Lyra Therapeutics, Inc. (LYRA) Q4 2020 Earnings Report, Transcript and Summary

Welcome to the Lyra Therapeutics Fourth Quarter and End Year 2020 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Following management's prepare remarks, we will hold a Q&A session. [Operator Instructions] As a reminder, this call is being recorded today March 9, 2021. I would now like to turn the conference call over to Laurence Watts, Managing Director at Gilmartin Group. Please, go ahead.

Thank you, Terry. Joining us on the call today from Lyra Therapeutics are President and Chief Executive Officer, Maria Palasis; Chief Financial Officer, Don Elsey; Chief Medical Officer, Rob Kern; and Senior Vice President of Commercial Strategy and Market Development, Corinne Noyes. Early today, Lyra released financial results for the fourth quarter ended December 31, 2020. If you have not received this news release, or you -- to be added to the company's distribution list to receive future releases, please go to the investor relations section of Lyra's website, which can be found at www.lyratherapeutics.com. During the conference call management will make forward-looking statements, including statements related to Lyra's financial results and guidance for 2021, and the clinical development of the company's product candidates, business strategy and planned operations. These forward-looking statements are based on the company's current expectations and inherently involves significant risks and uncertainties. Lyra's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements, as a result of these risks and uncertainties. Factors that could cause results to be different from these statements, include factors the company describes in the section titled risk factors and the company's annual report on form 10-K filed today, March 9, 2021. Lyra cautions you not to place undue reliance on forward-looking statements and undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in its expectations. With that, I will now turn the call over to Maria Palasis, CEO of -- Therapeutics. Maria?

