Lyra Therapeutics, Inc. (LYRA) Q3 2021 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Lyra Therapeutics’ Third Quarter Financial Review and Operational Highlights Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Now I'll turn to call over to Stephanie Marks with Argot Partners.

Thank you, Operator and welcome everyone to today's call. With me today are Dr. Maria Palasis, Lyra’s President and Chief Executive Officer; Jason Cavalier, Chief Financial Officer; Dr. Robert Kern, Chief Medical Officer, and Corinne Noyes, SVP of Commercial Strategy & Market Development. This afternoon, Lyra issued a press release announcing its third 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 involve 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 that the company describes in the section titled risk factors and the company's current report on Form 10-Q filed today on, November 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. This third quarter of 2021 was another quarter of significant progress at Lyra. On the clinical front, we continue to generate data that strengthens the profile of our lead candidate, LYR-210 for the treatment of chronic rhinosinusitis. We announced new positive data from the Phase 2 LANTERN post-treatment evaluation, which showed continued safety in all patients and a durable response six months post removal of LYR-210, and roughly half the patients that we've treated. This durable response in some of the patients, even six months after removal was impressive and important differentiator relative to other treatments in the field. We also reported the full results from the 56-day pharmacokinetic clinical study, which demonstrated that Mometasone Furoate blood levels were low and constant over time providing further evidence that LYR-210 delivers a steady daily dose of Mometasone. We believe that it is these drug release kinetics of LYR-210 that underpin the rapid and prolonged symptom relief that we've observed in our clinical studies. This third study further strengthens our data, safety and efficacy database. Dr. Kern will review these data in more detail shortly. Both clinical studies were presented at the 67th Annual Meeting of American Rhinologic Society last month. At ARS, we presented the data in two oral presentations and also received additional recognition by the society for our clinical research. The PK study was selected as a top clinical abstract at the meeting and the LANTERN Phase 2 manuscript won the ARS 2021 Clinical Science Maurice Cottle Award. This recognition speaks to the quality of the science at Lyra. Our clinical programs are advancing into late stage development with the start of the Phase 3 clinical program for LYR-210 and the Phase 2 clinical trial for LYR-220 in the coming month. On the corporate front, Jason Cavalier was appointed as our new Chief Financial Officer in September. He brings over two decades of experience as an investment banker and has an extensive track record in advising companies on financing and strategic alternative. Most recently, he was Managing Director, Head of Life Sciences Mergers & Acquisitions at Cantor Fitzgerald, where he led numerous transactions across medical technology, diagnostics and biopharma sectors. He also held other investment banking positions at RBC Capital Markets, Barclays Capital, Bear Stearns, and Lehman Brothers. Jason leads our financial and capital market strategy and will support our investor, public relations and business development activities. He takes the reins from Don Elsey who guided the company through our IPO. As you know, Don's retiring, he'll remain an advisor through year end. On behalf of the entire Lyra team, I'd like to thank Don for his tremendous dedication, commitment and contributions to the company. Now I'd like to take a few minutes to remind you why we have initially focused our development on a treatment for patients with chronic rhinosinusitis. CRS is a debilitating disease that has been largely ignored. The disease is highly prevalent in the world with about 14 million people just in the United States. Patients are currently treated with off-label medications that have not been approved to treat CRS. Consequently, about half of these patients’ fail medical treatment and continue to suffer with their disease. In the United States alone, there are 4 million patients that fail medical management each year. Their next option is invasive surgery. Currently, marketed products have only been developed to treat polyps, which only represent 10% of the CRS patients. Lyra's mission is to provide the very first treatment for these millions of CRS patients, who have been underserved by current treatment options by developing an effective drug that directly targets inflammation at the epicenter of the disease. Our proprietary XTreo platform technology enables delivery of a targeted and consistent therapeutic dosing directly to the disease semi-mucosa for six months with one application. No one else has been able to achieve this to-date. Lyra is developing two product candidates to fully address patients with CRS, LYR-210 and 220. Both are small, shape memory implants that are placed deep in the nasal passage using a small diameter applicator in ENT's office during a routine endoscopy. LYR-210 is designed to be used early in the treatment paradigm in surgically naive patients after topical steroid sprays have failed. We estimate this population to represent about 2.4 million patients in the United States each year. The post-market -- the postsurgical market opportunity is also significant at about 1.6 million patients each year. To address this market, we're developing LYR-220, which is designed for the post-surgical anatomy in patients, who continue to require therapy despite having had prior endoscopic sinus surgery. Our growing body of scientific evidence continues to support the safety and efficacy of LYR-210 and highlights the benefits of our proprietary XTreo platform technology. We have strong validation of our technology in CRS. Our first targeted in indication, and we intend to leverage the platform in new indications over the next year. In addition to our own research, we have also been hearing from key opinion leaders about their enthusiasm for the potential of LYR-210 to be a new treatment alternative for their CRS patient. Over the past few months, we hosted two events with leading ENTs who all shared their experiences in treating CRS patients, the shortcomings of current therapies and the need for new effective treatments. We urge you to listen to the webcasts, which are found in the IR section of our corporate website. I'm sure that you will find their perspectives informative. With the upcoming initiations of our two clinical programs, our Phase 3 ENLIGHTEN programs for LYR-210, and the Phase 2 BEACON program for LYR-220 were one step closer to potentially changing the treatment paradigm for the millions of underserved CRS patients. I'll now turn the call over Dr. Robert Kern, who will review the new data as well as the clinical trial designs for LYR-210 and 220, which are both anticipated to initiate around year end. Rob?

