Lyra Therapeutics(LYRA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis of financial condition and operational results Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's financial position, performance, and significant accounting policies Condensed Consolidated Balance Sheets The balance sheets show a decrease in cash and cash equivalents and total assets from December 31, 2024, to June 30, 2025, while total liabilities also decreased, and stockholders' equity significantly declined | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Cash and cash equivalents | $29,784 | $40,577 | $(10,793) | | Total assets | $52,573 | $66,346 | $(13,773) | | Total liabilities | $50,951 | $54,752 | $(3,801) | | Total stockholders' equity | $1,622 | $11,594 | $(9,972) | Condensed Consolidated Statements of Operations and Comprehensive Loss The company experienced a significant reduction in net loss for both the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to lower operating expenses, including reduced R&D, G&A, and the absence of large impairment and restructuring charges seen in 2024 | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | | :-------------------- | :------------------------------- | :------------------------------- | :----------- | | Collaboration revenue | $183 | $598 | $(415) | | R&D expenses | $5,110 | $13,264 | $(8,154) | | G&A expenses | $3,501 | $5,139 | $(1,638) | | Impairment of P&E | $0 | $1,883 | $(1,883) | | Impairment of ROU | $0 | $22,836 | $(22,836) | | Restructuring charges | $398 | $6,450 | $(6,052) | | Total operating expenses | $9,009 | $49,572 | $(40,563) | | Net loss | $(7,437) | $(48,131) | $40,694 | | EPS (basic & diluted) | $(5.51) | $(36.76) | $31.25 | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :-------------------- | :----------------------------- | :----------------------------- | :----------- | | Collaboration revenue | $366 | $1,130 | $(764) | | R&D expenses | $9,986 | $31,502 | $(21,516) | | G&A expenses | $6,764 | $10,957 | $(4,193) | | Impairment of P&E | $0 | $1,883 | $(1,883) | | Impairment of ROU | $0 | $22,836 | $(22,836) | | Restructuring charges | $1,283 | $6,450 | $(5,167) | | Total operating expenses | $18,033 | $73,628 | $(55,595) | | Net loss | $(15,984) | $(70,583) | $54,599 | | EPS (basic & diluted) | $(12.00) | $(54.51) | $42.51 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased significantly from December 31, 2024, to June 30, 2025, primarily due to net losses, despite new capital raised through common stock and warrant issuances | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Common Stock Amount | $1 | $2 | | Additional Paid-In Capital | $416,383 | $422,394 | | Accumulated Deficit | $(404,790) | $(420,774) | | Total Stockholders' Equity | $11,594 | $1,622 | - Issuance of common stock and pre-funded warrants, net of issuance costs, contributed $4.273 million to additional paid-in capital in the six months ended June 30, 2025[26] - Net loss for the six months ended June 30, 2025, was $(15,984) thousand, significantly impacting accumulated deficit[22][26] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities decreased substantially in the first six months of 2025 compared to 2024, while investing activities shifted from providing cash to using a minimal amount. Financing activities provided less cash in 2025 | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------- | | Net cash used in operating activities | $(15,432) | $(42,436) | $27,004 | | Net cash (used in) provided by investing activities | $(2) | $44,033 | $(44,035) | | Net cash provided by financing activities | $4,641 | $8,555 | $(3,914) | | Net decrease in cash, cash equivalents and restricted cash | $(10,793) | $10,152 | $(20,945) | - The decrease in cash used in operating activities was primarily due to a lower net loss and reduced non-cash adjustments related to impairments in 2025[29][210][212] - Investing activities in 2024 included significant maturities of short-term investments ($81.5 million), which were absent in 2025[29][213] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's financial statements, covering its organization, significant accounting policies, restructuring events, fair value measurements, equity transactions, collaboration agreements, and lease obligations, offering crucial context for the reported financial figures 1. Organization, Restructuring, Going Concern and Basis of Presentation Lyra Therapeutics is a clinical-stage biotechnology company focused on chronic rhinosinusitis (CRS) therapies. Following the failure of its ENLIGHTEN 1 trial in May 2024, the company underwent a significant restructuring, including an 87-employee workforce reduction, cessation of commercialization efforts for LYR-210, pausing LYR-220 development, and marketing leased properties for sublease. These events, coupled with recurring losses and an accumulated deficit of $420.8 million, raise substantial doubt about the company's ability to continue as a going concern - Lyra Therapeutics is a clinical-stage biotechnology company developing therapies for chronic rhinosinusitis (CRS), with LYR-210 as its primary product candidate[31] - The Phase 3 ENLIGHTEN 1 trial for LYR-210 failed to meet its primary endpoint in May 2024[33] - In response to the trial failure, the company implemented a workforce reduction of 87 employees, stopped commercialization efforts for LYR-210, paused LYR-220 development, and is seeking to sublease its three leased properties[34] | Metric | Value (as of June 30, 2025) | | :------------------ | :-------------------------- | | Cash and cash equivalents | $29.8 million | | Accumulated deficit | $420.8 million | - The company's recurring net operating losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern for one year from the financial statement issuance date[36] - The company completed