Thank you, Laurence. And welcome, everyone to Lyra's Therapeutics fourth quarter and full year 2020 financial results conference call. 2020 was an exciting and successful year at Lyra, culminating in the release of our LANTERN Phase 2 trial results in December, and the completion of enrollment in our 24-patient pharmacokinetic clinical study, both despite the ongoing global COVID-19 pandemic. We believe this bodes well for future enrollment in our pivotal Phase 3 programs. Before I turn to the LANTERN results, let me remind you of some recent key appointments that Lyra has made. Recently, we were joined by Dr. Robert Kern, who has been appointed as our Chief Medical Officer. Rob is a renowned Otolaryngologist and a world leading expert in chronic rhinosinusitis. He is a Chair of Otolaryngology at Northwestern University and the immediate past president of the American Rhinologic Society. As a practicing Otolaryngologist, he knows firsthand the enormous need for new treatment options for patients with chronic rhinosinusitis, or CRS. And we are delighted he will be overseeing the next phase of clinical development for LYR-210 and LYR-220. In the fourth quarter, we also expanded our Board of Directors through the appointment of Dr. Nancy Snyderman. We were pleased to have Nancy join our team and look forward to leaning on her extensive ENT experience as a board certified otolaryngologist and head and neck surgeon. As you know, Lyra’s first area of focus as a company is in the treatment of chronic rhinosinusitis, for which there are an estimated 8 million patients treated each year in the United States, with roughly half of them failing current medical therapy. The market for these failed patients is estimated to be 6 billion annually, just in the United States. The problem and opportunity is even greater when the ex-US markets are considered. Lyra has designed LYR-210 and LYR-220 to be disease modifying and best-in-class for CRS patients who are currently underserved by medical management. Having now demonstrated, effectiveness in our Phase 2, for underlying XTreo platforms, Lyra intends to use LYR-210 and 220 as the foundation, on which we building – we build a leading ear, nose and throat company. Turning now to our LANTERN study results. Let me just say that we were very pleased with the data and the patient experience that resulted from this trial. Our LANTERN Phase 2 trial show that CRS patients treated with 7,500 micrograms, achieved a statistically significant improvement in their symptoms at several time points compared to the control, including 24 weeks, the intended treatment duration for our product candidate. As such, Lyra believes that the results of this randomized controlled blinded clinical trial support a clear path to regulatory submission for LYR-210 and also provide sufficient insight and data to enable us to move the program forward to a pivotal trial, subject to an end of Phase 2 meeting with the FDA. This meeting is planned to take place before the end of the first half of this year. Following agreement on the design of the single Phase 3 pivotal trial that we believe will be sufficient to complete our registration package under a 505(b)(2) new drug application, we anticipate initiating the pivotal study for LYR-210 at the end of 2021. As a reminder, the LANTERN trial was completed with 67 patients. This was reduced from the planned enrollment due to the COVID-19 pandemic. The 67 patients were split into three treatment arms or 7,500 micrograms, 2,500 micrograms of nomadism, curate and control, and were evaluated for improvement in the four cardinal symptoms of chronic rhinosinusitis at four weeks, and up to 24 weeks in addition to other secondary endpoints. We were excited to see a statistically significant treatment effective 24 weeks for the 7,500 microgram dose in both, the four cardinal symptoms and SNOT-22 scores. This gives us confidence to LYR-210 could be an effective therapy for up to six months. Additionally, we saw improvement relative to control at earlier time points in both the four cardinal symptoms and the SNOT-22 symptom scores. Another key takeaway from the LANTERN trial was demonstrating the safety of the 7,500 microgram dose of nomadism curate, three times the dose we used in our Phase 1 trial. At this dose, 70% of patients achieved the minimal clinically important difference at four weeks as measured by the SNOT-22 score and the 100% by week 24. On the back of this data, we plan to move forward with a 7500 microgram dose for our Phase 3 program. Based on the observed rapid and durable symptom relief over 24 weeks, we believe LYR-210 if approved would deliver a major step forward in care for CRS patients who are facing surgery as their next treatment option. We intend to present a full data set from the LANTERN study at COSM, the Combined Otolaryngology Spring Meetings, which is being held from April 7th to April 11th. We believe the results of the trial support a clear pathway to pursue a larger pivotal phase 3 trial for LYR-210 and a proposed 24 week primary endpoint based on the cardinal symptoms of CRS, the FDA preferred measure of efficacy. Importantly, the LANTERN results also support Lyra's proprietary XTreo platform, which is designed to deliver drugs directly, continuously and consistently to disease tissue over a sustained period of time via single administration. Because of this, the LANTERN study gives us confidence to advance LYR-220, our second program that will utilize the XTreo platform for chronic rhinosinusitis patients who have previously undergone surgery and require ongoing medical management. Approximately 40% of patients who see an ENT have had a prior nasal surgery or even multiple surgeries. LYR-220 utilizes a larger matrix then LYR-210 and is designed to adapt to the anatomy of these patients. Given the positive results from my LANTERN study, we now plan to initiate a Phase 2 study for LYR-220 using the 7500 microgram dose in the second half of 2021. Furthermore, Lyra continues to see versatility in the XTreo platform, which we believe has potential applications and many additional indications beyond CRS, where long-term delivery to treat chronic diseases would improve local drug bioavailability and enhance the efficacy and safety. The LANTERN study showed that XTreo can successfully deliver continuous therapy for up to six months, we believe XTreo to be tuneable with regard to the drug being delivered and the period of delivery, which provides us with multiple expansion opportunities either as additional internal development programs or as partnerships. Before I turn the call over to Dan to discuss the financials, let me allow Dr. Kern, our newly appointed Chief Medical Officer to share his own perspective on the LANTERN study.

Thank you, Maria. I'm very pleased to join Lyra Therapeutics as CMO. An appointment I accepted after the company released data from its Phase 2 study of LYR-210. As you can see, I have quite clearly voted with my feet. As a practicing otolaryngologist with many years of experience working with companies to develop new products to treat CRS, I believe the LANTERN study has demonstrated that LYR-210 is the first nasal implant to achieve the benefit up to six months in CRS patients after only a single administration and a simple, clinical, outpatient office setting. A prolonged treatment effect of LYR-210 is impressive. Currently, no therapy can deliver 750 micrograms of Mometasone for extended symptom relief. Patients often forget to use daily medications. And we believe this product candidate provides the potential to eliminate the need for patient compliance for a full six months with a single office visit. There is no doubt that mometasone is an effective anti-inflammatory treatment for CRS, the limitations relate to compliance and drug delivery. What LYR-210 has the potential to do, unlike any currently available therapy is to eliminate both these limitations by delivering mometasone continuously and directly to the affected tissue for a prolonged period of time, thus exerting maximum therapeutic effect and maximum symptom relief for patients. Together, LYR-210 and 220 have the potential to offer ENT physicians a full range of CRS treatments, regardless of whether or not patients have had prior sinus surgery and whether or not they have had polyps. I believe is such a comprehensive offering will be very appealing to ENT physicians worldwide. My experience CRS patients would much prefer to avoid surgery if at all possible. It can be painful, and so often not curative, as most patients continue to require medical management even after surgery. I believe the data and the experience generated from the LANTERN study position us quite well to design a successful Phase 3 pivotal trials. Subject to eventual FDA approval, I believe LYR-210 has the opportunity to change the current treatment paradigm for CRS patients. With that, I will now hand the call over to Don, to summarize Lyra's financial results for the fourth quarter. Don?