Thank you, Maria. As Maria mentioned, new positive data on LYR-210 was a subject of two presentations at the 67 Annual ARS Meeting at American Rhinologic Society. Before I review these data, I wanted to remark on the award that the LANTERN manuscript received at that meeting. My 30 years as a Rhinologist and a member of that society, I have not seen that award given to industry sponsored research. So it was quite an accomplishment for Lyra and a validation of our rigorous clinical program. The LANTERN post-treatment evaluation assessed the safety and efficacy over six months, following matrix removal. During the post-treatment period, there was no increased incidence of treatment-related adverse events. Also, approximately half of these CRS patients experienced a durable response, six months after the removal of LYR-210, while roughly 90% of the patients in the control arm showed worsen CRS symptoms from weeks 24 to 48. The durable symptom relief observed in some patients after the removal of LYR-210 offers potential long-term benefit and as a meaningful differentiator relative to other treatments. We also reported results from the 56 day pharmacokinetic study, which showed that LYR-210 delivered a constant daily dose of Mometasone Furoate over the study period without the drug burst. The PK study enrolled 24 patients across four U.S. sites to receive LYR-210, 2,500 and 7,500 microgram doses or 7,500 microgram doses. The study showed LYR-210 to be safe and effective in patients with less severe disease. As patients in the PK study had baseline SNOT-22 scores of 38 points, compared to 68 points in the LANTERN Phase 2 trial. Impressively, 63% of patients achieved a score below 20. The common standard threshold for surgery and 38% of patients achieved a normal score, meaning below 9 by day 56, these results further demonstrate our belief that LYR-210 has the potential to provide an effective treatment for mild all the way to severe CRS disease. We've now shown in three separate trials, both safety and efficacy for our lead product LYR-210. We believe these impressive results validate a six month treatment duration provided with a single administration and the potential for a more durable effect post removal. As a practicing physician in Otolaryngologist, I believe that LYR-210 offers a significant advantage over existing therapies and has the potential to establish a new standard of care for chronic rhinosinusitis. Looking ahead, the global Phase 3 ENLIGHTEN program for LYR-210 is expected to initiate around year end. We anticipate enrollment at each trial of about 180 adult patients with CRS for failed medical management and are surgically naive. The two studies will be randomized two to one to LYR-210 versus control. The primary endpoint will be the three Cardinal Symptom scores at 24 weeks with secondary endpoints to include SNOT-22, rescue treatments, sinus CT scans, and quality of life and pharmacoeconomic evaluations. The design is largely similar to the Phase 2 LANTERN study, which was highly statistically significant in the three Cardinal Symptoms at 24 weeks. ENLIGHTEN-1 will include a six month extension study where placebo patients will cross over to LYR-210 treatment and 50% of the treated patients, who will receive a repeat dose. It is important to note that the extension study will not delay top line readout of the primary endpoint in 24 weeks. We believe that ENLIGHTEN is a robust clinical development program. The first of its kind in this field. Later this month, we will also start the Phase 2 BEACON study for LYR-220. We plan to enroll approximately 65 postsurgical patients across sites in the United States and Australia. Randomized one to one to one, to receive one of two different matrix designs each at a dose of -- each of the dose of 7,500 pictograms core control. Primary endpoint will be safety and feasibility over 24 weeks, the secondary endpoints, including PK, SNOT-22, three cardinal symptoms, rescue treatments, sinus CT, nasal biomarkers, and quality of life. Let me now turn the call over to Jason, who will review the quarter’s financials. Jason?

