)

 

 

(8,865

)

Net amortization of premiums and discounts on marketable securities

 

 

(112

)

 

 

(527

)

Amortization of debt-discount and accretion of deferred debt costs

 

 

152

 

 

 

135

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,556

 

 

 

1,318

 

Unbilled receivable

 

 

 

 

 

(71

)

Other long-term assets

 

 

42

 

 

 

701

 

Accounts payable

 

 

(198

)

 

 

(3,616

)

Accrued expenses

 

 

(4,000

)

 

 

(4,217

)

Deferred revenue

 

 

 

 

 

(1,085

)

Operating lease liabilities

 

 

(264

)

 

 

(234

)

Net cash used in operating activities

 

 

(31,098

)

 

 

(36,901

)

Investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(235

)

Proceeds from the disposition of asset-held-for-sale

 

 

29

 

 

 

 

Purchases of marketable securities

 

 

(24,669

)

 

 

(48,500

)

Maturities of marketable securities

 

 

 

 

 

22,987

 

Net cash used in investing activities

 

 

(24,640

)

 

 

(25,748

)

Financing activities

 

 

 

 

 

 

Payments on financing lease obligations

 

 

 

 

 

(53

)

Payment of issuance cost related to underwritten registered direct offering and at-the-market facility

 

 

(265

)

 

 

 

Net cash used in financing activities

 

 

(265

)

 

 

(53

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(56,003

)

 

 

(62,702

)

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

 

 

 

 

 

 

Beginning of period

 

 

141,645

 

 

 

170,553

 

End of period

 

 

85,642

 

 

 

107,851

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

1,209

 

 

$

1,053

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Offering costs incurred but unpaid as of period end

 

$

74

 

 

$

10

 

See accompanying notes to unaudited condensed consolidated financial statements.

9


 

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 committed to developing new standards of care for the frontline treatment of patients with hematologic malignancies.

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. 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.

The Company has incurred significant 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. As of March 31, 2024, the Company had cash, cash equivalents and marketable securities of $108.3 million and an accumulated deficit of $726.5 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 a credit facility, the sale of equity securities and through license and collaboration agreements. 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.

On April 6, 2023, the Company filed a universal shelf registration statement on Form S-3 (the “2023 Registration Statement”), with the Securities and Exchange Commission (the “SEC”) to register for sale from time to time up to $250.0 million of common stock, preferred stock, debt securities, warrants and/or units in one or more registered offerings. The 2023 Registration Statement was declared effective on April 28, 2023. Further, in April 2023, the Company entered into an at-the-market sales agreement (the “2023 Sales Agreement”) with Cowen and Company, LLC (“Cowen”) pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $50.0 million through Cowen pursuant to the 2023 Registration Statement.

On October 2, 2023, the Company announced a strategic realignment to prioritize key development and pre-launch activities to advance tamibarotene for the treatment of newly diagnosed higher-risk myelodysplastic syndrome and newly diagnosed acute myeloid leukemia, and to stop further investment in the clinical development of SY-2101 (oral arsenic trioxide) for the treatment of newly diagnosed acute promyelocytic leukemia, as well as in the Company’s preclinical and discovery-stage programs. In connection with these decisions, the Company instituted certain expense reduction measures (the “Restructuring”), including a reduction of approximately 35% of the Company’s employee base excluding members of the Company’s drug discovery organization whose employment ended concurrently with the termination, effective October 16, 2023, of its collaboration with Pfizer, Inc. (“Pfizer”) related to the discovery, development and commercialization of novel therapies for sickle cell disease and beta thalassemia. The Restructuring was completed by February 2024.

 

Based on its current operating plan, the Company’s management believes that as of March 31, 2024, the Company will meet its liquidity requirements for a period of at least 12 months from the issuance date of this Quarterly Report on Form 10-Q.

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”).

10


 

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 March 31, 2024, the results of its operations for the three months ended March 31, 2024 and 2023, statements of stockholders’ equity for the three months ended March 31, 2024 and 2023, and statements of cash flows for the three months ended March 31, 2024 and 2023. Such adjustments are of a normal and recurring nature. The results for the three months ended March 31, 2024 are not necessarily indicative of the results for the year ending December 31, 2024, or for any future period.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, (i) 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, (ii) Syros Pharmaceuticals (Ireland) Limited, an Irish limited liability company formed by the Company in January 2019, and (iii) Tyme Technologies, Inc., a Delaware corporation, which was the surviving corporation in connection with the filing of a certificate of merger with the Secretary of State of the State of Delaware on September 16, 2022. 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, valuation of warrant liabilities, stock-based compensation expense, accrued expenses, and income taxes. Actual results may differ from those estimates or assumptions.

