Lyra Therapeutics(US:LYRA)2022-11-08 21:29PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (unaudited) Unaudited financial statements for the period ended September 30, 2022, reflect significant asset growth from financing, continued net losses, and increased operating expenses for clinical development Condensed Consolidated Balance Sheets As of September 30, 2022, the balance sheet reflects substantial increases in liquidity and stockholders' equity from April 2022 financing, alongside a widening accumulated deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $109,558 | $45,747 | | Total current assets | $112,230 | $47,918 | | Total assets | $119,463 | $54,867 | | Liabilities & Equity | | | | Total liabilities | $26,241 | $20,551 | | Accumulated deficit | $(234,440) | $(193,397) | | Total stockholders' equity | $93,222 | $34,316 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and nine months ended September 30, 2022, the company reported increased net losses driven by significantly higher operating expenses, particularly R&D costs for clinical trials Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $359 | $14 | $1,352 | $14 | | Research and development | $10,048 | $7,077 | $29,346 | $19,352 | | General and administrative | $5,137 | $4,018 | $13,157 | $10,639 | | Loss from operations | $(14,826) | $(11,081) | $(41,151) | $(29,977) | | Net loss | $(14,766) | $(11,055) | $(41,043) | $(29,896) | | Net loss per share | $(0.40) | $(0.85) | $(1.47) | $(2.30) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity significantly increased to $93.2 million by September 30, 2022, primarily due to $96.3 million net proceeds from Q2 2022 stock and warrant issuance, partially offset by net losses - In the second quarter of 2022, the company issued common stock and pre-funded warrants, resulting in net proceeds of $96.25 million after issuance costs24 - The accumulated deficit increased from $193.4 million at December 31, 2021, to $234.4 million at September 30, 2022, reflecting ongoing net losses24 Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2022, net cash used in operating activities significantly increased, while net cash provided by financing activities from the April 2022 stock sale led to a substantial net increase in cash Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(31,221) | $(14,523) | | Net cash used in investing activities | $(136) | $(2,302) | | Net cash provided by financing activities | $96,257 | $363 | | Net increase (decrease) in cash | $64,900 | $(16,462) | Notes to Unaudited Condensed Consolidated Financial Statements Key notes detail the company's clinical-stage operations, liquidity position, and significant agreements, including the April 2022 financing and LianBio collaboration revenue recognition - The company is a clinical-stage therapeutics company focused on ENT diseases with an accumulated deficit of approximately $234.4 million at September 30, 20223032 - Management believes cash and cash equivalents of $109.6 million as of September 30, 2022, will be sufficient to fund operations for at least one year3233 - In April 2022, the company raised gross proceeds of approximately $100.5 million ($96.3 million net) through a private placement of common stock and pre-funded warrants56 - The LianBio License Agreement included a $12.0 million upfront payment and a $5.0 million development milestone payment received in February 2022, with revenue recognized as performance obligations are satisfied838790 Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's ENT disease focus, clinical trial advancements, operational adjustments, increased operating losses, and enhanced liquidity from recent financing - The company's lead product candidate, LYR-210, is in a Phase 3 program (ENLIGHTEN I and ENLIGHTEN II) for surgery-naïve CRS patients105 - Enrollment in the ENLIGHTEN II trial was paused to align with internal manufacturing timelines for clinical trial supply, with resumption expected in Q3 2023107 Results of Operations Comparison (in thousands) | Period | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | :--- | | Three Months | R&D Expenses | $10,048 | $7,077 | $2,971 | | | G&A Expenses | $5,137 | $4,018 | $1,119 | | | Net Loss | $(14,766) | $(11,055) | $(3,711) | | Nine Months | R&D Expenses | $29,346 | $19,352 | $9,994 | | | G&A Expenses | $13,157 | $10,639 | $2,518 | | | Net Loss | $(41,043) | $(29,896) | $(11,147) | - As of September 30, 2022, the company had cash and cash equivalents of $109.6 million, which is expected to fund operations and capital expenditures through mid-2024117165 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing 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 risk171 Controls and Procedures Management identified a material weakness in internal control over financial reporting, resulting in financial statement restatements and ineffective disclosure controls, with a remediation plan underway - A material weakness was identified in internal control over financial reporting concerning the allocation of the transaction price for the LianBio License Agreement175 - This material weakness resulted in a restatement of the financial statements for the three months ended March 31, 2022, and the three and six months ended June 30, 2022175 - As a result of the material weakness, the CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of September 30, 2022173 - A remediation plan is underway, which includes enhancing review procedures for complex transactions and augmenting staff with outside technical accounting resources176 PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in legal claims or actions expected to materially adversely 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 business181 Risk Factors The company outlines numerous material risks, including ongoing operating losses, capital needs, internal control weaknesses, high dependency on LYR-210, clinical trial uncertainties, reliance on third parties, and market acceptance challenges - The company has a history of significant operating losses and expects to incur additional losses for the foreseeable future, requiring substantial additional funding to continue operations186190 - A material weakness in internal control over financial reporting was identified, which, if not remediated, could adversely affect the business and stock price197 - The business is highly dependent on the success of its most advanced product candidate, LYR-210, which faces uncertain clinical trial outcomes and regulatory approval processes205 - The company relies on third parties for manufacturing and conducting clinical trials, which introduces risks related to supply, quality control, and trial execution350355 - The COVID-19 pandemic has previously disrupted clinical trials, such as the Phase 2 LANTERN trial, and may continue to adversely impact business operations411412 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - The company reported no unregistered sales of equity securities for the period448 Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company reported no defaults upon senior securities448 Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the company's operations449 Other Information The company reported no other information for the period - The company reported no other information for the period450 Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including agreement amendments and officer certifications - Exhibits filed include the First Amendment to the License and Collaboration Agreement with LianBio and certifications required by the Sarbanes-Oxley Act451