Thank you, Dr. Kern. Before I review the quarter’s financials, I would like to take this opportunity to express my enthusiasm for the opportunity at Lyra. Over the course of my investment banking career, I've worked with numerous companies across the healthcare sector, and I believe that Lyra is uniquely positioned for tremendous potential to change the treatment paradigm for CRS patients. I'm honored to be working with a stellar team here and support our mission to be a leader in CRS treatments. Turning to the quarter’s financial results, a press release was just issued, but let me review select highlights. Lyra ended the third quarter with cash and cash equivalents of $58.1 million compared to $69.0 million as of June 30, 2021. We believe that Lyra has sufficient cash to fund the company's planned operations through 2022. Research and development expenses for the quarter ended September 30, 2021 were $7.1 million compared to $3.7 million for the same period in 2020, primarily attributable to an increase in product development and manufacturing expenses related to the tech transfer to our contract manufacturer, as well as an increase in research and development headcount and consulting expenses, as we ramp up for our later stage clinical programs. G&A expenses for the third quarter 2021 were $4.0 million compared to $2.7 million for the same period in 2020, primarily attributable to an increase in professional and consulting expenses, stock-based compensation and general and administrative headcount. Total operating expenses for the third quarter were $11.1 million compared to $6.4 million for the same period in 2020. Net loss for the third quarter was $11.1 million compared to $6.3 million for the same period in 2020. And shares outstanding as of September 30, 2021, we're approximately $13 million. With that, I'll turn the call back to Maria.

Thank you, Jason. Lyra is poised to be a dominant player in the CRS market LYR-210 and 220 are designed to be disease modifying and best-in-class treatments for the millions of CRS patients who are underserved by current medical management. We're extremely excited to be advancing into late-stage development with the start of the Phase 3 clinical program for LYR-210 and a Phase 2 clinical trial for LYR-220 in the coming months. Now we're ready to take your questions. Operator?

Thank you. [Operator Instructions] Your first question comes from the line of Tim Lugo from William Blair. Your line is now open.

Thanks for taking the question and congratulations on all the progress. I guess one quick housekeeping question. Can you give us an update on the manufacturing capacity at Lyra and at what point in the future do you likely scale that capacity?

Hi, Tim. Thank you for the question. As we have mentioned in the past, we have transferred the technology to an outside contractor in the past. We have also manufactured in-house and we've used our SMEs here to transfer the process. The scale up right now is gear towards our clinical studies and we're sufficient for those studies. As you know, we have three trials. We have the ENLIGHTEN-1, the ENLIGHTEN-2 and also BEACON. And so we're in very good shape with our manufacturing. We're going to be spending time during the enrollment period and follow-up periods to be scaling up at our contract manufacturer. And as I think I mentioned in the past, we've very selective with who we have chosen, we've chosen a contract manufacturer that we believe is very well suited to be able to scale up the matrix for commercial.

Okay. So there's no need for second sourcing, or I guess you consider second sourcing since you have manufactured in-house in the past?

Well, we -- at this point, we don't, but yes. We will absolutely have a backup. We'll continue to look at other backup in addition to Lyra. Certainly, at this point we can, and we're well positioned between our contract manufacturer and Lyra. But certainly in the future, we will have additional source to manufacture the product.

Okay, great. And I'm interested, I believe it was Dr. Kern had mentioned this in the past, or maybe with you Maria as well. In the fact that you won the Clinical Science Maurice Cottle Award, and the first company from industry that has won this award. I guess, what do you think the society saw in the Phase 2 data specifically, which stood out beyond the other biologics and the other kind of larger Phase 3s that have obviously been presented in the past?