a 1-for-50 reverse stock split on May 27, 2025, to regain compliance with Nasdaq's minimum bid price requirement, which was achieved by June 13, 2025[42][45] 2. Summary of Significant Accounting Policies This note outlines the company's key accounting policies, including comprehensive loss, restricted cash, and net loss per share calculations, noting no material changes since the last annual report except for specific disclosures - Comprehensive loss for the three and six months ended June 30, 2025, was zero, compared to unrealized losses on short-term investments in 2024[49] | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Restricted cash | $1,993 | $1,993 | - The company computes basic net loss per share by dividing net loss by weighted-average common shares outstanding, treating pre-funded warrants as basic shares. Diluted net loss per share is the same as basic due to anti-dilutive effects of potentially dilutive securities[52][53] | Potentially Dilutive Securities (common stock equivalent shares) | June 30, 2025 | June 30, 2024 | | :--------------------------------------------------------------- | :------------ | :------------ | | Stock options | 89,959 | 140,916 | | Common stock warrants | 1,018,871 | 172,126 | | Restricted stock units | 85,804 | 17,349 | | Total | 1,194,634 | 330,391 | 3. Fair Value Measurements The company's financial assets measured at fair value on a recurring basis primarily consist of cash equivalents, categorized into Level 1 (money market funds) and Level 2 (U.S. treasury bills) inputs, with no Level 3 inputs used | Asset (in thousands) | June 30, 2025 | Level 1 | Level 2 | Level 3 | | :------------------- | :------------ | :------ | :------ | :------ | | Money market funds | $11,725 | $11,725 | $0 | $0 | | U.S. treasury bills | $12,996 | $0 | $12,996 | $0 | | Total cash equivalents | $24,721 | $11,725 | $12,996 | $0 | | Asset (in thousands) | December 31, 2024 | Level 1 | Level 2 | Level 3 | | :------------------- | :---------------- | :------ | :------ | :------ | | Money market funds | $23,214 | $23,214 | $0 | $0 | | U.S. treasury bills | $6,995 | $0 | $6,995 | $0 | | Total cash equivalents | $30,209 | $23,214 | $6,995 | $0 | - The carrying values of accounts payable, accrued expenses, and deferred revenue approximate their fair values due to their short-term nature and are considered Level 1 in the fair value hierarchy[56] 4. Restructuring and Other Related Charges Following the ENLIGHTEN 1 trial failure, the company incurred $12.2 million in total restructuring charges since Q2 2024, with $1.3 million recorded in the first six months of 2025, primarily for severance and retention costs - Total restructuring charges since Q2 2024 amount to $12.2 million, following the failure of the ENLIGHTEN 1 trial and a workforce reduction of 87 employees[57] | Restructuring Charges (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :----------------------------------- | :------------------------------- | :----------------------------- | | Severance costs | $0.3 million | $1.0 million | | Retention costs | $0.1 million | $0.3 million | | Total | $0.4 million | $1.3 million | | Restructuring Liability (in thousands) | December 31, 2024 | June 30, 2025 | | :------------------------------------- | :---------------- | :------------ | | Balance | $4,347 | $3,486 | 5. Property and Equipment and Related Impairment The company recorded a $1.9 million impairment charge on property and equipment in Q2 2024 due to the ENLIGHTEN 1 trial failure, with no additional impairment indicators identified as of June 30, 2025 | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Laboratory equipment | $3,897 | $3,927 | | Computer software and equipment | $159 | $159 | | Office furniture and fixtures | $961 | $961 | | Leasehold improvements | $487 | $486 | | Total | $5,504 | $5,533 | | Accumulated depreciation | $(4,345) | $(4,129) | | Property and equipment, net | $1,159 | $1,404 | - An impairment charge of $1.9 million was recorded in Q2 2024 for property and equipment, following the ENLIGHTEN 1 trial failure, based on a third-party appraisal[60] - No additional impairment indicators for property and equipment were identified as of June 30, 2025[60] 6. Impairment of Right-of-Use Assets The company recorded a $22.8 million impairment charge on its right-of-use assets in Q2 2024, triggered by the ENLIGHTEN 1 trial failure and subsequent efforts to sublease its leased properties. No further impairment was deemed necessary as of June 30, 2025 - A $22.8 million impairment charge was recorded for right-of-use assets in Q2 2024 due to the ENLIGHTEN 1 trial failure and the decision to market leased properties for sublease[61] - The fair value determination for the impairment used a discounted cash flow methodology with a discount rate of 9.5-10.5% and expected sublease rent increases of 3.0%[62] - No additional impairment indicators for right-of-use assets were identified as of June 30, 2025[61] 7. Segment Reporting The company operates as a single segment focused on developing therapies for ENT diseases. The CEO, as CODM, reviews operations and allocates resources based on net loss, considering costs related to clinical development, employee expenses, and regulatory responses - The company manages its business as a single operating segment: developing targeted medicines for ear, nose, and throat (ENT) diseases[63] - The CODM evaluates resource allocation based on net loss, considering employee, clinical, facility, and consulting costs, as well as the probability of success for product candidates[65] | Expense Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Clinical related costs | $1,346 | $5,058 | $2,632 | $11,019 | | Employee related costs | $3,074 | $5,451 | $6,149 | $14,926 | | Product development & manufacturing | $176 | $1,415 | $309 | $2,898 | | Facilities, support & depreciation | $2,669 | $3,708 | $5,341 | $7,773 | | Professional, consulting & public company costs | $1,346 | $2,771 | $2,319 | $5,843 | | Impairment of P&E | $0 | $1,883 | $0 | $1,883 | | Impairment of ROU assets | $0 | $22,836 | $0 | $22,836 | | Restructuring charges | $398 | $6,450 | $1,283 | $6,450 | | Total operating expenses | $9,009 | $49,572 | $18,033 | $73,628 | 8. Preferred and Common Stock The company has 10 million authorized preferred shares but none issued. Common stockholders have one vote per share and no dividends. The company has an effective shelf registration for up to $300 million in securities. Recent financing in June 2025 raised $5.0 million gross proceeds through common stock and warrants, with proceeds allocated based on fair value. Previous financings in September 2023, May 2023, and April 2022 also involved significant equity and warrant issuances - The company has 10,000,000 authorized shares of preferred stock ($0.001 par value), with no shares issued or outstanding as of June 30, 2025, and December 31, 2024[68] - Common stockholders are entitled to one vote per share and are not entitled to receive dividends unless declared by the Board of Directors[68] - A shelf registration statement on Form S-3 allows the company to offer up to $300.0 million in various securities, with $26.7 million (net of issuance costs) sold as of June 30, 2025[69][141] - The June 2025 Financing raised $5.0 million in gross proceeds ($4.3 million net) from the sale of 273,012 common shares, pre-funded warrants for 150,360 shares, and private placement warrants for 846,744 shares[70][73][215] | Financing Event | Gross Proceeds (in millions) | Net Proceeds (in millions) | | :---------------- | :--------------------------- | :------------------------- | | June 2025 | $5.0 | $4.3 | | September 2023 | $18.9 (from two sales) | $15.7 (from two sales) | | May 2023 | $50.0 | $46.5 | | April 2022 | $100.5 | $96.3 | | Shares Reserved for Future Issuance (as of June 30, 2025) | | :-------------------------------------------------------- | | Option to exercise stock warrants | 1,142,231 | | Stock options and restricted stock units | 237,694 | | Employee stock purchase plan | 19,730 | | Total | 1,399,655 | 9. Common Stock Warrants As of June 30, 2025, the company had 1,018,871 common stock warrants and 123,360 pre-funded warrants outstanding, with varying exercise prices and expiration dates, all classified as equity | Warrant Type | Number Outstanding (June 30, 2025) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | | :------------- | :--------------------------------- | :------------------------------ | :-------------------------------------------------- | | Common Warrants | 1,018,871 | $32.186 | 2.23 | | Pre-funded Warrants | 123,360 | $0.001 | 2.42 | - All outstanding warrants are equity-classified freestanding instruments[74][83][88] - 27,000 of the 2025 Pre-Funded Warrants were exercised as of June 30, 2025, at $0.001 per share[78][88] 10. Stock-Based Compensation Expense Stock-based compensation expense decreased for both the three and six months ended June 30, 2025, compared to 2024, primarily due to reduced R&D and G&A expenses. Unrecognized compensation for options and RSUs totals $4.9 million, expected to be recognized over approximately 2.1 years | Stock-Based Compensation (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $240 | $(290) | $513 | $413 | | General and administrative | $674 | $1,414 | $1,226 | $2,873 | | Total | $914 | $1,124 | $1,739 | $3,286 | - Unrecognized stock-based compensation for stock options is $2.6 million, and for restricted stock units is $2.3 million, both expected to be recognized over approximately 2.1 years[92] - No stock options were granted during the three and six months ended June 30, 2025. Options to purchase 33,886 shares were voluntarily forfeited by executives in February 2025[90][93] 11. Collaboration Agreement The LianBio License Agreement, amended in September 2022, involves an upfront payment and a development milestone, totaling $17.0 million in transaction price. Revenue is recognized as clinical supply is delivered and development activities are performed. The future of this collaboration is uncertain due to LianBio's strategic wind-down, and negotiations for a clinical supply agreement are currently inactive - The LianBio License Agreement, amended on September 26, 2022, has a total transaction price of $17.0 million, including an upfront payment of $12.0 million and a $5.0 million development milestone[95][100] - Revenue is recognized for the combined performance obligation as clinical supply of LYR-210 is delivered, and for development activities using an input method based on costs incurred[99][162] | Deferred Revenue (in thousands) | December 31, 2023 | December 31, 2024 | June 30, 2025 | | :------------------------------ | :---------------- | :---------------- | :------------ | | Combined Performance Obligation | $11,748 | $11,748 | $11,748 | | Development Activities Performance Obligation | $2,046 | $512 | $146 | | Total | $13,794 | $12,260 | $11,894 | - The future of the collaboration is uncertain due to LianBio's strategic review, wind-down activities, and ongoing efforts to find a third party to acquire its rights under the agreement[98][163] - Negotiations for a clinical supply agreement are not actively engaged, and it is uncertain if such an agreement will be completed[96][100] 12. Income Taxes The company recorded minimal income tax expense for the three and six months ended June 30, 2025 and 2024, related to its Massachusetts Security Corporation, maintaining a full valuation allowance on deferred tax assets due to uncertainty regarding future taxable income. The impact of the recently enacted OBBB Act is currently being assessed | Income Tax Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $2 | $12 | $6 | $26 | - The company maintains a full valuation allowance on its deferred tax assets due to uncertainty regarding future taxable income[103] - The company is currently assessing the potential impact of the One Big Beautiful Bill (OBBB) Act, signed into law on July 4, 2025[104] 13. Leases The company holds three operating leases in Watertown and Waltham, Massachusetts, with significant annual base rents and associated restricted cash for letters of credit. Total lease costs decreased in the first six months of 2025 compared to 2024, and the company is actively seeking to sublease these properties - The company has three operating leases: one in Watertown (expires April 2027, $2.0 million annual base rent) and two in Waltham (one expires June 2033, $2.2 million annual base rent; one sublease expires November 2032, $1.8 million annual base rent)[106][109][111][239][240][241] - Restricted cash of approximately $2.0 million secures letters of credit for these facility leases[50][107][110][112] | Lease Cost (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $1,292 | $1,877 | $2,601 | $3,736 | | Variable lease cost | $594 | $586 | $1,183 | $1,258 | | Total lease cost | $1,886 | $2,463 | $3,784 | $4,994 | | Future Lease Payments (in thousands) | Amount (as of June 30, 2025) | | :----------------------------------- | :--------------------------- | | From July 1, 2025 to December 31, 2025 | $3,184 | | 2026 | $6,494 | | 2027 | $5,131 | | 2028 | $4,507 | | 2029 | $4,642 | | Thereafter | $16,010 | | Total lease payments | $39,968 | | Less: Imputed interest | $(7,490) | | Present value of operating lease liability | $32,478 | 14. Commitments and Contingencies The company settled litigation with a former CMO in November 2023, involving mutual releases of claims related to a Master Clinical Supply Agreement. The remaining liability of $0.4 million was paid in Q4 2024 - The company settled litigation with a former CMO in November 2023, involving mutual releases of claims related to a Master Clinical Supply Agreement[117] - A $1.6 million loss on impairment of long-lived assets was recognized in 2023 due to the legal proceeding and termination of the agreement[116] - The remaining liability of $0.4 million from the settlement was paid in Q4 2024[117] 15. Subsequent Event On July 8, 2025, the company replaced two letters of credit for its Watertown lease and Waltham sublease, totaling $0.9 million, with one-year terms subject to automatic annual extensions - On July 8, 2025, the company replaced two letters of credit for its Watertown lease ($0.3 million) and Waltham sublease ($0.6 million)[118] - These new agreements expire in one year but are subject to automatic annual extension provisions through their respective lease terms[118] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operational results, and future outlook, highlighting key developments such as clinical trial outcomes, restructuring efforts, liquidity, and capital requirements. It also discusses the impact of recent events on revenue, expenses, and the company's ability to continue as a going concern Overview Lyra Therapeutics is a clinical-stage biotech company focused on CRS therapies, with LYR-210 as its lead candidate. While the ENLIGHTEN 1 trial failed, the ENLIGHTEN 2 trial showed positive results for LYR-210 in CRS patients without nasal polyps. Following the ENLIGHTEN 1 failure, the company implemented a 75% workforce reduction and paused LYR-220 development to preserve capital. Despite restarting LYR-210 manufacturing for potential future trials, the company faces substantial doubt about its ability to continue as a going concern due to recurring losses and limited cash, necessitating significant additional funding - Lyra Therapeutics is a clinical-stage biotechnology company developing anti-inflammatory therapies for chronic rhinosinusitis (CRS), with LYR-210 as its primary product candidate[123] - The Phase 3 ENLIGHTEN 2 trial for LYR-210 met its primary endpoint, demonstrating statistically significant improvement in 3CS at 24 weeks in CRS patients without nasal polyps, and also met key secondary endpoints[124][127][130] - The Phase 3 ENLIGHTEN 1 trial for LYR-210 failed to meet its primary endpoint in May 2024[126][128] - Following the ENLIGHTEN 1 failure, the company implemented a 75% workforce reduction (87 employees), stopped commercialization efforts for LYR-210, and paused development and manufacturing for LYR-220 to preserve capital[126][143] - The company has incurred recurring net operating losses since inception, with an accumulated deficit of $420.8 million as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern[142][146] - The company restarted LYR-210 manufacturing in early 2025 to meet potential clinical supply requirements for another Phase 3 trial[134][143] Nasdaq Listing Notification The company received a Nasdaq delisting notice in July 2024 for failing to meet the $1.00 minimum bid price. To regain compliance, a 1-for-50 reverse stock split was approved by stockholders and effected on May 27, 2025, successfully restoring compliance by June 13, 2025 - On July 19, 2024, the company received a Nasdaq notice for non-compliance with the $1.00 minimum bid price requirement[148] - A 1-for-50 reverse stock split was approved by stockholders and became effective on May 27, 2025, to regain compliance[149] - The company regained compliance with the Nasdaq minimum bid price requirement on June 13, 2025, after its common stock traded above $1.00 for more than 10 consecutive business days post-split[152] Recent Developments Recent developments include positive Phase 3 ENLIGHTEN 2 trial results for LYR-210, a $5.0 million gross proceeds financing in June 2025, and ongoing efforts to seek FDA feedback on the ENLIGHTEN program data and preserve cash through subleasing