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 its 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 consist of money market funds that invest in U.S. Treasury obligations, as well as overnight repurchase agreements, are stated at fair value. The Company maintains its bank accounts in two major financial institutions.

Off-Balance Sheet Risk and Concentrations of Credit Risk

The Company has no financial instruments with off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash equivalents and marketable securities. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. The Company is not exposed to any significant concentrations of credit risk from these financial instruments. The goals of the Company’s investment policy, in order of priority, are safety and preservation of principal and liquidity of investments sufficient to meet cash flow requirements.

11


 

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 inputs 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 inputs 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:

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.

Property and Equipment

Property and equipment consists of computer equipment, furniture and fixtures and leasehold improvements, all of which are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs that do not improve or extend the lives of the respective assets are recorded to expense as incurred. Major betterments are capitalized as additions to property and equipment. Depreciation and amortization are recognized over the estimated useful lives of the assets using the straight-line method.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the carrying values of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying values of the assets exceed their fair value. The Company did not record any impairment losses during the three months ended March 31, 2024 and 2023.

Revenue Recognition

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;

12


 

(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 contract assets as unbilled accounts receivable 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.

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 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 judgments 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

13


 

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 liabilities 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 liability or 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.

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. The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. The Company estimates its expected stock volatility based on its historical volatility. The expected term of the Company’s stock options granted to employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The Company uses the contractual term in determining the expected term of the stock options granted to non-employees. 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 at the grant date to determine the fair value of restricted stock awards.

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.

Income Taxes

The Company accounts for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity, and changes in facts or circumstances related to a tax position.

14


 

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.

The following outstanding pre-funded warrants as of March 31, 2024 and 2023,were included in the basic and diluted net loss per share calculation (refer to Note 10):

 

 

 

As of March 31,

 

 

 

2024

 

 

2023

 

2020 Pre-Funded Warrants, issued in the 2020 Private Placement

 

 

100,000

 

 

 

100,000

 

2022 Pre-Funded Warrants, issued in the 2022 Private Placement

 

 

7,179,819

 

 

 

7,391,739

 

2023 Pre-Funded Warrants, issued in December 2023 registered direct offering

 

 

5,242,588

 

 

 

 

Total

 

 

12,522,407

 

 

 

7,491,739

 

 

 

 

 

 

 

 

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 March 31,

 

 

 

2024

 

 

2023

 

Stock options

 

 

1,479,059

 

 

 

1,714,298

 

Unvested restricted stock units

 

 

2,569,764

 

 

 

2,294,651

 

Warrants*

 

 

14,142,298

 

 

 

14,142,298

 

Total

 

 

18,191,121

 

 

 

18,151,247

 

* As of March 31, 2024 and 2023, this is comprised of 2,754 warrants to purchase common stock issued in connection with the execution and first draw of the Company’s loan agreement in February 2020 (refer to Note 7), 1,738 warrants to purchase common stock issued in connection with the second draw on this loan agreement in December 2020 (refer to Note 7), 282,809 warrants to purchase common stock issued in connection with the private placement in December 2020 (refer to Note 10), 13,813,912 warrants to purchase common stock issued in connection with the private placement in September 2022 (refer to Note 10), and 41,085 warrants to purchase common stock that were issued upon the assumption and conversion of warrants in connection with the acquisition of Tyme Technologies, Inc.

3. Collaboration and Research Arrangements

Collaboration with Global Blood Therapeutics

On December 17, 2019, the Company entered into a license and collaboration agreement (the “GBT Collaboration Agreement”) with Global Blood Therapeutics, Inc. (“GBT”), now a subsidiary of Pfizer, pursuant to which the parties agreed to a research collaboration to discover novel targets that induce fetal hemoglobin in order to develop new small molecule treatments for sickle cell disease and beta thalassemia. The research term (the “Research Term”) was for an initial period of three years and could be extended for up to two additional one-year terms upon mutual agreement. In November 2022, the Company and GBT agreed to extend the Research Term for an additional one-year period. In July 2023, Pfizer, as successor to GBT, elected to exercise its right to terminate the GBT Collaboration Agreement, effective October 16, 2023.

