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Syros Pharmaceuticals, Inc. (NASDAQ:SYRS)
Q1 2019 Earnings Call
May. 01, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning and welcome to Syros Pharmaceuticals first-quarter 2019 financial results conference call. [Operator instructions] This call is being webcast live on the Investor & Media section of Syros' website at www.syros.com. Please be advised that today's call is being recorded. [Operator instructions] At this time, I would like to turn the call over to Naomi Aoki, vice president of corporate communications and investor relations at Syros.

Naomi Aoki -- Vice President of Corporate Communications and Investor Relations

Thank you. This morning, we issued a press release with our first-quarter 2019 financial results, along with anticipated future milestones and recent accomplishments. This release is available on the Investors & Media section of Syros' website at www.syros.com. We'll begin the call with prepared remarks by Dr.

Nancy Simonian, our chief executive officer; and Joe Ferra, our chief financial officer. Then we will open the call for questions. Dr. David Roth, our chief medical officer; Dr.

Eric Olson, our chief scientific officer; and Dr. Jeremy Springhorn, our chief business officer, are also on the call and will be available for Q&A. Before we begin, I would like to remind everyone that statements we make on this conference call will include forward-looking statements. Actual events or results could differ materially from those expressed or implied by any forward-looking statements as the result of various risks, uncertainties and other factors, including those set forth in the Risk Factors section of our annual report on Form 10-K and any other filings that we may make with the SEC in the future.

In addition, any forward-looking statements made on this call represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statement. I would now like to turn the call over to Nancy.

Nancy Simonian -- Chief Executive Officer

Thank you, Naomi, and to everyone for joining us today. 2019 has gotten off to a great start for Syros and I'm happy to share our recent progress. As we work to achieve our vision of building a great and enduring company with medicines that provide a profound benefit for patients, our strategic priorities are to: advance our clinical stage programs, build on our leadership in CDK7 inhibition and continue to fuel our pipeline through ongoing investment in our leading gene control platform. In keeping with these priorities, we continue to advance 1425 and 1365 in the clinic during the first quarter with the aim of bringing much-needed therapies to market for patients as quickly as possible.

In addition to executing on our clinical trials, we've refined our development strategy for both programs as outlined on our fourth quarter call, giving us opportunities for proof-of-concept data in 2020 in three patient populations, biomarker-positive, relapsed or refractory AML for 1425 and relapsed ovarian clear cell cancer and heavily pretreated relapsed high-grade serous ovarian cancer for 1365. Given the high unmet need in these populations, we believe that with positive data, there are opportunities for accelerated development. In April, at the American Association for Cancer Research or AACR Annual Meeting, we presented new preclinical data on our selective CDK7 inhibitor, which supported our mechanistic rationale for the ongoing development of 1365 in ovarian and breast cancers and highlighted the potency, selectivity and antitumor activity of SY-5609, our oral CDK7 inhibitor, further demonstrating our leadership in CDK7 inhibition. We also successfully completed a $70 million financing in April.

The proceeds from this financing strengthen our balance sheet, extending our expected runway to the end of the first quarter of 2021, which is beyond potential proof-of-concept data readouts for both 1425 and 1365 while also allowing us to continue investing in our gene control platform. Together, these accomplishments mark significant progress against our strategic priorities, and we remain on track to report data from all eight of the cohorts in our clinical trials for 1425 and 1365 this year and next. We also remain on track to advance 5609 into a Phase 1 oncology study in early 2020. For 1425, we plan to open the Phase 2 trial cohort evaluating 1425 in combination with azacitidine in biomarker-positive, relapsed or refractory AML patients in the third quarter of this year, positioning us for potential proof-of-concept data in 2020.

Meanwhile, we expect to complete enrollment midyear in the ongoing cohort evaluating the SY-1425/azac combo in biomarker-positive, newly diagnosed unfit AML patients and to report updated data on this combination in this population in the second half of this year. For 1365, we expect to report initial data in the fourth quarter of 2019 from the expansion portion of our Phase 1 trial, including: initial efficacy and safety data from the cohort evaluating 1365 as a single agent in high-grade serous ovarian cancer patients who have had three or more prior lines of therapy; initial safety and PK data from the cohort evaluating 1365 in combination with carboplatinum in high-grade serous ovarian cancer patients who have had one or more prior lines of therapy; and initial safety, efficacy and mechanistic data from the cohort evaluating 1365 as a single agent in patients with advanced solid tumors accessible for biopsy. We plan to report additional data from each of these cohorts in 2020, including potential proof-of-concept data from the cohort of ovarian cancer patients who have had three-plus prior lines of therapy. In addition, we have recently opened the cohort evaluating 1365 as a single agent in patients with relapsed ovarian clear cell cancer, putting us on track for potential proof-of-concept in this population in 2020.