properties - On June 2, 2025, the ENLIGHTEN 2 Phase 3 clinical trial for LYR-210 met its primary endpoint[153] - The company raised approximately $5.0 million in gross proceeds through a registered direct offering of common stock and pre-funded warrants, and a concurrent private placement of warrants in June 2025[153] - The company plans to seek FDA feedback on the total ENLIGHTEN program dataset to determine the optimal regulatory path for LYR-210 and remains focused on cash preservation, including marketing leased properties for sublease[154] Financial Operations Overview The company has not generated product sales revenue and relies on collaboration revenue, primarily from the LianBio License Agreement, which is uncertain due to LianBio's wind-down. Operating expenses, including R&D and G&A, are expected to decrease due to restructuring but will fluctuate with clinical activities. Interest income includes payroll tax refunds, and income tax expense is minimal due to a full valuation allowance on deferred tax assets - The company has not generated revenue from product sales and does not expect to in the foreseeable future, relying primarily on collaboration revenue from the LianBio License Agreement[155][156] - The future of the LianBio collaboration is uncertain due to LianBio's wind-down activities, impacting potential future milestones or royalty payments[157][163] - Research and development expenses are expected to decrease due to the May 2024 RIF and completion of the ENLIGHTEN 2 trial, but will fluctuate based on future clinical development activities[168][170] - General and administrative expenses are expected to remain stable to support existing R&D and public company operations[174] - Interest income includes earnings on cash equivalents and short-term investments, and payroll tax refunds from the COVID-19 Employee Retention Credit[175][177] - Income tax expense is minimal, and the company maintains a full valuation allowance on deferred tax assets due to uncertainty regarding future taxable income[178] Results of Operations This section details the financial performance for the three and six months ended June 30, 2025, compared to the same periods in 2024, showing significant reductions in net loss driven by decreased operating expenses, particularly R&D, G&A, and the absence of large impairment and restructuring charges from the prior year Comparison of the Three Months Ended June 30, 2025 and 2024 For the three months ended June 30, 2025, net loss significantly decreased by $40.7 million to $(7.4) million, primarily due to a $40.6 million reduction in total operating expenses. This reduction was driven by an $8.2 million decrease in R&D, a $1.6 million decrease in G&A, and the absence of $1.9 million in property impairment and $22.8 million in ROU asset impairment, and a $6.1 million decrease in restructuring charges compared to the same period in 2024 | Metric (in thousands) | 2025 | 2024 | Change | | :-------------------- | :--- | :--- | :----- | | Collaboration revenue | $183 | $598 | $(415) | | R&D expenses | $5,110 | $13,264 | $(8,154) | | G&A expenses | $3,501 | $5,139 | $(1,638) | | Impairment of P&E | $0 | $1,883 | $(1,883) | | Impairment of ROU | $0 | $22,836 | $(22,836) | | Restructuring charges | $398 | $6,450 | $(6,052) | | Net loss | $(7,437) | $(48,131) | $40,694 | - Collaboration revenue decreased by $0.4 million due to the completion of the primary study phase of the ENLIGHTEN 1 trial[184] - Other income increased by $1.0 million, primarily from payroll tax refunds related to the COVID-19 Employee Retention Credit[190] Comparison of the Six Months Ended June 30, 2025 and 2024 For the six months ended June 30, 2025, net loss decreased by $54.6 million to $(16.0) million, driven by a $55.6 million reduction in total operating expenses. This included a $21.5 million decrease in R&D, a $4.2 million decrease in G&A, and the absence of $1.9 million in property impairment and $22.8 million in ROU asset impairment, and a $5.2 million decrease in restructuring charges compared to the same period in 2024 | Metric (in thousands) | 2025 | 2024 | Change | | :-------------------- | :--- | :--- | :----- | | Collaboration revenue | $366 | $1,130 | $(764) | | R&D expenses | $9,986 | $31,502 | $(21,516) | | G&A expenses | $6,764 | $10,957 | $(4,193) | | Impairment of P&E | $0 | $1,883 | $(1,883) | | Impairment of ROU | $0 | $22,836 | $(22,836) | | Restructuring charges | $1,283 | $6,450 | $(5,167) | | Net loss | $(15,984) | $(70,583) | $54,599 | - The decrease in R&D expenses was primarily due to reduced clinical costs ($8.3 million), employee-related costs ($5.9 million), and product development/manufacturing costs ($2.6 million)[198] - Other income increased by $1.0 million, primarily from payroll tax refunds related to the COVID-19 Employee Retention Credit[202] Liquidity and Capital Resources The company has raised $429.8 million since inception, with $29.8 million in cash and cash equivalents as of June 30, 2025. Net cash used in operating activities significantly decreased in H1 2025 due to lower net loss and reduced non-cash charges. Despite recent financing, substantial doubt remains about the company's ability to continue as a going concern, requiring additional funding through equity, debt, or collaborations to support ongoing operations and potential future clinical trials - From inception through June 30, 2025, the company has raised an aggregate of $429.8 million to fund its operations[206] | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $29,784 | $40,577 | | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(15,432) | $(42,436) | | Net cash (used in) provided by investing activities | $(2) | $44,033 | | Net cash provided by financing activities | $4,641 | $8,555 | - Management believes existing cash and cash equivalents will fund