Pursuant to the terms of the GBT Collaboration Agreement, GBT paid the Company an upfront payment of $20.0 million. GBT also agreed to reimburse the Company for full-time employee and out-of-pocket costs and expenses

15


 

incurred by the Company in accordance with the agreed-upon research budget, which was anticipated to total approximately $40.0 million over the initial Research Term.

The Company granted to GBT an option (the “Option”) to obtain an exclusive, worldwide license, with the right to sublicense, under relevant intellectual property rights and know-how of the Company arising from the collaboration to develop, manufacture and commercialize any compounds or products resulting from the collaboration. This Option terminated simultaneously with the effective date of termination of the GBT Collaboration Agreement, and the Company is no longer eligible to receive any milestone or royalty-based payments from GBT.

GBT Collaboration Revenue

The Company analyzed the GBT Collaboration Agreement and concluded that it represented a contract with a customer within the scope of ASC 606.

The Company identified a single performance obligation, which included a (i) non-exclusive research license that GBT had access to during the initial Research Term and (ii) research and development services provided during the initial Research Term. The non-exclusive research license only allowed GBT to evaluate the candidate compounds developed under the research plan or to conduct work allocated to it during the Research Term. GBT could not extract any benefit from the non-exclusive research license without the research and development services performed by the Company, including the provision of data package information. As such, these two promises are inputs to a combined output (the delivery of data package allowing GBT to make an Option exercise decision) and are bundled into a single performance obligation (the non-exclusive research license and research and development service performance obligation).

ASC 606 requires an entity to recognize revenue only when it satisfies a performance obligation by transferring a promised good or service to a customer. A good or service is considered to be transferred when the customer obtains control. As the non-exclusive research license and research and development services represent one performance obligation, the Company has determined that it would satisfy its performance obligation over a period of time as services are performed and GBT receives the benefit of the services, as the overall purpose of the arrangement is for the Company to perform the services. The Company recognizes revenue associated with the performance obligation as the research and development services are provided using an input method, according to the costs incurred as related to the research and development activities and the costs expected to be incurred in the future to satisfy the performance obligation. The transfer of control occurs during this time and is the best measure of progress towards satisfying the performance obligation.

During the three months ended March 31, 2023, the Company recognized revenue of $3.0 million under the GBT Collaboration Agreement.

4. Cash, Cash Equivalents and Marketable Securities

Cash equivalents are highly liquid investments that are readily convertible into cash with original maturities of three months or less when purchased. Marketable securities consist of securities with original maturities greater than 90 days when purchased. The Company classifies these marketable securities as available-for-sale and records them at fair value in the accompanying condensed consolidated balance sheet. Unrealized gains or losses are included in accumulated other comprehensive loss. Premiums or discounts from par value are amortized to interest income over the life of the underlying security.

Cash, cash equivalents and marketable securities consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

 

 

 

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

March 31, 2024

 

Amortized Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market funds

 

$

83,523

 

 

$

 

 

$

 

 

$

83,523

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury obligation - due in one year or less

 

 

24,781

 

 

 

1

 

 

 

1

 

 

 

24,781

 

Total:

 

$

108,304

 

 

$

1

 

 

$

1

 

 

$

108,304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16


 

 

 

 

 

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

December 31, 2023

 

Amortized Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market funds

 

$

139,526

 

 

$

 

 

$

 

 

$

139,526

 

Total

 

$

139,526

 

 

$

 

 

$

 

 

$

139,526

 

Although available to be sold to meet operating needs or otherwise, securities are generally held through maturity. The cost of securities sold is determined based on the specific identification method for purposes of recording realized gains and losses. During the three months ended March 31, 2024 and 2023, there were no realized gains or losses on sales of investments, and no investments were adjusted for other-than-temporary declines in fair value.

As of March 31, 2024, marketable securities with maturities of one year or less when purchased are presented in current assets in the accompanying condensed consolidated balance sheet.

As of March 31, 2024, the Company had one security that was in an unrealized loss position. The aggregate fair value of the security held by the Company in an unrealized loss position for less than 12 months as of March 31, 2024 was $8.9 million. The Company determined that there was no material change in the credit risk of the above marketable security. As a result, the Company determined it did not hold any marketable securities with an other-than temporary impairment as of March 31, 2024.

