Lyra Therapeutics, Inc. (LYRA) Q2 2021 Earnings Report, Transcript and Summary

Welcome to the Lyra Therapeutics Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s prepared remarks, there will be a question-and-answer session. [Operator Instructions] Now, I’ll turn the call over to Ms. Stephanie Marks with Argot Partners. Please go ahead.

Thank you, operator, and welcome everyone to today’s call. We me today are Dr. Maria Palasis, Lyra’s President and Chief Executive Officer; Don Elsey, Chief Financial Officer; Dr. Robert Kern, Chief Medical Officer, and Corinne Noyes, SVP of Commercial Strategy and Market Development. This afternoon, Lyra issued a press release announcing its second quarter 2021 financial results and business updates. A copy of the announcement can be found in the investor relations tab of the company's website, lyratherapeutics.com. During the conference call, management will make forward-looking statements, including statements related to 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 current report on Form 10-Q filed today, August 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. And with that, I’ll turn the call over to Maria?

Thank you Stephanie, and thank you all for joining us this afternoon. I hope everyone is doing well. Second quarter has been an exciting one for Lyra, we released the full data set from our positive LANTERN Phase 2 study, we had a very successful End-of-Phase 2 meeting with the FDA for our lead program. We entered into a licensing agreement in Greater China and other Asian markets with LianBio, and we reported positive top-line results from the PK study, which support a 505(b)(2) new drug application for LYR-210. Our fundamentals are strong and we are in a position to successfully execute against our upcoming milestones. The foundation of our company is our proprietary XTreo technology platform, which is grounded in drug formulation chemistry and polymer science. Our product candidates are pharmacologic interventions, which target highly potent therapeutics directly to the site of disease for month to manage chronic illnesses. Our ability to deliver the right drug to the right place for the right amount of time translates into a number of potential benefits for patients including increased efficacy, improved compliance and avoidance of systemic side effects. Deep drug formulation expertise has been a core capability of Lyra’s developed over many years. This expertise provides us with a distinct advantage over others in the field. Lyra is now at a major inflection point, we have strong validation of our technology in our first two indications and our first indication, chronic rhinosinusitis or CRS, the randomized controlled, LANTERN Phase 2 study clearly demonstrated with high statistical significance that LYR-210 works as design, providing six months of symptom relief for patients suffering with CRS from just a single treatment. We are deepened preparations to advance clinical programs for both of our derisk pipeline candidates, LYR-210 is a Phase 3 and LYR-220 into Phase 2, both around the end of this year. We're as now in a strong position to bring these new therapies to the CRS patients who need them. Chronic rhinosinusitis has been described as an unrecognized epidemic in the US, about 14 million people have CRS, 8 million of those patients are treated each year, but at least half of them failed current medical treatments. Of those 4 million patients who failed medical management each year only about 400,000 go on to have invasive surgery and the rest remain undertreated. This is an enormously underserved market and we know patients do not want to sign up for surgery. Similar dynamics apply globally with millions of CRS patients underserved in Asia and Europe. We believe our current candidate for the treatment of CRS will completely transform the current treatment landscape by uniquely addressing the unmet need in the broad CRS market. LYR-210 into LYR-220 are designed to provide a therapeutic option for the full spectrum of CRS patients treated by ENTs, including both those seeking to avoid surgery, and those returning after surgery. The ENT physician community is particularly eager to have a safe and effective treatment for the millions of CRS patients, who are under treated. Lyra’s product candidates are the only ones designed to address this vastly under penetrated patient population. As you can see, we're positioning ourselves to be a dominant player for this tremendous opportunity. There have been no products in this space that have had this type of broad potential. We remain confident that the purposeful design of our pharmacologic interventions, the strong data that we've generated to date in the clinic, and the relationships we are building with the ENT community, give us a chance to truly create best-in-class products that will benefit millions of CRS patients. Dr Robert Kern, our Chief Medical Officer and Chair of Northwestern’s ENT department will share his insight into the current treatment landscape and unmet need in CRS, and review our recent regulatory developments. Rob?