operations into Q3 2026, but substantial doubt about going concern remains[218] - Future funding requirements depend on clinical trial costs, manufacturing scale-up, regulatory approvals, and commercialization efforts, with no committed external sources of funds[220][222] - The company is an 'emerging growth company' and 'smaller reporting company,' utilizing reduced disclosure requirements, which may affect investor attractiveness[225][226][228][491][495] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Lyra Therapeutics is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[228] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025. No material changes in internal control over financial reporting were identified during the quarter - Management, with CEO and CFO participation, evaluated and concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[230] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the three months ended June 30, 2025[231] - Controls and procedures, regardless of design, can only provide reasonable assurance of achieving desired control objectives due to inherent limitations and resource constraints[229] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other information pertinent to the company's operations and financial standing Item 1. Legal Proceedings The company's management believes there are no pending claims or actions that could materially adversely affect its results of operations or financial condition - Management believes there are currently no claims or actions pending against the company that could have a material adverse effect on its results of operations or financial condition[234] Item 1A. Risk Factors This section outlines numerous risks and uncertainties that could materially and adversely affect the company's business, financial condition, results of operations, or prospects, including those related to strategic options, financial position, product development, regulatory compliance, commercialization, third-party dependence, intellectual property, employee matters, common stock, and general economic conditions Risks Related to Our Exploration of Strategic Options The company's pursuit of strategic options, including mergers, sales, or licensing, following the ENLIGHTEN 1 trial failure, may not yield suitable transactions or favorable terms, incurring significant costs. Additionally, efforts to sublease or assign three leaseholds, which represent substantial operating costs, may not be successful, further impacting financial condition - The company is exploring strategic options (merger, sale, divestiture, licensing) following the ENLIGHTEN 1 trial failure, which may be costly, time-consuming, and may not result in a suitable transaction or favorable terms[236][237] - Efforts to sublease or assign three significant leaseholds (Watertown and two in Waltham) are underway to reduce operating costs, but success on favorable terms is not assured, which could adversely affect the business[238][242] - Future acquisitions or strategic partnerships could disrupt business, dilute stockholders, reduce financial resources, or incur debt/contingent liabilities[243] Risks Related to Our Financial Position and Need for Additional Capital The company has incurred significant and recurring losses since inception, with an accumulated deficit of $420.8 million, raising substantial doubt about its ability to continue as a going concern. The failure of the ENLIGHTEN 1 trial has made it more difficult to raise capital, and significant additional funding is required to complete product development and commercialization. Failure to secure this funding could lead to delays, reduction, or termination of programs, or even discontinuation of operations, with potential dilution for existing stockholders - The company has incurred significant operating losses since inception, with an accumulated deficit of $420.8 million as of June 30, 2025, and expects to continue incurring losses[244][142] - Recurring losses from operations raise substantial doubt about the company's ability to continue as a going concern[249] - The failure of the ENLIGHTEN 1 Phase 3 trial has made it significantly more difficult to raise additional capital, which is needed to complete development, manufacturing, and regulatory approval of product candidates[251][252] - Failure to raise capital when needed could force delays, reductions, or elimination of product development programs or commercialization efforts, or discontinuation of operations[252] - Raising additional capital through equity or convertible debt securities will dilute existing stockholders' ownership interests[256][257] - The company has no approved products and has not generated product revenues to date[259] Risks Related to Discovery, Development, Clinical Testing, Manufacturing, and Regulatory Approval The company's business heavily relies on the success of LYR-210, which requires ongoing clinical testing and regulatory approval. The ENLIGHTEN 1 trial failed its primary endpoint, while ENLIGHTEN 2 showed positive results. Clinical trials are expensive, time-consuming, and uncertain, with potential for delays or failures. Manufacturing activities for LYR-210 have recently restarted after a pause, but face risks related to personnel, process optimization, and supply chain. Regulatory approval is complex, especially for drug-device combination products like LYR-210, and reliance on the 505(b)(2) pathway or foreign trial data carries specific risks - The business is highly dependent on the success of LYR-210, which requires ongoing clinical testing and regulatory approval[261] - The Phase 3 ENLIGHTEN 1 trial for LYR-210 failed to meet its primary endpoint, while the Phase 3 ENLIGHTEN 2 trial met its primary and key secondary endpoints[264][265] - Clinical trials are expensive, time-consuming, and uncertain, with