 

5. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

 

 

 

 

 

Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

Description

 

March 31, 2024

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market funds

 

$

83,523

 

 

$

83,523

 

 

$

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury obligation - due in one year or less

 

 

24,781

 

 

 

24,781

 

 

 

 

 

 

 

Total

 

$

108,304

 

 

$

108,304

 

 

$

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

34,773

 

 

$

 

 

$

 

 

$

34,773

 

Total

 

$

34,773

 

 

$

 

 

$

 

 

$

34,773

 

 

 

 

 

 

 

Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

Description

 

December 31, 2023

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market funds

 

$

139,526

 

 

$

139,526

 

 

$

 

 

$

 

Total

 

$

139,526

 

 

$

139,526

 

 

$

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

61,747

 

 

$

 

 

$

 

 

$

61,747

 

Total

 

$

61,747

 

 

$

 

 

$

 

 

$

61,747

 

Assumptions Used in Determining Fair Value of Warrants

The Company issued warrants to purchase an aggregate of up to 13,813,912 shares of common stock in connection with a private placement in September 2022 (the “2022 Warrants”) and warrants to purchase an aggregate of up to 282,809 shares of common stock in connection with a private placement in December 2020 (the “2020 Warrants”). The Company accounted for the 2022 Warrants and 2020 Warrants as liabilities. The Company recorded the fair value of these warrants upon issuance using the Black-Scholes valuation model and is required to revalue these

17


 

warrants at each reporting date with any changes in fair value recorded on the Company's statement of operations. The valuation of the 2022 Warrants and 2020 Warrants is considered under Level 3 of the fair value hierarchy and influenced by the fair value of the underlying common stock of the Company.

A summary of the Black Scholes pricing model assumptions used to record the fair value of the warrants is as follows:

 

 

March 31, 2024

 

 

 

December 31, 2023

Stock price

 

$

5.35

 

 

 

$

7.79

 

 

Average risk-free interest rate

 

 

4.36

 

%

 

 

3.96

 

%

Average expected life (in years)

 

 

3.42

 

 

 

 

3.67

 

 

Average expected volatility

 

 

86.64

 

%

 

 

87.63

 

%

Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis

The following table reflects the change in the Company’s Level 3 warrant liabilities for the three months ended March 31, 2024 and the year ended December 31, 2023 (in thousands):

 

 

March 31, 2024

 

 

 

December 31, 2023

 

Fair value of warrant liabilities as of beginning of period

 

$

61,747

 

 

 

$

24,472

 

Change in fair value

 

 

(26,974

)

 

 

 

37,275

 

Fair value of warrant liabilities as of end of period

 

$

34,773

 

 

 

$

61,747

 

 

6. Restricted Cash

As of each of March 31, 2024 and December 31, 2023, the Company had $2.1 million in restricted cash, which was classified as long-term on the Company’s condensed consolidated balance sheets, and all of which was attributable to the into the lease with respect to the Company's corporate headquarters (the “HQ Lease”) (See Note 9).

In connection with the execution of the HQ Lease, the Company was required to provide the landlord with a letter of credit in the amount of $3.1 million that will expire 95 days after expiration or early termination of the HQ Lease. Pursuant to the HQ Lease, the Company exercised its right to reduce the amount of the letter of credit to $2.1 million during the year ended December 31, 2023.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the amounts shown in the Company’s condensed consolidated statement of cash flows as of March 31, 2024 and 2023 (in thousands):

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

83,523

 

 

$

104,765

 

Restricted cash

 

$

2,119

 

 

 

3,086

 

Total cash, cash equivalents and restricted cash

 

$

85,642

 

 

$

107,851

 

 

7. Oxford Finance Loan Agreement

On February 12, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC (the “Lender”). Pursuant to the Loan Agreement, a term loan of up to an aggregate principal amount of $60.0 million is available to the Company. A $20.0 million term loan (first tranche) was funded on February 12, 2020, and another $20.0 million term loan (second tranche) was funded on December 23, 2020. As of March 31, 2024, the final $20.0 million tranche remained available under the Loan Agreement, at the sole discretion of the Lender.