Finally, we also plan to report initial data in 2020 from the cohort assessing 1365 in combination with fulvestrant in metastatic HR-positive breast cancer patients who are resistant to CDK4/6 inhibitors. All in, this positions us for multiple key readouts in the second half of 2019 and 2020 as we pursue our vision of establishing 1425 as the foundation of care for all RARA and IRF8 biomarker-positive patients and realizing the promise of selective CDK7 inhibition as a transformative targeted approach for difficult-to-treat cancers. And as I mentioned earlier on the call, we were excited to share new preclinical data from our CDK7 franchise at AACR. We presented two posters, the first focused on 1365, demonstrating that alterations in the RB pathway are predictive of response in ovarian cancer models, with 90% of patient-derived xenograft models with prospectively defined RB pathway alterations responding to treatment with 1365.

These data support our mechanistic rationale for our ongoing development of 1365 in high-grade serous and clear cell ovarian cancer patients and CDK4/6 inhibitor-resistant HR-positive breast cancer patients, populations that are enriched for RB pathway alterations. These data also support the evaluation of these alterations as potential biomarkers of response to 1365. The second poster focused on detailing for the first time, the in vitro and in vivo profile of our newest development candidate, 5609. 5609 is a distinct chemical entity, is orally available and is a non-covalent inhibitor of CDK7.

The data showed that 5609 is greater than 13,000-fold more selective for CDK7 over CDK2, 9 and 12 with substantial antitumor activity observed in triple-negative breast and ovarian cancer models. Additionally, decreases were observed in multiple CDK7 downstream protein markers, including MCL1 and treated tumor tissue. Now let me take a moment to comment on the opportunity for our CDK7 inhibitors more broadly. Last week, we hosted a KOL breakfast symposium in New York on our CDK7 franchise with a focus on the unmet need in advanced ovarian and breast cancers.

The event featured two leading physicians, Trey Leath from the University of Alabama Medical Center, an ovarian cancer specialist; and Dejan Juric from the Termeer Center for Targeted Therapies at the Massachusetts General Hospital, a breast cancer specialist. In their presentations, both doctors spoke about the current treatment landscape, highlighting the advances made in recent years but also emphasizing just how many patients remain underserved by existing options. Both speakers commented on the limitations of existing therapies, the complex genomic landscape of the diseases, the emergence of resistance from newer agents and the need for new targeted agents with novel mechanisms of action that can be used alone or in combination to overcome resistance and improve patient outcomes. Additionally, Dr.

Leath emphasized that women with ovarian clear cell cancer have particularly limited options. Not only is the optimal treatment paradigm for these patients unclear and their disease more chemo-resistant, but there is very little a clinical development for them. For us, these presentations reinforce the urgency of our work. They also underscored the opportunity for our CDK7 inhibitors to fill a real gap in the existing landscape, potentially operate an effective targeted medicine with a novel mechanism for women living with ovarian and HR-positive metastatic breast cancers.

For anyone interested in hearing more, an archived webcast of the event is available on our website. In closing, we had a strong start to 2019 through a focused execution against our strategic priorities. With the refinement of our clinical strategy to incorporate three potential paths to market opportunities across two clinical programs, new preclinical data supporting the potential of our CDK7 inhibitors for patients in dire need of new options and a successful financing that allows us the flexibility to invest for our near-term and long-term growth. Building on these accomplishments, we expect a data-rich 2019 and 2020 with multiple clinical milestones that promise to bring us closer to our vision of becoming a fully integrated company with medicines that provide a profound benefit for patients.

With that, I'll turn it over to Joe Ferra to review our financial results for the quarter.

Joe Ferra -- Chief Financial Officer

Thank you, Nancy. In April, we fortified our financial position with successful financing resulting in gross proceeds of approximately $70 million before deducting underwriting discount and commissions and offering expenses of approximately $4.6 million. With this capital, we believe that we are sufficiently funded to support our planned operations and capital expenditures through the end of the first quarter of 2021, beyond anticipated proof-of-concept readouts for each of our three paths to market opportunities while also investing in our gene control platform. We are humbled by the continued support of our existing shareholders and excited to welcome new high-quality investors to Syros.

