LYRA THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.
Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition, and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A. Risk Factors.
We caution readers not to place undue reliance on any forward-looking statements
made by us, which speak only as of the date they are made. We disclaim any
obligation, except as specifically required by law and the rules of the
Overview
We are a clinical-stage therapeutics company focused on the development and
commercialization of novel integrated drug and delivery solutions for the
localized treatment of patients with ear, nose and throat diseases. Our
proprietary technology platform, XTreo, is designed to precisely and
consistently deliver medicines directly to the affected tissue for sustained
periods with a single administration. Our initial product candidates, LYR-210
and LYR-220, are bioresorbable polymeric matrices designed to be administered in
a brief, non-invasive, in-office procedure and intended to deliver up to six
months of continuous drug therapy to the sinonasal passages for the treatment of
chronic rhinosinusitis, or CRS. The therapeutic embedded within LYR-210 and
LYR-220 is mometasone furoate, which is the active ingredient in various
We have advanced LYR-210 as a potential preferred alternative to surgery through
our Phase 2 randomized, controlled, patient blinded LANTERN clinical trial,
designed to evaluate the safety and efficacy in CRS patients both with and
without nasal polyps who have failed previous medical management but have not
undergone endoscopic sinus surgery. The trial was designed to enroll 99
evaluable patients with the potential to increase to up to 150 patients and was
initiated in
On
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In addition, we initiated a separate characterization study in
In our Phase 1 clinical trial, LYR-210 met its primary safety endpoint, and we observed that patients generally experienced significant, rapid, clinically meaningful, and durable improvement in SNOT-22 scores, an established patient symptom severity scale, through week 25, which was the end of the trial. Secondary findings from our Phase 1 clinical trial showed that LYR-210 demonstrated significant reduction of sinonasal Type 2 inflammation in surgically-naïve patients with CRS. We believe the reduction of Type 2 inflammation suggests a correlation with rhinologic symptom improvement in CRS and we believe the reduction could be a potential measure of LYR-210's local anti-inflammatory effects at the site of inflammation in the sinonasal passages.
We initiated our LYR-210 Phase 3 program in
ENLIGHTEN II is a 24-week, multi-center, randomized, blinded, sham-controlled trial designed to evaluate the efficacy and safety of LYR-210 in approximately 216 surgery-naïve CRS patients without nasal polyps or with polyps confined to the middle meatus and have failed prior medical management. The trial consists of two stages - a 2- to 4-week screening and run-in stage and a 24-week treatment stage. Patients are randomized 2:1 to receive LYR-210 (7,500 µg) or sham-procedure.
The primary endpoint of both ENLIGHTEN I and ENLIGHTEN II is the change from baseline, or CFBL, at week 24 in the composite score of three cardinal symptoms, namely nasal congestion, facial pain/pressure, and nasal discharge, or 3CS. Secondary endpoints include CFBL in individual cardinal symptoms at week 24, CFBL in CT sinus opacification score at week 24, CFBL in SNOT-22 at week 24, and rescue treatment use through week 24.
We are also developing LYR-220 for use in CRS patients who have an enlarged
nasal cavity due to sinus surgery but continue to require treatment to manage
CRS symptoms. We initiated the Phase 2 BEACON clinical trial for LYR-220 in
We were incorporated as a
From inception through
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We have incurred significant net operating losses in every year since our
inception and expect to continue to incur significant expenses and increasing
operating losses for the foreseeable future. Our net losses may fluctuate
significantly from quarter to quarter and year to year and could be substantial.
Our net losses were
• conduct additional clinical trials of our most advanced product
candidate, LYR-210, including two planned pivotal Phase 3 clinical
trials of LYR-210;
• conduct a Phase 2 clinical trial of LYR-220;
• continue to discover and develop additional product candidates;
• establish manufacturing and supply chain capacity sufficient to provide
commercial quantities of any product candidates for which we may obtain
marketing approval;
• seek regulatory and marketing approvals for product candidates that
successfully complete clinical trials, if any;
• establish a sales, marketing, and distribution infrastructure to
commercialize any products for which we may obtain regulatory approval
in geographies in which we plan to commercialize our products
ourselves;
• maintain, expand and protect our intellectual property portfolio;
• hire additional staff, including clinical, scientific, technical,
regulatory, operational, financial, commercial, and support personnel,
to execute our business plan; and
• add clinical, scientific, operational, financial and management
information systems and personnel to support our product development
and potential future commercialization efforts, and to enable us to
operate as a public company.
We do not expect to generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate. Additionally, we currently use contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, to carry out our clinical development activities. We do not yet have a sales organization. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to fund our operations through public or private equity or debt financings or other sources, including strategic collaborations and licensing arrangements. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed.