The term loan initially bore interest at an annual rate equal to the greater of (i) 7.75% and (ii) the sum of 5.98% and the greater of (A) one-month LIBOR or (B) 1.77%. The Loan Agreement initially provided for interest-only payments until March 1, 2023, and repayment of the aggregate outstanding principal balance of the term loan in monthly installments starting on March 1, 2023 and continuing through February 1, 2025 (the “Maturity Date”). Pursuant to the terms of an amendment to the Loan Agreement dated July 3, 2022 (the “First Loan Amendment”), effective September 16, 2022, Oxford agreed to extend the interest-only period from March 1, 2023 to March 1, 2024 and to extend the Maturity Date from February 1, 2025 to February 1, 2026, and upon the achievement of certain milestones and subject to

18


 

the payment of certain fees, further extend the interest only period to September 1, 2024 and the Maturity Date to August 1, 2026. Pursuant to the terms of a subsequent amendment to the Loan Agreement dated November 15, 2022, the floating annual rate for each term loan was amended to equal the greater of (i) 7.75% and (ii) the sum of (a) the 1-month CME Term SOFR reference rate, (b) 0.10%, and (c) 5.98%. On May 9, 2024, the Company entered into a further amendment to the Loan Agreement with the Lender (refer to Note 12).

The Company paid a facility fee of $0.1 million upon the issuance of the first tranche, paid a facility fee of $75,000 upon the issuance of the second tranche and must pay a $50,000 facility fee if and when the third tranche is issued. The Company also paid fees of $300,000 related to the First Loan Amendment. The Company is required to make a final payment equal to 5.00% of the amount of the term loan drawn payable on the earlier of (i) the prepayment of the term loan or (ii) the Maturity Date. At the Company’s option, the Company may elect to prepay the loans subject to a prepayment fee equal to the following percentage of the principal amount being prepaid: 2% if an advance is prepaid during the first 12 months following the applicable advance date, 1% if an advance is prepaid after 12 months but prior to 24 months following the applicable advance date, and 0.5% if an advance is prepaid any time after 24 months following the applicable advance date but prior to the Maturity Date.

In connection with the Loan Agreement, the Company granted the Lender a security interest in all of the Company’s personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property. The Loan Agreement also contains certain events of default, representations, warranties and non-financial covenants of the Company.

In connection with the issuance of the first tranche, the Company issued the Lender warrants to purchase 2,754 shares of the Company’s common stock at an exercise price per share of $72.60 in February 2020. In connection with the issuance of the second tranche, the Company issued the Lender warrants to purchase 1,738 shares of the Company’s common stock at an exercise price of $115.00 per share in December 2020 (collectively, the “Oxford Warrants”). The Oxford Warrants are exercisable within five years from the respective dates of issuance.

The Oxford Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Oxford Warrants do not provide any guarantee of value or return.

The Company has the following minimum aggregate future loan payments as of March 31, 2024 (in thousands):

Nine months ending December 31, 2024

 

$

6,667

 

Year ending December 31, 2025

 

 

20,000

 

Year ending December 31, 2026

 

 

13,333

 

Total minimum payments

 

 

40,000

 

Less unamortized debt discount

 

 

(287

)

Plus accumulated accretion of final fees

 

 

1,662

 

Less current portion

 

 

(11,667

)

Long-term debt

 

$

29,708

 

For the three months ended March 31, 2024 and 2023, interest expense related to the Loan Agreement was approximately $1.3 million and $1.2 million, respectively.

8. Accrued Expenses

Accrued expenses consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

 

 

March 31, 2024

 

 

December 31, 2023

 

External research and preclinical development

 

$

8,220

 

 

$

8,001

 

Employee compensation and benefits

 

 

2,487

 

 

 

6,993

 

Professional fees

 

 

1,022

 

 

 

1,015

 

Facilities and other

 

 

152

 

 

 

137

 

Accrued expenses

 

$

11,881

 

 

$

16,146

 

 

19


 

9. Commitments and Contingencies

Operating Lease

On January 8, 2019, the Company entered into the HQ Lease with respect to approximately 52,859 square feet of space in Cambridge, Massachusetts for a lease term commencing in January 2019 and ending in February 2030. The Company has the option to extend the lease term for one additional ten-year period. The HQ Lease has escalating rent payments and the Company records rent expense on a straight-line basis over the term of the HQ Lease, including any rent-free periods.

