Lyra Therapeutics(LYRA) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) Unaudited H1 2022 financials show cash increased to $120.7 million from financing, $5.8 million collaboration revenue, and a $21.5 million net loss Condensed Consolidated Balance Sheets The balance sheet reflects a substantial increase in cash and stockholders' equity driven by recent financing activities Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $120,669 | $45,747 | | Total current assets | $122,381 | $47,918 | | Total assets | $130,035 | $54,867 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $9,872 | $18,246 | | Total liabilities | $19,005 | $20,551 | | Total stockholders' equity | $111,030 | $34,316 | | Total liabilities and stockholders' equity | $130,035 | $54,867 | - Cash and cash equivalents increased significantly from $45.7 million at the end of 2021 to $120.7 million as of June 30, 2022, driven by financing activities[20] - Total stockholders' equity more than tripled, increasing from $34.3 million to $111.0 million, reflecting the issuance of new common stock and warrants[20] Condensed Consolidated Statements of Operations and Comprehensive Loss Operations show new collaboration revenue and increased R&D expenses, leading to a higher net loss for the period Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $407 | $0 | $5,774 | $0 | | Research and development | $10,793 | $7,505 | $19,298 | $12,275 | | General and administrative | $4,132 | $3,560 | $8,020 | $6,621 | | Loss from operations | ($14,518) | ($11,065) | ($21,544) | ($18,896) | | Net loss | ($14,484) | ($11,039) | ($21,496) | ($18,841) | | Net loss per share | ($0.43) | ($0.85) | ($0.91) | ($1.45) | - The company recognized $5.8 million in collaboration revenue in the first six months of 2022, a new revenue stream compared to the same period in 2021[23] - Both Research and Development and General and Administrative expenses increased year-over-year for both the three and six-month periods, contributing to a larger net loss[23] Condensed Consolidated Statements of Cash Flows Cash flow statements highlight significant cash generation from financing activities offsetting increased operating cash burn Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 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 | $76,011 | ($5,547) | - Financing activities provided $96.5 million in cash during the first six months of 2022, primarily from the sale of common stock and pre-funded warrants[28] - Net cash used in operating activities increased significantly to $20.4 million from $4.2 million in the prior year period, reflecting higher net losses and changes in working capital[28] Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the company's liquidity position, recent financing events, and collaboration revenue recognition - The company believes its cash and cash equivalents of $120.7 million as of June 30, 2022, are sufficient to fund operations for at least one year, but will require additional financing to support long-term strategy[34] - In April 2022, the company closed a private placement of common stock and pre-funded warrants, resulting in gross proceeds of approximately $100.5 million[54] - Under the LianBio License Agreement, the company received a $12.0 million upfront payment and is eligible for up to $135.0 million in future milestone payments. For the six months ended June 30, 2022, the company recognized $5.8 million in collaboration revenue, including a $5.0 million milestone achievement[81][87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical-stage focus, increased R&D, new collaboration revenue, and strengthened liquidity from recent financing - The company is a clinical-stage therapeutics company focused on developing and commercializing treatments for ear, nose, and throat (ENT) diseases using its proprietary XTreo platform. Its lead product candidates are LYR-210 and LYR-220 for chronic rhinosinusitis (CRS)[95] - The LYR-210 Phase 3 program, consisting of two pivotal trials (ENLIGHTEN I and ENLIGHTEN II), was initiated in January 2022[100] - The company believes its existing cash and cash equivalents of $120.7 million as of June 30, 2022, will be sufficient to fund operations and capital expenditures into mid-2024[113][160] Results of Operations Operating results show new collaboration revenue, increased R&D and G&A expenses, and a higher net loss year-over-year Comparison of Operating Results (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $407 | $0 | $5,774 | $0 | | R&D Expenses | $10,793 | $7,505 | $19,298 | $12,275 | | G&A Expenses | $4,132 | $3,560 | $8,020 | $6,621 | | Net Loss | ($14,484) | ($11,039) | ($21,496) | ($18,841) | - For the six months ended June 30, 2022, collaboration revenue was $5.8 million, resulting from the LianBio agreement, including a $5.0 million development milestone[146] - R&D expenses for the six months ended June 30, 2022 increased by $7.0 million year-over-year, primarily due to a $4.6 million increase in clinical development costs for the ENLIGHTEN I Phase 3 trial and a $1.8 million increase in employee-related costs[147][148] Liquidity and Capital Resources The company's liquidity is primarily from financing activities, with significant cash provided by the April 2022 financing - The company's primary sources of liquidity have been proceeds from preferred stock sales, its IPO ($57.3M net), the April 2022 Financing ($96.3M net), and the LianBio collaboration agreement ($12.0M gross)[152] - Net cash provided by financing activities was $96.5 million for the first six months of 2022, a significant increase from $0.4 million in the same period of 2021, due to the April 2022 Financing[158] - The company expects expenses to increase as it continues R&D, initiates later-stage clinical trials for its product candidates, and prepares for potential commercialization[159] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide the information for this item - As a smaller reporting company defined in Rule 12b-2 of the Exchange Act, Lyra Therapeutics is not required to provide quantitative and qualitative disclosures about market risk[167] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[169] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[170] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any legal claims or actions expected to materially affect its financial condition or operations - Management believes there are currently no pending claims or actions against the company that would have a material adverse effect on its results of operations or financial condition[173] Item 1A. Risk Factors The company outlines numerous risks across financial, developmental, commercial, third-party reliance, intellectual property, and operational areas - The company has a history of significant operating losses ($21.5 million for the six months ended June 30, 2022) and expects to incur additional losses for the foreseeable future, with no guarantee of ever achieving profitability[178] - The business is highly dependent on the success of its most advanced product candidate, LYR-210, which failed to meet the primary endpoint of its Phase 2 LANTERN clinical trial, a failure attributed primarily to enrollment discontinuation due to the COVID-19 pandemic[192][195] - The company relies on third parties for the manufacturing of its product candidates and to conduct its clinical trials, which increases risks related to supply sufficiency, quality control (cGMP compliance), and trial execution (GCP compliance)[342][346] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company references its Form 8-K for unregistered equity sales and confirms no material change in IPO proceeds use - The company's unregistered sales of equity securities during the quarter ended June 30, 2022, are detailed in the Current Report on Form 8-K filed on April 13, 2022[436] - There has been no material change in the planned use of proceeds from the company's IPO as described in its final prospectus[439] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - The company reports no defaults upon senior securities[440] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[441] Item 5. Other Information The company reports no other information for this item - The company reports no other information for this item[442] Item 6. Exhibits This section lists Form 10-Q exhibits, including corporate governance, lease agreements, inducement award plan amendments, and officer certifications - Exhibits filed include a new Lease Agreement dated May 31, 2022, amendments to the 2022 Inducement Award Plan, and an Employment Agreement with Dr. Richard Nieman[444]