Because of the numerous risks and uncertainties associated with therapeutics product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
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COVID-19 Pandemic and CARES Act
The COVID-19 pandemic is affecting
On
As of
If we raise additional funds through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales and do not expect
to generate any revenue from the sale of products in the foreseeable future. To
date, we have recognized
If our development efforts for our product candidates are successful and result in regulatory approval and successful commercialization efforts, or additional collaboration agreements, we may generate revenue in the future from product sales, payments from additional collaboration or license agreements that we may enter into with third parties, or any combination thereof. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
We expect that our revenue for the next several years will be derived primarily
from our collaboration agreement with
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Collaboration Agreement
On
We assessed this arrangement in accordance with ASC 606 and concluded that the
contract counterparty,
Under the LianBio License Agreement, in order to evaluate the transaction price
for purposes of ASC 606, we determined that the upfront payment of
Additionally, we determined that
We will recognize the revenue associated with the license to develop and commercialize LYR-210, manufacturing activities related to the clinical supply of LYR-210, and the non-exclusive license to manufacture LYR-210 and obligation to transfer manufacturing technology in the case of a supply failure combined performance obligation as the clinical supply of LYR-210 is delivered. We recognize revenue associated with the development activities related to the global Phase 3 clinical trial performance obligation as the development activities are performed using an input method, according to the costs incurred as to the development activities related to the global Phase 3 clinical trial and the costs expected to be incurred in the future to satisfy the performance obligation. The transfer of control occurs over this time period and, in management's judgment, is the best measure of progress towards satisfying the performance obligation. The amounts received that have not yet been recognized as revenue are deferred as a contract liability on our consolidated balance sheet and will be recognized as the clinical supply of LYR-210 is delivered and over the remaining time it takes to conduct the global Phase 3 clinical trial, respectively.
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Operating Expenses
Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including the development of and pursuit of regulatory approval of our most advanced product candidate, LYR-210, for the treatment of CRS, which include:
• employee-related expenses, including salaries, benefits, and
stock-based compensation expense for personnel engaged in research and
development functions;
• expenses incurred in connection with the preclinical and clinical
development of our product candidates, including under agreements with
CROs, investigative sites, and consultants;
• costs of manufacturing our product candidates for use in our clinical
trials, including fees paid to CMOs as well as other manufacturers that
provide components of our product candidates for use in our potential
future clinical trials;
• consulting and professional fees related to research and development
activities;
• costs related to compliance with clinical regulatory requirements; and
• facility costs and other allocated expenses, which include expenses for
rent and maintenance of our facility, utilities, depreciation, and
other supplies.
We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as clinical site activations, patient enrollment, or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and may be reflected in our consolidated financial statements as prepaid or accrued research and development expenses.
Our research and development expenses consist primarily of costs such as employee compensation, consulting fees, fees paid to CMOs and CRO expenses in connection with our preclinical and clinical development activities. We typically use our employee and infrastructure resources across our development programs and we do not allocate personnel costs and other internal costs to specific product candidates or development programs with the exception of the costs to manufacture our product candidates.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we initiate additional clinical trials, including two clinical trials for LYR-210 and one clinical trial for LYR-220, scale our manufacturing processes, and continue to discover and develop additional product candidates.
The successful development of LYR-210, LYR-220, and other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the development of these product candidates. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs, and timing of preclinical studies, clinical trials, and development of our product candidates will depend on a variety of factors, including:
• successful completion of clinical trials with safety, tolerability, and
efficacy profiles for LYR-210, LYR-220, and any potential future
product candidates that are satisfactory to the FDA or any comparable
foreign regulatory authority;
• approval of an IND for LYR-220 and any potential future product
candidate to commence planned or future clinical trials in the United
States or foreign countries;
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• significant and changing government regulation and regulatory guidance;
• timing and receipt of marketing approvals from applicable regulatory
authorities;
• making arrangements with CMOs for third-party clinical and commercial
manufacturing to obtain sufficient supply of our product candidates;
• obtaining and maintaining patent and other intellectual property
protection and regulatory exclusivity for our product candidates;
• commercializing the product candidates, if and when approved, whether
alone or in collaboration with others;
• competition with other therapies; and
• business interruptions resulting from the COVID-19 pandemic.
A change in the outcome of any of these variables with respect to the development, manufacture, or commercialization enabling activities of any of our product candidates would significantly change the costs, timing, and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we may be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor, and public relations, accounting, auditing, tax services, and insurance costs.
We expect that our general and administrative expenses will increase in the
future to support continued research and development activities and potential
commercialization of our product candidates. These increases will likely include
increased costs related to the hiring of additional personnel and fees to
outside consultants, attorneys, and accountants, among other expenses.
Additionally, we will continue to incur increased expenses associated with being
a public company, including costs of additional personnel, accounting, audit,
legal, regulatory, and tax-related services associated with maintaining
compliance with exchange listing and
Interest Income
Interest income consists of interest income earned on our cash, cash equivalents and restricted cash.