In connection with the execution of the HQ Lease, the Company was required to provide the landlord with a letter of credit in the amount of $3.1 million (See Note 6). The Company determined that, for purposes of applying the lease accounting guidance codified in ASU No. 2016-02, Leases (Topic 842) (“ASC 842”), the commencement date of the HQ Lease occurred on May 1, 2019. The Company recorded a right-of-use asset and lease liability of $15.8 million using an incremental borrowing rate of 9.3%, net of tenant allowances expected to be received of $9.3 million, on the May 1, 2019 lease commencement date. The Company is amortizing the tenant allowance to offset rent expenses over the term of the HQ Lease starting at the lease commencement date on a straight-line basis. On the Company’s condensed consolidated balance sheets, the Company classified $2.4 million of the lease liability as short-term and $17.9 million of the lease liability as long-term as of March 31, 2024.

The Company elected the practical expedient provided under ASC 842 and therefore combined all lease and non-lease components when determining the right-of-use asset and lease liability for the HQ Lease.

The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of March 31, 2024 (in thousands):

 

 

Amount

 

 

 

 

 

Nine months ending December 31, 2024

 

$

3,130

 

Year ending December 31, 2025

 

 

4,287

 

Year ending December 31, 2026

 

 

4,412

 

Year ending December 31, 2027

 

 

4,541

 

Year ending December 31, 2028 and beyond

 

 

10,303

 

Total minimum lease payments

 

 

26,673

 

Less imputed interest

 

 

(6,377

)

Total lease liability

 

$

20,296

 

The following table outlines the total lease cost for the Company’s operating lease as well as weighted average information for this lease as of March 31, 2024 (in thousands):

 

 

Three Months Ended March 31, 2024

 

Lease cost:

 

 

 

Operating lease cost

 

$

772

 

Cash paid for amounts included in the measurement of liabilities:

 

 

 

Operating cash flows from operating lease

 

$

1,037

 

 

 

 

Other information:

 

Three Months Ended March 31, 2024

 

Weighted-average remaining lease term (in years) - operating lease

 

 

5.92

 

Weighted-average discount rate - operating lease

 

 

9.30

 

Following the adoption of ASC 842, the Company has a right-of-use asset and lease liability that results in recording a temporary tax difference. This temporary tax difference is the result of recognizing a right-of-use asset and related lease liability while such asset and liability have no corresponding tax basis.

20


 

Asset Purchase Agreement

Orsenix, LLC

On December 4, 2020, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Orsenix, LLC (“Orsenix”), pursuant to which the Company acquired Orsenix’s assets related to a novel oral form of arsenic trioxide, which the Company refers to as SY-2101. Under the terms of the Asset Purchase Agreement, the Company is required to pay to Orsenix:

an upfront fee of $12.0 million, which was paid with cash on hand upon the closing of the transaction;
single-digit million dollar milestone payments related to the development of SY-2101 in indications other than APL;
$6.0 million following the achievement of a regulatory milestone related to the development of SY-2101 in APL; and
up to $10.0 million upon the achievement of certain commercial milestones with respect to SY-2101.

The Company’s obligation to pay the commercial milestone payments expires following the tenth anniversary of the first commercial sale of SY-2101. The Asset Purchase Agreement requires the Company to use commercially reasonable efforts to develop and commercialize SY-2101 for APL in the United States during such period, and to use commercially reasonable efforts to dose the first patient in a Phase 3 clinical trial of SY-2101 on or before the third anniversary of the closing of the transaction; however, the Company retains sole discretion to operate the acquired assets as it determines. The Company will expense any future milestone payments made prior to the time an alternative future use for SY-2101 has been established. Once an alternative future use for SY-2101 has been established, the Company will capitalize milestone payments as an addition to the carrying value of SY-2101.

License Agreement

TMRC Co. Ltd.

In September 2015, the Company entered into an exclusive license agreement with TMRC Co. Ltd. (“TMRC”) to develop and commercialize tamibarotene in North America and Europe for the treatment of cancer. This agreement was amended and restated in April 2016, and further amended in January 2021 to expand the territory under which the Company is licensed to include Central and South America, Australia, Israel and Russia.

