SYRS - Syros Pharmaceuticals: Rising Despite Dilution A Must Look

2024-01-14 03:44:11 ET

Summary

• Syros Pharmaceuticals is a cancer-focused biotech working on therapies for blood cancer, with a main drug in development.
• The company's main program is tamibarotene, targeting specific myeloid cancers with high RARA gene expression.
• Syros has encouraging data from a phase 2 trial and is currently conducting a phase 3 trial, but lack of asset diversification and high risk should be considered.

Topline Summary

Syros Pharmaceuticals ( SYRS ) is a cancer-focused developmental biotech working on novel therapies for different forms of blood cancer. They currently have one main drug in development, for which they have encouraging data and a phase 3 trial nearly done. But this lack of asset diversification is a pretty big risk, and they're working in an area with a long history of exciting drugs failing to hit the mark. For me, SYRS is a hold of high interest, and I think it would be reasonable to consider a small position for the highly risk tolerant among you.

Pipeline Overview

Tamibarotene

The main program in the pipeline for SYRS is tamibarotene, an agonist of RAR? designed to target specific myeloid cancers that overexpress RARA . In particular, patients with acute myeloid leukemia [AML] and myelodysplastic syndromes [MDS] have high rates of overexpression of this gene.

Binding to RAR? can help overcome the negative signaling that prevents cancer cells from differentiating and causing a litany of potential complications.

SYRS has 2 main trials in these disease states ongoing. First, is the SELECT-MDS-1 study , a phase 3 trial enrolling patients with higher-risk MDS and RARA overexpression. Enrollment in this study is set to be complete as early as the first quarter 2024, with an anticipated readout in Q4 (which to me says they're hoping to be done in time for an ASH presentation). Patients are being randomly assigned to placebo plus azacitidine (a standard of care treatment approach) or tamibarotene plus azacitidine, with the primary goal of comparing the complete remission rate between the 2 arms.

Interestingly, this phase 3 study was initiated without a prior earlier-stage trial. Rather, it's based on findings from a phase 2 study in patients with newly diagnosed AML who were unfit for intensive chemotherapy. This is unusual but reasonable given that MDS is frequently a precursor to AML, especially in patients with higher-risk disease.

Speaking of AML, a presentation at ASH 2023 updating the findings of that phase 2 study highlighted a complete remission rate of 61% (50% true complete remission with complete hematologic recovery) among 18 evaluable patients. Meanwhile, patients who had RARA -negative AML had CR rates comparable to azacitidine alone, suggesting that the RARA overexpression is indeed important for activity.

More findings from the phase 2 trial are anticipated in 2024, but there is no word yet on the next steps after this study.

Financial Overview

As of their latest quarterly filing , SYRS held $122.5 million in total current assets, mostly coming from cash and equivalents that reached $112.2 million. Their total operating expenses were $38.4 million, and after accounting for collaboration revenue, interest and a change in fair value of warrant liabilities, the net loss for the quarter was $40.1 million.

Were these losses to continue, SYRS would have approximately 3-4 quarters of cash on hand to fund operations. However, this filing does not take into account 2 other events. First, there was the strategic reprioritization halting development of some of their programs, as well as preclinical discovery programs, in order to focus on development of tamibarotene. It is not clear how much this shift will affect the bottom line, but we'll probably get a good look in their next quarterly report.

Second, back in December the company realized $45 million in proceedings from a public offering of stock, which helps to cement their holdings for the near term. With these in place, the company should easily clear 5 quarters, I'd expect, and potentially longer.

Strengths and Risks

It's very good that SYRS was able to raise cash from a relative position of strength on the back of a positive ASH 2023 data readout. It really helps to quell major concerns I'd have about cash...pretty much for the rest of 2024. That gives them time to build market respect over the course of several more major meetings, ideally culminating in a positive phase 3 readout late in the year.

That said, you must not underestimate the risk of proceeding to a phase 3 trial in MDS. Many, many highly promising projects have failed once they reached that point, and those had really exciting phase 2 data backing them up before the rug was pulled out. Tamibarotene has no MDS data that I could locate, which absolutely raises the question about SYRS being a bit cavalier to move right into a phase 3 trial.

I'll be happy if they prove my concerns to be completely baseless, but this is not your typical phase 3 company, and I think it's a big reason why even after that positive readout we're looking at a sub-$200 million company. Not to say I think there's some guarantee they're going to fail. I'm just not going to be surprised if it doesn't live up to expectations.

There's also risk in the newly minted lack of diversification in the pipeline with that strategic realignment. Basically all gas is being poured into the tamibarotene engine, and if it stalls out, it's hard to imagine what future directions the company might be able to take.

Bottom-Line Summary

SYRS at this time represents a key example of a company with what I would characterize as a massive risk/massive reward proposition. On one hand, the share price could continue to appreciate throughout 2024 with more positive data updates, and if the phase 3 is positive, then you're easily looking at $500 million+ market capitalization.

But if it fails, SYRS is likely going to be all but wiped out, along with whatever you hazarded in the investment. There is a lot of uncertainty, which creates opportunity. At this time, I cannot come so far as to say they're really worth a buy, but I'm leaning in that direction if you're among the risk tolerant. A small investment could pay off big here, but for most, I'd encourage you to watch and wait.

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