Critical Accounting Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our unaudited consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in
There have been no material changes to our critical accounting estimates from
those described in Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Critical Accounting Estimates" in
our Annual Report on Form 10-K filed with the
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Recently Issued and Adopted Accounting Pronouncements
We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, such standards will not have a material impact on our consolidated financial statements or do not otherwise apply to our operations.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended June 30, Dollar
2022 2021 Change
Collaboration revenue $ 407 $ - $ 407
Operating expenses:
Research and development 10,793 7,505 3,288
General and administrative 4,132 3,560 572
Total operating expenses 14,925 11,065 3,860
Loss from operations (14,518 ) (11,065 ) (3,453 )
Other income:
Interest income 34 26 8
Total other income 34 26 8
Net loss $ (14,484 ) $ (11,039 ) $ (3,445 )
Collaboration Revenue
The increase in collaboration revenue for the three months ended
Research and Development Expenses
Research and development expenses increased by
The increase in research and development expenses for the three months ended
General and Administrative Expenses
General and administrative expenses increased by
The increase in general and administrative expenses for the three months ended
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Interest Income
Interest income increased by
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended June 30, Dollar
2022 2021 Change
Collaboration revenue $ 5,774 $ - $ 5,774
Operating expenses:
Research and development 19,298 12,275 7,023
General and administrative 8,020 6,621 1,399
Total operating expenses 27,318 18,896 8,422
Loss from operations (21,544 ) (18,896 ) (2,648 )
Other income:
Interest income 48 55 (7 )
Total other income 48 55 (7 )
Net loss $ (21,496 ) $ (18,841 ) $ (2,655 )
Collaboration Revenue
The increase in collaboration revenue was a result of revenue recognized under
the LianBio License Agreement related to the achievement of a development
milestone in the amount of
Research and Development Expenses
Research and development expenses increased by
The increase in research and development expenses for the six months ended
General and Administrative Expenses
General and administrative expenses increased by
The increase in general and administrative expenses for the six months ended
Interest Income
Interest income decreased by
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Liquidity and Capital Resources
Sources of Liquidity
We have funded our operations from inception through
As of As of
June 30, December 31,
2022 2021
Cash and cash equivalents $ 120,669 $ 45,747 We currently have an effective shelf registration statement on Form S-3 (No.
333-256020) filed with the
On
Cash Flows
The following table provides information regarding our cash flows for the six
months ended
Six Months Ended June 30,
2022 2021
Net cash used in operating activities $ (20,375 ) $ (4,209 )
Net cash used in investing activities (107 ) (1,785 )
Net cash provided by financing activities 96,493 447
Net increase (decrease) in cash, cash equivalents and restricted cash
$ 76,011 $ (5,547 )
The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.
Net cash used in operating activities was
•$2.7 million increase in net loss; •$14.4 million decrease in changes in the components of working capital; •$0.7 million increase in stock-based compensation; and •$0.2 million increase in depreciation expense. 26
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Net cash used in investing activities was
Net Cash Provided by Financing Activities
Net cash provided by financing activities was
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development for, begin the manufacturing scale up process for, initiate later stage clinical trials for, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.
We expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into mid-2024. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:
• the costs of conducting future clinical trials of LYR-210 and LYR-220;
• the costs of manufacturing additional material for two pivotal Phase 3
clinical trials of LYR-210 and a Phase 2 clinical trial of LYR-220 as
well as potential future clinical studies we might conduct for our
other product candidates;
• the costs of scaling up our manufacturing process and supply chain
capacity to provide sufficient quantities of LYR-210 and LYR-220 for
the potential commercialization of LYR-210 and LYR-220 if our clinical
development program is successful and we obtain marketing approval;
• the scope, progress, results, and costs of discovery, preclinical
development, laboratory testing, and clinical trials for other
potential product candidates we may develop, if any;
• the costs, timing, and outcome of regulatory review of our product
candidates;
• our ability to establish and maintain collaborations on favorable
terms, if at all;
• the achievement of milestones or occurrence of other developments that
trigger payments under any collaboration agreements we might have at
such time;
• the costs and timing of future commercialization activities, including
product sales, marketing, manufacturing, and distribution, for any of
our product candidates for which we receive marketing approval;
• the amount of revenue, if any, received from commercial sales of our
product candidates, should any of our product candidates receive
marketing approval;
• the costs of preparing, filing, and prosecuting patent applications,
obtaining, maintaining, and enforcing our intellectual property rights,
and defending intellectual property-related claims;
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• our headcount growth and associated costs as we expand our business
operations, our research and development activities, and our
manufacturing scale up;
• the costs of operating as a public company; and
• the cost of potential business interruptions resulting from the
COVID-19 pandemic.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. We have access to additional funds to be earned in connection with our LianBio License Agreement, if development activities are successful under that agreement. Any debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Emerging Growth Company Status
The JOBS Act permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.
We will remain an emerging growth company until the earliest to occur of: (1)
the last day of the fiscal year (a) following the fifth anniversary of the
completion of our IPO, or
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