potential for delays, negative results, or unforeseen safety issues, which could impair commercialization[278][279][280][284] - Manufacturing activities for LYR-210 recently restarted after a pause, involving technical transfer and risks related to personnel, process optimization, and supply chain disruptions[287][289][290] - LYR-210 is regulated as a drug-device combination product, which may lead to increased regulatory complexity and potential delays in approval[307] - The company intends to seek FDA approval for LYR-210 via the Section 505(b)(2) pathway, but there is no guarantee of acceptance or accelerated approval, and it may face patent litigation[298][300][301] - Data from clinical trials conducted outside the United States may not be accepted by the FDA, potentially requiring additional costly and time-consuming trials[303] - Product candidates may cause serious adverse events or undesirable side effects, which could delay or prevent regulatory approval, limit commercialization, or result in negative consequences post-approval[325][326][330] Risks Related to Healthcare Laws and Other Legal Compliance Matters The company is subject to extensive and costly government regulations, including FDA, HIPAA, and GDPR, which govern all aspects of product development and commercialization. Non-compliance can lead to severe penalties, delays, or withdrawal of approvals. Healthcare legislation, such as the ACA, IRA, and OBBBA, can increase costs and impact pricing and reimbursement. The company also faces risks from IT system failures, cyberattacks, and data security incidents, which could compromise sensitive information and lead to legal liabilities and reputational damage - The company is subject to extensive and rigorous government regulations (FDA, CMS, HIPAA, GDPR) covering research, development, manufacturing, marketing, and sales of pharmaceutical products[337][366][371] - Non-compliance with healthcare laws and regulations can result in significant penalties, including fines, injunctions, product recalls, withdrawal of approvals, and criminal prosecutions[340][363][367] - Enacted and future healthcare legislation (e.g., ACA, IRA, OBBBA) may increase the difficulty and cost of obtaining marketing approval, impact pricing and reimbursement, and adversely affect the business[341][345][346][349][351] - The company's IT systems and data are vulnerable to cyberattacks, system failures, and data security incidents, which could lead to data loss, legal claims, regulatory penalties, and reputational harm[335][336][368][370] - Compliance with data privacy laws like CCPA and GDPR is expensive and complex; failure to comply could result in significant fines (up to €20 million or 4% of global annual revenue under GDPR) and litigation[371][372] Risks Related to Commercialization The company faces intense competition from established pharmaceutical and biotech companies, which may render its products obsolete or non-competitive. Even if approved, LYR-210 may fail to achieve market acceptance by physicians, patients, or payors due to perceived efficacy, administration complexity, or cost. Successful commercialization depends on establishing effective manufacturing, sales, marketing, and distribution capabilities, either independently or through collaborations, especially in foreign markets, where additional regulatory burdens and risks exist. Inaccurate estimates of patient populations could also adversely affect revenue and profitability - The company faces intense competition from pharmaceutical, biotechnology, and specialty pharmaceutical companies with greater resources and market presence, potentially rendering its products obsolete or non-competitive[380][383] - Even if LYR-210 receives marketing approval, it may fail to achieve market acceptance by physicians, patients, or third-party payors due to factors like perceived safety/effectiveness, administration complexity, cost, or competition from existing treatments[399][120] - The successful commercialization of product candidates depends on establishing manufacturing, sales, marketing, and distribution capabilities, which the company currently lacks and may struggle to build or secure through collaborations[407][412] - Commercialization in foreign markets is subject to additional regulatory burdens, price controls, and other risks, and the company may rely on third-party collaborations for these markets[414][415][419] - The availability of coverage and adequate reimbursement from governmental and private payors is essential for market acceptance; failure to obtain this could limit market access and revenue generation[385][388] - Inaccurate estimates of patient populations for product candidates could lead to smaller addressable markets and adversely affect revenue and profitability[420][421] Risks Related to Our Dependence on Third Parties The company relies on third parties for critical development, manufacturing, and clinical trial services, and does not have long-term supply contracts for all components. This dependence increases risks of insufficient supply, quality issues, regulatory non-compliance, and delays, which could impair development and commercialization efforts. Failures by CROs or other third parties to meet deadlines or comply with regulations could extend or terminate clinical trials, and the inability to establish or maintain collaborations could significantly limit product development - The company relies on third parties for certain development and manufacturing-related services, and does not have multiple sources of supply or long-term contracts for all components of LYR-210[427][445] - Reliance on third-party manufacturers increases risks of insufficient quantities, unacceptable costs, quality issues, and non-compliance with cGMP requirements, potentially delaying or preventing regulatory