Now for our first-quarter 2019 financial results. We ended the first quarter with $75.9 million in cash, cash equivalents and marketable securities, compared with $99.7 million on December 31, 2018. This does not include the net proceeds of $65.4 million for the financing that closed in April 2019. We recognized $0.5 million of revenue in the first quarter of 2019, compared to $0.4 million for the first quarter of 2018.

Revenues in both periods were earned entirely from our collaboration with Incyte. R&D expenses were $12.6 million for the first quarter of 2019, compared to $11.1 million for the same period in 2018. This increase was primarily a result of the progress of our existing clinical trials and preclinical programs, including the advancement of 5609 into IND-enabling studies. G&A expenses were $4.9 million for the first quarter of 2019, compared to $4.1 million for the same period in 2018.

This increase was primarily a result of increase in employee-related expenses. Finally, we reported a net loss for the first quarter of $16.5 million or $0.49 per share, compared to a net loss of $14.5 million or $0.48 per share for the same period in 2018. With that, I will turn the call over to operator for questions. Thank you.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from Phil Nadeau of Cowen and Company.

Phil Nadeau -- Cowen and Company -- Analyst

A couple on the pipeline. First, on 1365, you've been pretty clear that you expect the proof-of-concept data to come next year, but we are going to get some data by the end of this year from 1365. So I'm kind of curious what is different about the quality of data, the amount of follow-up or the doses and what we're going to see next year versus what we get later this year. Why couldn't the data later this year be proof of concept for 1365?

Nancy Simonian -- Chief Executive Officer

I'm going to have David, well, answer that question.

David Roth -- Chief Medical Officer -- Analyst

Yes. I'll go take that. Thanks for the question, Phil. Yes, this is David.

So our plan is to present some of the initial data in the fourth quarter of this year. And then that will be followed by what we call PoC, our proof-of-concept data in 2020. And by that, we mean a more robust data set that would give us conviction to be moving forward into a registrational trial. So you'll see a fuller data set in 2020.

Phil Nadeau -- Cowen and Company -- Analyst

Good. And is it patient numbers and follow-up will be relatively short in Q4? Is that what we should -- or patient numbers small and follow-up relatively short?

David Roth -- Chief Medical Officer -- Analyst

Yes. It will be initial data, so I think the fuller data set will likely have more information in terms of numbers on duration.

Phil Nadeau -- Cowen and Company -- Analyst

Got it, OK. And then on 1425, starting the new biomarker-positive relapsed refractory AML cohort in Q3, I'm curious what has given rise to that cohort? Is that based on optimism from the newly diagnosed cohort that you're currently enrolling? Or was there some other reason that you've decided to add that cohort?

Nancy Simonian -- Chief Executive Officer

I think as you know, we're excited about the combination synergy we saw between 1425 and azacitidine in the newly diagnosed patients, the data that we presented at ASH. And as we thought about what was the sort of the optimal way to bring that 1425 combination as quickly as possible to market, given the overall competitive landscape and shifting landscape in the newly diagnosed treatment setting, we felt that the relapsed setting was going to be the most rapid approach to get the combination to patients. So we believe that there's strong combination synergy if we select with the biomarker -- we'll be selecting for the biomarker in the relapsed population. And given the very high unmet need in that relapsed population, we believe, again, that's the most efficient path.

We're still very excited about the newly diagnosed opportunity. With the drug -- with that updated data later this year, but based on the data we presented at ASH, seeing such a high overall response rate and CR rate, we think that's also a really important and exciting opportunity as well.

Phil Nadeau -- Cowen and Company -- Analyst

Got it. That makes sense. And then one last question for Joe. Joe, just qualitatively on R&D expense, appreciating that your guidance is for cash flow onto 2021.

Should we just basically expect a relatively slow and gradual increase in R&D through the remainder of 2019? Or are there any points in the year where there'll be a step-up because of new expenses?

Joe Ferra -- Chief Financial Officer

Yes. Yes. So you'll see a gradual increase in R&D expense and operating expenses in general as we move on. And as you said, as we continue to advance the programs in clinical development that you would expect those expenses to increase.

One note on that though, with the cash burn in Q1, it did include some rather onetime expenses that were related to restricted -- moving some cash to restricted cash relating to our move later this year and also some more seasonal items that are related to Q1 that were accrued for in prior periods. So as you noted, looking forward, a key part is that with the cash on hand as of March 31 plus the financing we did in April, we have cash until the end of the first quarter in 2021.

Operator

And our next question comes from Ted Tenthoff of Piper Jaffray.

Ted Tenthoff -- Piper Jaffray -- Analyst

Thank you very much for the update and for the recent KOL breakfast on CDK7 efforts. Quick question there just with respect to the oral program. What really has to be done to prep that for advancement into the clinic early next year? And how do you sort of see using IV and oral or IV versus oral in the clinic?