Thank you, Maria. I treat CRS patients every day and I can attest to the fact that we have very few medical options, and no FDA approved therapies for the vast majority of patients suffering with chronic rhinosinusitis. Consequently, LYR-210 truly has the potential to change the CRS treatment paradigm. LYR-210 is designed to fit into the sinonasal anatomy of an unoperated patient. In a matter of minutes, with a single administration in a simple non invasive office procedure, anti surgeons can provide patients with relief for up to six months. LYR-210 delivers highly potent anti inflammatory drug Mometasone furoate continuously and directly to the affected tissue for a prolonged period of time, thus exerting the maximum therapeutic effect and maximum symptom relief for patients. Our products are designed to deliver the drug to the epicenter of sinusitis to the directly to the affected area. Eliminating drug washout and also eliminating the need for patient compliance, thus addressing the three major limitations of current topical treatments. Furthermore, our products are designed to avoid systemic side effects, which are a potential issue with the costly biologics and certainly a major issue with oral corticosteroids. I believe LYR-210 will become the standard of care for the 60% of CRS patients, 2.4 million patients who have failed medical management, and have not yet had sinus surgery. For the remaining 1.6 million, who have had a prior surgery, and seek to avoid a second surgery. LYR-210, I'm sorry, our LYR -- Lyra has designed LYR-220. Keep in mind that surgery is not curative in the majority of cases, and usually requires ongoing medical management to manage residual and recurrent CRS symptoms. LYR-220 is an enlarged mometasone furoate eluting matrix size to fit into the operating sinus cavity, and again, designed to provide up to six months of symptom relief for patients with recurrent disease. LYR-210 and 220 have been created to help patients avoid surgery whether it's their first, second or third. And I know firsthand that, this seems obvious, but most patients would prefer a simple office treatment, rather than surgery. It’s important to note that, no other products in this space target the breadth of CRS patients that we. The products are available – currently available only address about 10% of CRS patients, and these are ones that have polyps, whereas LYR-210 and 220 have been developed to treat 90% of the CRS patient population, providing an option for the vast majority of patients including those without polyps. As a result, we believe these products have the potential to represent the most important advance in the medical care for CRS patients, since the introduction of intranasal corticosteroids over 30 years ago. I truly believe that 210 and 220 have the potential to fill the void in the CRS treatment landscape with a novel and differentiated approach to this burdensome disease. As we reported in June, following our positive in the Phase 2 meeting with the FDA, a company now has a clear path forward on our pivotal program for LRY-210. Our Phase 2 study was highly successful, and we view the upcoming Phase 3 has the – I'm sorry, we view that our upcoming Phase 3 has been significantly de-risked as a result. So that the Phase 3 program will largely mirror that trial. The Phase 3 program will consist of two multicenter randomized patient blinded controlled trials evaluating 210 at 750 microgram dose with approximately 180 CRS patients per trial. These patients will have failed medical treatments, and continue to be symptomatic. The single primary endpoint of the pivotal program will be a composite score of the three cardinal symptoms of CRS at 24 weeks. And these are nasal blockage, nasal discharge and facial pain. As a reminder, in the Phase 2 LANTERN study LYR-210, it's 750 microgram dose showed highly statistically significant improvement over control at this endpoint, with a P value of 0.003 at week 24. We also recently reported positive top line results in the pharmacokinetic study of LYR-210. There are two important takeaways from this PK trial. The first is safety data providing breaches to support a 505(b)(2) approval pathway. The second point is that this was our first US study of LYR-210 and was fully enrolled across four states in just 11 weeks, during the fall of 2020 in the midst of high rates of COVID infection. We believe that the LY -- the Lyra is well-positioned to address this large underserved market with unique and disruptive CRS products that have the potential to alter the current treatment landscape. Don will next discuss the financials. Don?