approval[427][429][432] - The company is dependent on third parties (CROs, investigators) to conduct pre-clinical studies and clinical trials; their failure to comply with GCP or meet deadlines could delay or terminate trials[435][436] - Failure to establish and maintain collaborative relationships for development and commercialization of product candidates could significantly limit the company's ability to bring products to market and generate revenue[440][441][443] - Inaccurate, misleading, or incomplete data provided by third-party vendors could materially adversely affect the company's business[444] Risks Related to Our Intellectual Property The company relies on patents, trade secrets, and confidentiality agreements to protect its intellectual property, but faces significant risks including the failure of patent applications to issue, challenges to patent validity or enforceability, and the inability to prevent third-party infringement or independent development of similar technologies. Litigation to protect or defend IP can be costly and time-consuming, and recent patent reform legislation has increased uncertainties. Inadequate protection of trademarks could also harm brand recognition and competitive position - The company relies on patents, trade secret protection, and confidentiality agreements to protect its intellectual property, but the strength and enforceability of patents in the biotechnology field are uncertain[450][451] - Risks include failure of patent applications to issue, challenges to inventorship, ownership, validity, or enforceability of patents, and the inability to prevent others from designing around claims or independently developing similar technologies[451][452][455][480] - Third-party claims of intellectual property infringement could prevent or delay development and commercialization efforts, leading to substantial litigation expenses, damages, or the need for costly licenses[459][461][462] - Litigation to protect or enforce patents can be expensive, time-consuming, and unsuccessful, potentially resulting in patents being invalidated, narrowly interpreted, or held unenforceable[463][464] - Recent patent reform legislation (Leahy-Smith Act) and court rulings have increased uncertainties and costs surrounding patent prosecution and enforcement, potentially diminishing the value of patents[466][467][468] - Trade secret protection is difficult to maintain, and breaches of confidentiality agreements or independent discovery could impair competitive position[456][457] - Inadequate protection of trademarks and trade names could prevent the company from building name recognition and competing effectively[479] Risks Related to Employee Matters The May 2024 Reduction in Force (RIF), while intended to reduce operating expenses, may lead to unintended consequences such as loss of institutional knowledge, attrition, decreased morale, and difficulties in distributing duties, potentially harming business operations and financial condition - The May 2024 RIF, which impacted 87 employees, was implemented to significantly reduce ongoing operating expenses[245][482] - The RIF incurred approximately $4.1 million in initial charges and an additional $7.7 million in subsequent restructuring charges, including $1.3 million in the first six months of 2025[482] - Unintended consequences of the RIF may include loss of institutional knowledge, attrition beyond the intended number, decreased employee morale, and difficulties in distributing duties, potentially harming business, financial condition, and results of operations[483] Risks Related to Our Common Stock Failure to maintain Nasdaq listing compliance could harm the stock price and liquidity. The market price of common stock is volatile and influenced by numerous factors, including clinical trial results and competitor actions. Future sales of outstanding shares could cause significant price drops. As an 'emerging growth company' and 'smaller reporting company,' reduced disclosure requirements may make the stock less attractive to investors. Anti-takeover provisions in corporate documents and Delaware law could make acquisitions difficult, and exclusive forum designations may limit stockholder litigation options - Failure to maintain compliance with Nasdaq listing rules could lead to delisting, negatively impacting stock price, liquidity, and ability to raise capital[484] - The market price of the common stock is volatile and can fluctuate substantially due to factors like clinical trial results, competitor success, regulatory actions, and general market conditions[487][489] - Sales of a significant portion of total outstanding shares in the near future could cause the market price to drop[490] - As an 'emerging growth company' and 'smaller reporting company,' the company utilizes reduced disclosure requirements, which may make its common stock less attractive to some investors[491][492][495] - Provisions in the restated certificate of incorporation and bylaws, along with Delaware law, could make an acquisition of the company more difficult and prevent attempts to replace current management[496][497] - The restated certificate of incorporation designates specific courts as the exclusive forum for certain litigation, potentially limiting stockholders' ability to choose a favorable judicial forum[498][499] General Risk Factors Operating as a public company incurs significant costs and demands substantial management time for compliance. The company does not anticipate paying cash dividends, making capital appreciation the sole source of gain. Litigation, including securities class actions, could be costly and divert resources. Insurance coverage is expensive and may not cover all business risks, leaving the company exposed to significant uninsured liabilities. Adverse developments in the financial services indu