Personal Finance

Here's Why Syros Pharmaceuticals Is Collapsing Today

A paper airplane representing the arrow of a declining chart.

What happened

Shares of Syros Pharmaceuticals (NASDAQ: SYRS) fell more than 26% today after the development-stage company announced the pricing of a stock offering. The business will sell roughly 8.7 million shares of common stock at $7.50 per share, in addition to warrants allowing the purchase of additional shares of common stock in the future. All of the transactions are expected to raise approximately $70 million in gross proceeds.

The dilution will sting shareholders, but management is wisely taking advantage of the fact that shares had gained 75% from the beginning of 2019 to the time the share offering was announced. That means fewer shares can be issued to raise more capital as compared to an offering at a lower share price. Considering the early-stage nature of the company's pipeline and the fact the business reported an operating loss of $64 million in 2018, it was a well-timed move in the grand scheme of things.

As of 1:20 p.m. EDT, the stock had settled to a 24.3% loss.

A paper airplane representing the arrow of a declining chart.

Image source: Getty Images.

So what

Syros Pharmaceuticals is developing a pipeline of drug candidates aiming to safely and predictably control the level of gene expression as a way to treat disease. For example, certain cancer cells might overexpress a gene that allows them to elude the body's immune system, but it might be possible to force cancer cells to return to a more "normal" profile of gene expression and thus make them susceptible to the immune system and/or other cancer drugs.

It's an intriguing idea but one that has mostly led to disappointing results to date . Researchers still don't have a great understanding of the complex networks cancer cells use to communicate, which makes it unlikely that targeting a single gene or protein will have much of an effect. That won't stop Syros Pharmaceuticals from testing its novel technology platform, which will be a little easier to do following the latest capital raise. The $70 million in gross proceeds will be added to an end-of-year cash balance of approximately $100 million in 2018.

Now what

Syros Pharmaceuticals stock is down today in response to the expected dilution from a share offering. Increasing the number of shares outstanding makes each share less valuable. That said, it's a wise move by management, especially considering the stock's impressive rise so far in 2019 and a slew of ongoing clinical trials. But given the uncertainty of the company's approach to controlling gene expression and a lack of successful results, investors are better off steering clear of this early-stage pharma altogether.

10 stocks we like better than Syros Pharmaceuticals, Inc.

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Syros Pharmaceuticals, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SYRS

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More