Thank you, Rob. The earnings release we issued today outlines our financial results in full. So I'll only provide a summary here. Starting with our cash and cash equivalents, we ended the second quarter with $69 million, compared with $74.6 million as of December 31, 2020. We believe that Lyra has sufficient cash to fund the company through planned operations into 2023. Total operating expenses for second quarter were $11.1 million, compared to $4.5 million for the same period in 2020. This increase was driven by our tech transfer program and by clinical operations, as we wrapped up the Lyra-210 Phase 2 trial and prepared for our FDA meeting. Net loss for the second quarter was $11.1 million. Lyra’s shares outstanding, as of June 30, 2021 were approximately 13 million shares. And with that, I'll turn the call back to Maria.

Thank you, Don. As you heard from Don, we are sufficiently funded to drive all our clinical programs forward through next year. We are at an exciting inflection point in Lyra’s evolution. We have strong validation of our technology and our first indication and have several important catalysts on the horizon. Preparations are already underway for advancing our two clinical programs. We're manufacturing the clinical product. We have already selected our CRS. I'm also pleased to announce that we recently received approval in Australia to begin our Phase 2 clinical trial for LYR-220, which will then expand into the US. We remain on track to initiate two clinical studies around the end of this year. The first Phase 3 for LYR-210 and the Phase 2 trial for LYR-220. With both of these programs significantly do risk, our stellar team and our deep clinical and regulatory expertise, I'm highly confident in our ability to execute. We expect we'll begin seeing data from the 220 trials towards the end of 2022 and readout from the 210 trials in 2023. In addition, we are making meaningful progress with the LianBio team and are confident in our ability to bring LYR-210 to Asia through our partnership. We have additional significant events in the near term. On Tuesday, August 31, we will be hosting an event with KOL for a deep dive into the current CRS treatment landscape and how LYR-210 and 220 could impact management of their patients. The event will be moderated by Rob and include two leading ENT physicians, Dr. Amber Luong, Professor and Vice Chair of Otolaryngology at University of North Carolina School of Medicine. Additional details will follow soon. And we look forward to your participation. We are very proud of the commitment we have two conducting high quality science at Lyra and are excited to have our work acknowledged by the American Monologic Society and in leading journals. We've had two abstracts accepted for podium presentation at the Annual Meeting of the American Otolaryngology society in October. There we will present long term follow up from the LANTERN study and the full data set from the PK Study of LYR-210, which was selected by the Academy as a top clinical abstract. Also, we recently received further validation of our work with the acceptance of two publications and leading scientific journals. The full LANTERN data has been accepted for publication and the International form of Allergy and Rhinology and our preclinical research and LYR-210, has been accepted for publication in the American Journal of Brainology and Allergy. We expect they will both be available online shortly. We've come a long way and I'm very proud of what we've accomplished. We have demonstrated the safety and efficacy of Lyra’s lead product and three clinical studies. It's important to understand that this data not only provide validation for our products for CRS, but also for our XTreo technology platform, which has broad potential across a wide range of chronic diseases. We can now begin to take concrete steps to leverage our technology to expand our pipeline for the future. And now we'd be happy to take your questions.

[Operator Instructions] Our first question is from Bert Hazlett from BTIG. Your line is now open.

Yes, so thank you for taking the questions. A couple of them for me. First of all, just with regard to Lyra-220, could you provide a little bit more color on the kind of study size endpoints things like that? Then, secondly, I'd like to ask about the pace of R&D spend? And then I'll follow up with another one after that.

Hey. Hi, Bert. I hope you're doing well. So, 220 is the larger metrics that we've developed for patients who have had surgery, so it's been designed to be able to say, opposed to that larger anatomy. It'll have the same dose of drugs 7500 micrograms, and the release kinetics are aligned with LYR-210. We estimate approximately 60 patients in that study. We're going to be evaluating the safety. We're going to be doing pharmacokinetics and characterizing the pharmacokinetics, we'll also be assessing the CRS symptoms via SNOT-22 score and also the three cardinal symptoms. And as I had mentioned in the past, there's three arms to that study. We'll have a control group. And then, we have two designs that we'll be evaluating, again, both with the same dose of drugs.