Thank you, Rob. Starting with our cash and cash equivalents balance, we ended the fourth quarter and the year with $74.6 million, compared with $81.6 million as of September 30, 2020. Total operating expenses for the fourth quarter were $7.1 million, compared to $4.4 million for the same period in 2019, net loss for the fourth quarter and the year were $7 million and $22.1 million, respectively. The earnings release we issued today outlines our financial results in full. So I will not go through the details on this call. In terms of financial guidance, we believe that Lyra has sufficient cash to fund the company through planned operations into 2023. Finally, Lyra's shares outstanding as of December 31, 2020 were approximately 12.9 million shares. And with that, I'll turn the call back to Maria.

Thank you, Don. In the coming months, we have several milestones that will prove pivotal for the company. These include an end of Phase 2 meeting with the FDA for LYR-210 and the initiation of our Phase 2 study for LYR-220. Before that, however, we will have two additional data announcements to share with you, which will be the results from our 56-day U.S. based PK study of LYR-220 in the second quarter, and the presentation of our full LANTERN dataset at COSM in April. In January, we announced the PK study, the first involving U.S. patients had completed enrollment at 24 subjects and achievement in and of itself considering the ongoing COVID pandemic. The lead enroller in the PK study recently commented on LYR-210s ease of application and deployment during an analyst call. Some of his comments regarding his experience include that LYR-210 was satisfying, quick, and painless to administer. And the learning curve for administration was fast and would likely be so for other ENT. In summary, Lyra remains dedicated to providing solutions across the continuum of care for millions of sinus sufferers. Our product pipeline is well-aligned with the needs in CRS and we're pleased with the clinical results to-date. I think physician share our enthusiasm for the impact our technology will have for their patients. I'm also incredibly proud of the extraordinary team we've built at Lyra. We have accomplished so much since we went public just under a year ago and we continue to believe we have all the ingredients for success. That concludes our prepared remarks for today and we'd like to now take some questions. As always, thanks for your continued interest and support. Terry, you can go ahead and open up the line for questions.

[Operator Instructions] Your first question comes from the line of Chris Howerton from Jefferies. Your line is now open.

Excellent. Thank you so much for taking the questions and congratulations on the progress.

Thank you, Chris.

Great. Yes, of course. So -- maybe just a couple of questions for me. First on just a -- maybe just a housekeeping question. With respect to the presentation at CASM, can you kind of highlight what new information we will be able to receive at that time relative to the topline results from December? So, that's one question. And another question that we have is, kind of, thinking about the eventual reimbursement strategy that you've discussed in the past, I think has primarily been focused on buy and build, but I believe you've said that you're willing to kind of like see how things shape in the market. So, I guess, the question is do you have any evolved view in terms of whether or not you like, buy and build still or if you're considering exploring the specialty pharmacy route? And then the third question is one of the things we had some KOL discussions recently and one of the things that the physician we spoke to found very interesting was the idea of halting the disease progression. So, starting earlier, in terms of the treatment paradigm and the disease progression, so I guess, I'd be curious to hear Dr. Kern comments on that and how 210 could potentially be changing the eventual treatment? Thanks.