Nancy Simonian -- Chief Executive Officer

Great. Thanks, Ted. I'm going to have Eric answer the first part and then David the second.

Eric Olson -- Chief Scientific Officer

Yes. This is Eric Olson. Yes, so in order to -- as you know, in order to get these small molecules into the clinic, we have to go through all the series of IND-enabling studies, which are preclinical studies. And we have to manufacture and release drug and then have a protocol for the clinical study that's all supported by that preclinical and CMC data.

Nancy Simonian -- Chief Executive Officer

And for all those things, we remain on track to complete those by the end of the year and to move into the clinic in the early part of 2020.

David Roth -- Chief Medical Officer -- Analyst

This is David here. Just in terms of the opportunities for CDK7, obviously, we see a very broad opportunity given the compelling preclinical data and the significant unmet need of the populations we're currently focused on. And there are clear opportunities where an IV may be a preferred agent in terms of the route of administration and the types of other therapies that may be combined with that and the treatment used, whereas an oral may nicely lend itself to more long-term therapy like in the maintenance setting. And so we think there is opportunity for using both approaches and in various treatment settings.

Operator

And our next question comes from Jason Butler of JMP Securities.

Jason Butler -- JMP Securities -- Analyst

Congrats on the progress. First one, just to follow up on Ed's question on 5609. Other than the obvious difference of IV and oral, can you just speak to some of the data you presented at AACR and how the attributes of the two molecules that, that versus 1365 could differ? And then second question, you touched on this somewhat at the breakfast. But can you talk a little bit more about how the RB pathway alterations biomarker approach could -- how you're thinking about that both from a science perspective and logistically?

Nancy Simonian -- Chief Executive Officer

Great. Thanks, Jason. I'm going to turn the first part of the question over to Eric on 5609.

Eric Olson -- Chief Scientific Officer

Yes. Thanks for the questions. so both 5609 and 1365 are highly selective CDK7 inhibitors. And as you said, there are some other features besides just being IV and oral.

1365 is a covalent inhibitor so covalently attaches to CDK7, whereas 5609 is a non-covalent molecule. The data we presented at AACR is both showing in vivo efficacy in activity in preclinical models of breast cancer and ovarian cancer, both cell line xenograft models as well as patient-derived xenograft models. We also show that we induced apoptosis with 5609 in tumor cells but not in animal cells and we also see that with SY-1365. So based on what we've seen to date, we think much of the activity of each of those molecules in the preclinical setting is largely due to CDK7 inhibition.

I think as we go further explore more in both preclinical and eventually in the clinic, we expect we will see some differences that will really highlight some opportunities for each molecule.

Nancy Simonian -- Chief Executive Officer

And David will answer the question on the RB pathway.

David Roth -- Chief Medical Officer -- Analyst

Yes. And so with the RB pathway, you asked about the scientific rationale and then some of the logistical issues around that and how to implement it. So obviously, there are many tumor types known to have abnormalities in core RB pathway involving mutations. And also, there are related cell cycle pathway genes that are also just regulated.

And together, that defines this pathway. And there's a fairly high prevalence of them in selected tumor types. Obviously, we're focusing on ovarian because that represents one of them and HR-positive metastatic breast cancer, following progression after treatment with a CDK4/6 inhibitor, and CDK4/6 inhibitor also is considered one of those. So we're looking at enriching our patients with this.

And then we're testing our patients for a background of having these abnormalities. We expect we'll identify a fair number given the known prevalence. And we're using fairly standard tests that are readily available to help identify these patients. So these involve sequencing, DNA sequencing.

We're looking at circulating tumor DNA that you can simply obtain through a plasma, a blood tube sample. And then when tissue biopsies are available, we're looking at the tumor biopsies themselves, which also gives us an opportunity to evaluate the DNA for mutations or amplifications or RNA expression changes. So I think it's relatively straightforward to implement this if we end up demonstrating that our preclinical data translate into the clinic as we would anticipate.

Operator

And our next question comes from Jotin Marango of ROTH Capital.

Anna Vorobyeva -- ROTH Capital Partners -- Analyst

This is Anna Vorobyeva on the line for Jotin Marango. I have two questions. So starting with the first, I'm going to follow up on Phil's question regarding 1425. So now you have this new relapsed refractory combo cohort in addition to the newly diagnosed.

And so from a registrational point, do you think one path may be faster? In other words, assuming both are successful, could one take a faster registrational path?