In exchange for this license, the Company agreed to a non-refundable upfront payment of $1.0 million, for which $0.5 million was paid in September 2015 upon execution of the agreement, and the remaining $0.5 million was paid in May 2016. Under the agreement, the Company is also obligated to make payments upon the successful achievement of clinical and regulatory milestones totaling approximately $13.0 million per indication, defined as a distinct tumor type. The Company paid $1.0 million to TMRC for a development milestone achieved upon the successful dosing of the first patient in its Phase 2 clinical trial of tamibarotene in 2016. In May 2021, the Company paid $2.0 million to TMRC for a development milestone achieved upon the successful dosing of the first patient in its Phase 3 clinical trial of tamibarotene in MDS patients. In September 2021, the Company paid $1.0 million to TMRC for a development milestone achieved upon the successful dosing of the first patient in its Phase 2 clinical trial of tamibarotene in AML patients. In addition, the Company is obligated to pay TMRC a single-digit percentage royalty, on a country-by-country and product-by-product basis, on net product sales of tamibarotene using know-how and patents licensed from TMRC in North America and Europe for a defined royalty term.

The Company also entered into a supply management agreement with TMRC under which the Company agreed to pay TMRC a fee for each kilogram of tamibarotene that is produced. The Company incurred no fees under this supply management agreement during the three months ended March 31, 2024 and 2023.

10. Stockholders’ Equity

Issuance of Securities through an Underwritten Registered Direct Offering

In December 2023, the Company issued 4.9 million shares of common stock and, in lieu of its common stock to certain investors who so chose, pre-funded warrants (the "2023 Pre-Funded Warrants") to purchase an aggregate of

21


 

5,242,588 shares of common stock, pursuant to the 2023 Registration Statement, in an underwritten registered direct offering for gross proceeds of $45.0 million, before deducting underwriting fees and other transaction costs of $3.4 million.

The Company determined that the 2023 Pre-Funded Warrants are freestanding financial instruments because they are both legally detachable and separately exercisable from the common stock sold in the offering. As such, the Company evaluated the 2023 Pre-Funded Warrants to determine whether they represent instruments that require liability classification pursuant to the guidance in ASC 480. However, the Company concluded that the 2023 Pre-Funded Warrants are not a liability within the scope of ASC 480 due to their characteristics. Further, the Company determined that the 2023 Pre-Funded Warrants do not meet the definition of a derivative under ASC 815 because they do not meet the criteria regarding no or little initial net investment. Accordingly, the Company assessed the 2023 Pre-Funded Warrants relative to the guidance in ASC No. 815-40, Contracts in Entity’s Own Equity, to determine the appropriate treatment. The Company concluded that the 2023 Pre-Funded Warrants are both indexed to its own stock and meet all other conditions for equity classification. Accordingly, the Company has classified the 2023 Pre-Funded Warrants as permanent equity.

Issuance of Securities through a Private Placement

On September 16, 2022, the Company issued in a private placement (the “2022 Private Placement”) 6,387,173 shares of common stock, and, in lieu of shares of common stock, the pre-funded warrants to purchase an aggregate of 7,426,739 shares of common stock (the “2022 Pre-Funded Warrants”), and, in each case, the accompanying 2022 Warrants to purchase an aggregate of up to 13,813,912 additional shares of common stock (or 2022 Pre-Funded Warrants to purchase common stock in lieu thereof) at a price of $10.34 per share and accompanying 2022 Warrant (or $10.33 per 2022 Pre-Funded Warrant and accompanying 2022 Warrant). The 2022 Private Placement resulted in aggregate gross proceeds of $129.9 million, before $10.1 million of transaction costs.

On December 8, 2020, through a private placement (the “2020 Private Placement”), the Company issued 1,031,250 shares of common stock, and, in lieu of shares of common stock, pre-funded warrants to purchase an aggregate of 100,000 shares of common stock (the “2020 Pre-Funded Warrants”), and, in each case, accompanying 2020 Warrants to purchase an aggregate of up to 282,809 additional shares of common stock (or 2020 Pre-Funded Warrants to purchase common stock in lieu thereof) at a price of $80.00 per share and accompanying 2020 Warrant (or $79.90 per 2020 Pre-Funded Warrant and accompanying 2020 Warrant). The 2020 Private Placement resulted in aggregate gross proceeds of $90.5 million, before $0.4 million of transaction costs.