Thank you, Chris. I can start with the question for -- related to CASM and then, I'll turn it over to Corinne to provide her thoughts on reimbursement and then Dr. Kern on the -- comments by doctor--. So, we look forward to presenting our results at CASM and that will take place, as I mentioned the first week of April. That will be April 11. We will be presenting data on each cardinal symptom of Chronic Rhinosinusitis. As a reminder, the symptoms are nasal obstruction, nasal discharge, facial pain, and smell. Those are the four symptoms and we’ll have results from -- as it pertains to each of those symptoms individually in addition to the composite scores. We've already shown the composite of four cardinal symptoms. And the SNOT-22 score. We’ll also show the composite of three cardinal symptoms. In addition to that, we will also be showing our results. Our objective results on by MRI, so we assessed inflammation using MRI, we'll be sharing those results. And then, finally, we will also be showing results for patients that both have pilots and patients that don't have pilots, and this will all be new information. The second part of your question was on the reimburse --

I’ll take second question.

Yes. Go ahead, Corinne.

Yes. Hi, Chris. This is Corinne Noyes. To answer your question about our reimbursement and distribution model, of course, we're going to continue to evaluate the most appropriate strategy as we progress through development. But our plan right now is to have a hybrid approach that incorporates both, a buy and bill model, as well as specialty pharmacy. There are some physicians who will enjoy the benefits of a buy and bill model. But there are others who will prefer the ease of a specialty pharmacy and some payers that will require going through a specialty pharmacy network. So we envision having a hybrid distribution and reimbursement model that incorporates both, buy and bill and specialty pharmacy.

Okay. Very Clear. Thank you.

Hi, this is Rob. I'll enter -- Corrinne, interject now. You asked about whether, if I understood your question correctly. Whether this device might more or less arrest disease progression? Is that what you're asking?

Yes. I mean, the nature of the question is essentially, yes, that you could arrest disease progression and alter what the sequelae are from a treatment perspective? Like, do they even have to have a surgery, for example?

Well, I think that that's -- yes. And the short answer is, yes, that would -- I think that will almost assuredly be the case. Again, assuming that we get FDA approval and all the other, but that would be one role for the product, that if you look at what limited epidemiological studies have been performed, there's usually about a six month period beforehand where patients start to get really symptomatic, and then they get diagnosed with chronic sinusitis. So there's at least six months, maybe a year or so, when they're suffering, and maybe they haven't fully been diagnosed yet. I think the awareness of a product like this, again, assuming we come to market and get FDA approval, that intervention early might very well for prevent the progression of disease, because the physicians, and eventually the patients, become aware that the products like this are out there. So the short answer is, yes. And hopefully that long answer provided a little more clarity.

Yes. Maybe, if I -- if you don't mind, a quick follow up there. I guess, is that something that you think would be interesting to collect data for in terms of long term follow up, like, whether or not patients that received 210 are progressing to surgical procedures? Is that something that you think you can collect in a clinical trial setting?

You're talking like -- go ahead.

Yes. Maybe, Chris, I can mention that in our Phase 2 study, we followed our patients that had a way our two test for six months and then after the six months the implants were removed. We continue to follow those patients and this is ongoing for an additional six months. So it's an excellent question, and we will – we are tracking those patient's symptoms. So we will have a sense for when their symptoms returned, when the Phase 2 study is fully completed. And maybe one thing that I think Dr. Kern can probably speak to is that, with oral steroids, I believe when patients do come off those oral steroids their symptoms do tend to recur pretty quickly.

Yes. That's correct. I mean, again, I think we're speculating here, but I would imagine that, if we bring a product to the market that patients do well on it, we'll get it every six months. That's certainly the way intersect the newer product is used. And this would just offer a longer duration and prevent – hopefully, prevent the progression to surgical level of morbidity.

And from a measurement standpoint, Chris, we're going to be in the Phase 3 assessing the percent of patients that no longer require surgery. So we'll have an outcome measure, which maybe is partly what you're asking for as well. And so we will have an assessment of does this patient still require surgery, if they require surgery at time of entry? So we know that will be important for payers. And that will be a proxy for our benefit in terms of preventing surgery?

Understood? Okay. All right. Great. Thank you very much.

Thank you, Chris.

Your next question comes to the line of Robert Hazlett from BTIG. Your line is now open.

Hi, thanks. My name is – its Bert from BTIG. Hope you're well? Just a quick question or two on the upcoming pivotal study; first of all, with the arrival of Dr. Kern, are there any elements of the study that might be either tweet or considered or added in terms of either the primary endpoints in terms of timing or three cardinal symptom score, or any secondary that you might want to include with the study? I've got one or two more after that?