Nancy Simonian -- Chief Executive Officer

Yes. I believe that just based on precedents with other agents and the hurdles, we believe that the relapsed refractory cohort pathway will likely be quicker, and that was one of the rationales by which to add that. In the newly diagnosed setting, with the addition of multiple new agents over the last couple of years, it makes that pathway probably longer and not as straightforward. So we believe, yes, that the relapsed refractory pathway to registration based on historical precedents with other drugs will be likely quicker.

And that was the major rationale.

Anna Vorobyeva -- ROTH Capital Partners -- Analyst

OK. Yes. And my second question, also regarding 1425 in AML, you studied that compound extensively. Are you thinking about exploring other indications? There's literature supporting retinoids or retinoid-mediated mechanisms in inflammatory diseases? Is that possibly a potential direction? Or how are you thinking about 1425 in terms of possibly building an opportunity in inflammation?

Nancy Simonian -- Chief Executive Officer

It's a great question. First of all, just on the cancer side, when we made the initial discovery of the biomarker, we actually also found that to be relevant in, in vitro studies in breast cancer -- in vivo and in vitro. So even within the cancer space, we believe that there are other tumor types that have RARA pathway activation that we could select based on the presence of the biomarker. So really, right now, our focus is on driving the program forward in AML, trying to get the 1425 in combination to patients as quickly as possible.

We are aware of the literature and the data that go beyond cancer and inflammatory diseases. It certainly is of interest. But right now, our focus is really in the cancer space and the initial cancer being AML.

Operator

[Operator instructions] And our next question comes from Mark Breidenbach with Oppenheimer.

Mark Breidenbach -- Oppenheimer Holdings -- Analyst

First, focusing on the new cohort in relapsed refractory AML. I was hoping you could give us a little more color on the patients you intend to enroll in the cohort and the size of this cohort. Is this going to be open to patients who have seen prior azacitidine therapy or even patients who have relapsed following transplant?

Nancy Simonian -- Chief Executive Officer

Wait, I will have David Roth answer that.

David Roth -- Chief Medical Officer -- Analyst

Yes. No. Thanks. It's a good question, and the answer is the cohort is sized at 25 patients who are positive for our novel biomarker, identifying patients with RARA pathway activation.

And these will be open to any patients with AML who have relapsed. So yes, they could have been relapsed following a transplant or they could have relapsed following treatment with an HMA in their prior past history. So will be all-inclusive. And part of the rationale for doing that is that we have a really compelling preclinical data that demonstrates combination synergy with the 1425 and hypomethylating agents, including azacitidine that show a unique mechanistic synergy with DNA damage and inducing apoptosis.

So we believe that this is different than either drug alone in supporting the potential therapeutic effects that we hope to see. And so we want to make that opportunity available to as many patients as possible.

Mark Breidenbach -- Oppenheimer Holdings -- Analyst

OK. That's very helpful. And with regard to the expansion cohorts for 1365 in ovarian, I realized that biopsies aren't going to be available from all of these patients. I'm just wondering if we're going to have enough information to assign RB pathway status in the data that is expected later this year.

David Roth -- Chief Medical Officer -- Analyst

Yes. Again, another good one. So we, first of all, have a biopsy cohort where the focus is to interrogate the patients by doing direct analysis of the tissues. And so from there, we do expect to have a robust data set.

But we are, in all of our patients, those who do and don't have tissue biopsies of tumor will be submitting samples for circulating tumor DNA. And we expect to get the lion's share of RB pathway abnormalities identified through that direct DNA sequencing strategy. So we hope to have good information at baseline in all patients.

Operator

And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Nancy Simonian for any closing remarks.

Nancy Simonian -- Chief Executive Officer

Thank you, operator, and thank you all for your continued interest in Syros. We are looking ahead to the rest of 2019 into 2020 with excitement, and we look forward to keeping you updated on our progress. Have a good day.

Operator

[Operator signoff]

Duration: 32 minutes

Call participants:

Naomi Aoki -- Vice President of Corporate Communications and Investor Relations

Nancy Simonian -- Chief Executive Officer

Joe Ferra -- Chief Financial Officer

Phil Nadeau -- Cowen and Company -- Analyst

David Roth -- Chief Medical Officer -- Analyst

Ted Tenthoff -- Piper Jaffray -- Analyst

Eric Olson -- Chief Scientific Officer

Jason Butler -- JMP Securities -- Analyst

Anna Vorobyeva -- ROTH Capital Partners -- Analyst

Mark Breidenbach -- Oppenheimer Holdings -- Analyst

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