Terrific. That kind of the pace of R&D spend and then, my other question is there has been some M&A in the sector recently, I'd love your thoughts on, what that means for Lyra in the near-term, and maybe the longer term with regard to commercial infrastructure and/or other strategic implications?

All right. Don, do you want to address the question on the pace of R&D spend?

Sure. Hi. Bert. So, basically as we sit here today. We look out through the balance of the year. The R&D spends given that that includes both, tech transfer and clinical operations. Tech transfer is going to continue, basically, at levels that are somewhat similar today, maybe a little bit less as we've done a lot of work in the first half. And then, the clinical operations will start to pick-up toward the latter part of the year. Once they pick up, I anticipate, that we'll probably continue in first quarter and then, start to level off, during the course of the trial, once we've got the sites up and running. We've got all of that. Then it's of course, as you know its patient recruitment, and then, following through the six months of treatment. So, a little bit of a spike at year-end and into the first part of the year for clinical operations and a leveling off. Tech ops should generally as we approach the end of the year start to level off. But it will continue somewhat a pace with the supply of the clinical material. And then, of course, all sites are on getting ready for commercial material.

Terrific, I appreciate the color. And then, I'd love your thoughts on what it might mean for Lyra with regard to some of the M&A and that has gone on in the sector?

I'll take that Bert, and Corinne, if you want you can add some color with respect to the commercial opportunity. So there was an announcement that the Medtronic is acquiring Intersect ENT, which we think is really great news for us. We've been saying that the market is huge and vastly under penetrated. And so, apparently Medtronic also agrees and has taken steps to more sort of fully participate in the market. We suspect that Medtronic will be aggressively developing the ENT market, which will benefit us when we get to that point. At the same time, I think it's important to note that, we don't overlap LYR-210 doesn't overlap with intersects products. When we get to that point, we'll be able to really address the lion's share of the market. Corinne, do you have anything you'd like to add.

No. I think that's exactly right, it validates what we're trying to do will benefit from what they're doing in the marketplace. And our products are uniquely differentiated and targeting a different patient population that we think, we can leverage all of their work and be positioned to really benefit. So it's great news.

Terrific, thank you very much, I'll get back in the queue.

And our next question is from Tim Lugo from William Blair. Your line is open.

Thanks for taking my question and congratulations on all the progress during the quarter. Then also thank you for setting up the upcoming R&D day, those are always very helpful, but maybe a question for Dr. Kern, can you comment, given your experience in treating CRS patients on how 210 will be differentiated from the biologics. I think there's still a big disconnect between how the Street is looking at the respective opportunities between 210 and the biologics, which isn't unusual but I'd love to hear from a trading division?

Sure. I mean the biologics are really, practically speaking only going to be applied to patients who have failed surgery and have failed surgery and have extensive nasal polyps. So you're talking about a pretty small chunk of the market. We're looking at 4 million patients, they're looking at probably by their own admission about 100,000. So that's the first step. The second thing is that, you know biologics, they are very powerful, but they're systemic drug with systemic side effects, there's going to be huge approval hurdles for those products from insurance companies and there are $38,000, $35,000 a year basically for the rest of the patient's life. So that's a massive commit. And we're talking about – what we're looking at the completely opposite end of the market. Patients 210 is really for patients that have had no surgeries, there are patients that have symptomatic disease but yet continue to, they live with it. They don't like using nasal steroids or steroid nasal steroids aren't effective, and it's the vast majority of patients. And it's more of an entry level, as opposed to an at the end stage product. So, and it's also a simple office procedure, patients in and out. There's minimal commitment from the patient and really from the insurance company. So, they're really kind of apples and oranges but I live this, so it's obvious to me. I don't know that I fully answered your questions.