Sure. So Bert, thanks for the question. We had a – what we would consider very successful Phase 2 study. So we are certainly going to keep our inclusion -- exclusion very similar to what we did in Phase 2. With respect to the endpoint, we are -- as we mentioned, we will be using the cardinal symptoms we have not yet determined or announced whether we'll be using the four cardinal symptoms or the three cardinal symptoms, it is our understanding that the FDA would prefer two or more cardinal symptoms. So we wills let the data guide us and after our end of Phase 2 meeting, we will be able to announce which composite we will use. But the primary endpoint will be cardinal symptoms. And as I mentioned, we are planning that the time point will be at 24 weeks, it's – our product is a six month product and so six months duration is most appropriate for it. Given the recent approval of antibodies, now there's also precedents for that, which there wasn't when we initiated the trial. So that's sort of how we're thinking about it. And the other area that is also we have previously stated that we are expecting the trial size again to be about 300 to 350 patients.

Terrific. Thank you for that color. And just with regard to potential enrollments on it, you just mentioned the US Phase 3 case study, enrolled well rapidly and great to hear that. Any sense of what that might portend with regard to enrollment timing for the pivotal study?

It really is too early for us to provide a perspective on how long it will take to enroll the study. We certainly will do that after we have our end of Phase 2 meetings. But at this point, it really is too early to say.

Okay. Thanks. And then just a question on 220, could you give a little bit more detail on the Phase 2 that's upcoming? Will this mimic LANTERN in terms of size, scope and opportunities or if it – will it have a slightly larger or smaller a different focus, just any additional color with regard to the design, size and maybe timing of that study?

Sure. So the study for LYR-220, we anticipate it being approximately 40 patients. This is a study that will also include the 7,500 microgram dose. Prior to the end of the LANTERN study, we were uncertain which dose, but we've now clearly made the decision, we're going to be moving forward with that dose. And another interesting aspect is that we have actually two designs for that 220 matrix that we are considering. So that will be different from 210. So 210 have the two doses, one design in this situation. We actually have two candidates designed, and both of which deliver 7,500 micrograms and both of them from our XTreo platform. We see it as very derisk. So we're going right into the Phase 2 and we're on target to start this study in the second half of 2021.

Terrific. Appreciate the additional color. And with regard to the – just one more for me. With regard to the XTreo platform more broadly, you've clearly got your hands full with 210, 220 and the development going on there, but should we expect anything in the near to mid-term with regard to XTreo additional opportunities?

We do agree that the XTreo platform definitely lends itself to the treatment of many other areas, we can make the platform very small to fit into the tight spaces within the ear or other places in the sinus. We are, as you said, very focused right now on LYR-210 and 220 and getting those trials started. However, the work that we do in other areas at this point is really around the market research and meeting with physicians. So, we're still a ways away from clinical work in those programs.

Okay, terrific. Thank you so much. I appreciate it. Congratulations on all the progress.

Thank you, Bert.

Your next question comes from the line of Ash Verma from Bank of America. Your line is now open.

Hi, there. This is Ash. Thanks for taking our questions. Congrats on the progress. So, I had a couple of questions. The first one was just on the pharmacokinetics study. Can you remind us the design of this trial? And what is the expectation for the results, like what would you consider to be a win in this situation? Second question pertains to just on the like the financial guidance. I think last year, you mentioned, I think you gave specific guidance for the financial year 2020 around $60 million -- $70 million finishing around that, you certainly did not spend that much, curious if why you chose not to have a similar cash flow and guide for this year? And then the third question that I had was just around the FDA meeting, is that schedule or do you need to still schedule it? And what are some of the discussion points that that you have in the agenda for this meeting?

Thank you, Ash.

Yes.

So, I will start with the PK study design. We started the PK study in the fall and we -- while the pandemic was going on, the goal was to enroll 24 patients. 12 of those patients were enrolled at the 2,500 micrograms and 12 at the 7,500 micrograms. And we were able to enroll all the patients and we did it all within the fall. So, we were thrilled that we were able to execute that study. The design of the study -- we're taking blood draws from these patients and determining the level of mometasone furoate in the blood, the characterization that we're going to -- that we need to do as a 505(b)(2) product and would be required for the NDA. And what it allowed us to do is get some experience in the US and that experience that we have this in US sites is going to serve us well in the Phase 3 trial. We will be announcing results from that study in the second quarter of 2021. And that study is still ongoing.