In the event of certain fundamental transactions involving the Company, the holders of the 2022 Warrants and 2020 Warrants may require the Company to make a payment based on a Black-Scholes valuation, using specified inputs. The holders of 2022 Pre-Funded Warrants and 2020 Pre-Funded Warrants do not have similar rights. Therefore, the Company accounted for the 2022 Warrants and 2020 Warrants as liabilities, while the 2022 Pre-Funded Warrants and 2020 Pre-Funded Warrants met the permanent equity criteria classification. The 2022 Pre-Funded Warrants and 2020 Pre-Funded Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the 2022 Pre-Funded Warrants and 2020 Pre-Funded Warrants do not provide any guarantee of value or return. The initial fair value of the 2022 Warrants and the 2020 Warrants at issuance was $64.7 million and $19.3 million, respectively, determined using the Black-Scholes valuation model. The Company recorded a gain for the remeasurement of the aggregate fair value of the 2022 Warrants and the 2020 Warrants in its condensed statement of operations of $27.0 million and $8.9 million for three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023 the aggregate fair value of the 2022 Warrants and the 2020 Warrants included in the Company's condensed balance sheet was $34.8 million and $61.7 million, respectively.

11. Stock-Based Payments

2016 Employee Stock Purchase Plan

The 2016 Employee Stock Purchase Plan (the “2016 ESPP”) was adopted by the board of directors on December 15, 2015, approved by the stockholders on June 17, 2016, and became effective on July 6, 2016 upon the closing of the IPO. The number of shares of the Company’s common stock reserved for issuance under the 2016 ESPP

22


 

automatically increases on the first day of each calendar year through the 2025 calendar year, in an amount equal to the least of (i) 117,333 shares of the Company’s common stock, (ii) 1.0% of the total number of shares of the Company’s common stock outstanding on the first day of the applicable year, and (iii) an amount determined by the Company’s board of directors. For the calendar year beginning January 1, 2024, the number of shares reserved for issuance under the 2016 ESPP was increased by 117,333 shares. As of March 31, 2024, 258,504 shares remained available for future issuance under the 2016 ESPP.

2022 Inducement Stock Incentive Plan

On January 25, 2022, the Company’s board of directors adopted the 2022 Inducement Stock Incentive Plan (the “2022 Plan”), pursuant to which the Company may grant non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Awards under the 2022 Plan may only be granted to persons who (i) were not previously an employee or director of the Company or (ii) are commencing employment with the Company following a bona fide period of non-employment, in either case as an inducement material to the individual’s entering into employment with the Company and in accordance with the requirements of Nasdaq Stock Market Rule 5635(c)(4). In January 2023, the Company's board of directors amended the 2022 Plan to increase the aggregate number of shares that can be granted by 750,000 shares of common stock. As of March 31, 2024, 702,555 shares remained available for future issuance under the 2022 Plan.

2022 Equity Incentive Plan

The 2022 Equity Incentive Plan (the “2022 EIP”) was adopted by the board of directors on July 14, 2022, approved by the stockholders and became effective on September 15, 2022. The 2022 EIP replaced the 2016 Stock Incentive Plan (the “2016 Plan”). Any options or awards outstanding under the 2016 Plan remained outstanding and effective. Under the 2022 EIP, the Company may grant incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. As of March 31, 2024, 105,036 shares remained available for future issuance under the 2022 EIP. Under the 2022 EIP, stock options may not be granted at less than fair value on the date of grant.

Stock Options

Terms of stock option agreements, including vesting requirements, are determined by the board of directors, subject to the provisions of the applicable plan. Stock option awards granted by the Company generally vest over four years, with 25% vesting on the first anniversary of the vesting commencement date and 75% vesting ratably, on a monthly basis, over the remaining three years. Such awards have a contractual term of ten years from the grant date.

A summary of the status of stock options as of December 31, 2023 and March 31, 2024 and changes during the three months ended March 31, 2024 is presented below:

 

 

 

 

 

 

 

 

 

 

 

Aggregate

 

 

 

 

 

 

Weighted

 

 

Remaining

 

 

Intrinsic

 

 

 

 

 

 

Average

 

 

Contractual

 

 

Value

 

 

 

Shares

 

 

Exercise Price

 

 

Life (in years)

 

 

(in thousands)

 

Outstanding at December 31, 2023

 

 

1,548,642

 

 

$

34.80

 

 

 

4.5

 

 

$

646

 

Cancelled