No, that's very helpful. Thank you. And maybe kind of pivoting to the LianBio agreements and the clinical program in Israel [ph]. Should you, I guess Maria or whoever wants to address this. Can you maybe talk about the regulatory environment there? What the study is going to look like? Is there a kind of similar a 505(b)(2) pathway versus the states and also maybe just the prevalence there?

Tim, hi. So, I'll take that and then Corinne, I'll turn it over to you.

Okay.

So the agreement and the collaboration with LianBio is has been going very well, so we're very pleased with how things are progressing. And in terms of the regulatory environment, they don't per se, have a 505(b)(2) process but we are going to be able to leverage our US data in China, we're very confident about that. Corinne, would you like to follow up on the commercial question?

Sure. So, in China, what we know is that there is a – the treatment pattern looks very similar to what exists in the United States with patients starting with medical management, after medical management sales, roughly around the same percentage, 50% of patients. The only other option is surgery so we know there are over 80 million patients in China that have CRS, they are captured in a very concentrated hospital setting where patients go in for treatment for even outpatient treatment. And that what we can say right now about the market is that we know it's at least as large if not larger than what exists in the United States. And with the development plan that we're putting in place, we're very excited that there's the potential to access China and those other territories, in short order following a US approval.

Thank you for that.

[Operator Instructions] Our next question is from Ashwani Verma from Bank of America. Your line is open.

Hi. Thanks for taking our questions. This is Ashwani, Bank of America. So couple of follow-ups to what has been discussed earlier. So regarding LYR-210, is there any inclusion/exclusion criteria difference between the Phase 3, that you plan to conduct versus what you had in Phase 2? That's my first question. Separately, just on the LianBio bio milestone payments so the -- any color around the timing of these $135 million milestone? Is that based on your activity or does LianBio have to conduct some operations for that? So – and I have another follow-up after that.

Hi, Ash. Regarding the 210 trial of the Phase 3 program inclusion/exclusion, now the Phase 2 trial was very successful. We were very pleased with the results of that trial and as -- as you know because the COVID we had to stop it short. But despite that, we were able to see statistical significance in many of the endpoints, the SNOT-22 for cardinal symptom, also the rescue medication. So, we are mirroring the Phase 3, as inclusion/exclusion to that Phase 2 trial. One of the things that will be different, is as you recall in the Phase 2 study we measured the four cardinal symptoms in the Phase 3 study. We will be looking at the individual symptoms as we did in the Phase 2, but the primary endpoint is going to be the three cardinal symptoms. So that'll be the composite that we'll be using. Another note, that is different we did imaging in the Phase 2. We did MRI imaging. And the reason we did that was due to concerns about radiation burden outside of the US However, in the US, CT is really the standard. So we'll be doing CT rather than MRI. But really other than that, we're talking about a very similar trial. And then the next question was on the milestone payments. What we've said publicly, is that the milestone payments are regulatory clinical and commercial payments, both in the US and in Asia. So beyond that we haven't really given any more specifics.

Yes. Okay. I'm just so -- on OpEx. I wanted to go back to that. I think Don, you mentioned that the R&D line given by tech transfer and clinical operations spend. Have you given the breakdown of those two lines by any chance and just curious on I think G&A also came a little bit above expectations, so is that, could that be like the new run rate that we can -- we can understand.

First part of that question, have we given that breakdown between those couple of lines? We haven't. It's not really our intention to get that granular on that spending category. With respect to general and administrative. I'm going to say, that it's not necessarily indicative of a new run rate there are some things that come along episodically, drove Q2 probably a little bit higher, than what I would consider a run rate. That being said, as we look forward and clearly expand activities with China and the like there, there will be some additional spending in that category, not particularly material but there will be some increase there.

Yeah. Okay. Great. Thank you so much.

You bet.

I am showing no further questions at this time. I would now like to turn the conference back to Ms. Maria Palasis, CEO. Thank you. Thank you so much for joining us today. Please keep an eye out for details about our upcoming KOL event. We look forward to updating you as we make progress. Thanks again. Have a good evening.

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