Yes.

Let me maybe take your third question and then Don can take your second question. So, the FDA meeting -- what I can tell you is that we have been in contact with them. Again, we're -- we will be having that meeting as planned for before the end of the second quarter and until that plans at this point with the FDA. And our goal at that meeting is to review the LANTERN study results and then to propose our plans for the Phase 3 and to get FDA’s feedback. Again, we've had extensive conversations with the FDA in the past. So we're -- we'll be continuing those at the end of Phase 2 meeting. Don?

Great. So, Ash this is Don. Glad you could join us today. If I understood your question correctly, you were asking why we weren't giving guidance for 2021 specifically, is that correct?

Yeah. That's right.

Okay. Yeah. When we took a look at giving guidance, Ash, it really was we're starting Phase 2 for 220, a Phase 3 for 210. We're doing tech transfer. And we really felt it was probably a little less meaningful externally as to whether it fell on this side of 12/31, or it fell on the other side of 12/31. So we thought it was more meaningful to give a total cash guidance and saying that our resources would take us into 2023 on all of those programs that span a year end yardstick if you will. It was that simple.

Okay, got it. Great. Thank you so much.

Thank you, Ash.

[Operator Instructions] Our last question comes from the line of Tim Lugo from William Blair. Your line is now open.

Thanks for taking the question. And it sounds like this will be covered in the upcoming data release. But maybe broadly, can you just discuss around efficacy of the cardinal symptoms as individual symptoms? Were there any of the deviates from the others, or were the results consistent across the cardinal symptoms in LANTERN? And then also Dr. Kern, I appreciate that you know much more about the ENT than any of the financial analysts on the call. But I just want to hear your thoughts around really how a six month treatment will change this area of the field. And, what really brought you to joining Lyra team?

You want me to go ahead?

Yeah. Why don't I go first with the cardinal symptoms, and then Rob, you can take the next one. So, we have shared the four cardinal symptoms and that composite. And so because we see such a dramatic effect in the four cardinal symptoms, we see over the high dose of a change of about what is it 2.8 points at four weeks, and nearly five points at 20 weeks, and it's comprised of those four symptoms. So what you would expect is that each of those symptoms is having a significant effect here. So, we will be showing each of those when we do our full data release. I can't share that with you now. But certainly since the disease is defined as the cardinal symptoms, as you would expect, we are seeing an improvement in those. And then, as we had also mentioned earlier, our patients are both polyp and non-polyp patients. Non-polyp patients, sometimes have less of an effect on smell. And so, we will be sharing those results also with you, the effect on smell in addition to their nasal congestion, nasal discharge and facial pain and pressure.

Interesting, thank you. And Dr. Kern, maybe what brought you to join the team and your thoughts around LANTERN?

Well, I mean, I think that this really is a product that has the potential to change the way I practice on an everyday basis. I – maybe boring that to take care of people with runny noses and sinus problems, but that's my lot in life. And it's been that way for 30 years. And I've been involved with many – with many companies as we talked about. But, with – from the biologics, usually expensive things too, I was the National Pi of the RESOLVE trial that got brought SINUVA to market. But this is a product that has much longer duration of action. Six months really is a game changer. It's not every two months, it's six months. And so, getting involved here plus I knew the team here for a while now, and they were very pleasant to work with. And I thought this was an opportunity to me to move out of their clinical space and the laboratory space. I work with 30 basic scientists. We have been Northwestern, more NIH research money than the entire country combined for sinusitis. And this was an opportunity to take that practical laboratory experience and actually bring it to patient care in a product that I thought really could make a difference. So, that's kind of why I'm here.

Well, Dr. Kern, as a CRS sufferer, I appreciate your dedication to those of us with runny noses and facial pain, and all of that that comes along with care. Thank you.

Thank you.

I am showing no further questions at this time. I would now like to turn the conference back to Maria Palasis.

Thank you, Terry. In May, we plan to attend virtually the Bank of America Healthcare conference, and we welcome requests for meetings them in the interim. With that, I would like to thank you all for participating in today's call. Have a great rest of your day.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation, and have a wonderful day. You may all disconnect.