Well, I should probably answer that. I think the magnitude of the response is with a single administration is very striking. That's -- I mean, the only thing that comes close to this -- in this change in the SNOT-22 or either the biologics, which you have to give regularly and require or extraordinarily expensive, and the other option is surgery. So to have that kind of outcome at six months is striking. The statistics were robust. And the presentation was appropriately scaled. It was measured, but it was exciting, I think was probably the main reason. And it was well done.

Yes. Maybe I can also -- thanks, Rob. I totally agree with everything. One thing, I've been in this space for a long time doing drug delivery from implants and the fact that we had two doses and we did a dose response, I think really stood out. It's really a rare thing to see because you do have to create a whole new product and formulation and it just speaks to the strengths of our development and scientific team that we did that. We went into the study, really not knowing whether we would see a dose response and the fact that we did see it was validating, certainly to Lyra and to the scientific community.

I'd agree it. Congratulations on that milestone. And I guess one last question, could you give us an update on the LianBio development plan effects kind of come together for your Asian partner?

Sure. This is Corinne Noyes. We are very pleased with how the LianBio collaboration is progressing and we are on track to, and have them participate in our second of the two Phase 3 studies. And the goal with that participation is for them to submit and commercialize shortly after we do in the U.S.

Great. Congratulations on the progress.

Thank you, Tim.

Thank you. Your next question comes from the line of Bert Hazlett from BTIG. Your line is now open.

Yes, thanks. Just two for me -- my congratulations on the progress as well. Just with regard to the financial statements and looking forward, given that you're starting the two major efforts of three studies, but two major efforts with 210 and 220, how should we think about the trajectory of R&D going forward? It's been $7 million plus over the past couple of quarters, should that materially increase on a quarter-to-quarter basis? And if so, roughly what levels should we be thinking about in terms of modeling?

Yes, Bert, this is Jason. So I think given that we've completed the tech transfer to our contract manufacturer, we expect that spending to obviously tail off offset by increase in the manufacturing expense to supply the units for the clinical trials. So we would expect a slight uptick overall in our R&D, which the manufacturing as well as the, obviously the clinical expenses. So given that we're starting three trials, so I would expect a slight uptick, but again, we feel like with the cash on hand and expected milestones. We will have enough cash on the business through the end of next year.

Terrific. Thank you. And then just a question on the clinical data, the durability of effect scene is terrific data. How does that make you think about your kind of retreatment rates with 210, either patients with polyps or non-polyps? Does that make you make you think about the rate of retreatment? Or is that pretty steady and just your general thoughts there, in terms of the numbers of procedures that you would expect a patient with CRS to undergo per year with either 210 or 220?

Yes. So maybe I can start and then turn it over to Corinne and we can get her perspective too. So, we were excited to see that you in about half the patients, we did see a durable response. I think it really speaks to the fact that these patients are getting a consistent and targeted dose of steroid, which is a broad anti-inflammatory, which then potentially results in some remodeling of the tissue. It's small numbers clear. So we do have to evaluate this further in Phase 3. And as you heard from Rob, we do plan to do that in the Phase 3 extension study. Corinne?

Yes. And I think we've shared in the past but with our modeling internally, we always assume about 1.5 uses per year, so that 50% of patients get a retreatment. And interestingly enough, this early data that emerged from the LANTERN study directly aligned with that assumption. That around 50% of patients would get another one and 50% wouldn't need one in the first year, but might need another one at some point. So I think we'll see a mix of repeat use and some patients that have a durable response. And we modify that.

Terrific. That's very helpful. Just one more question then for me, a brief one. You've had some very intriguing additional data releases at presentations. We've had nice publications based on LANTERN and other data for 210, should we expect additional publications or presentations upcoming in the not too distant future?

Well, our next conference is at COSM, which is…

Yes. So we've submitted some data at COSM in April and we've submitted abstracts there. We'll find out if they are -- hope to find out soon if they're accepted, but we will be presenting some new data, if all goes well at that conference. And as soon as we hear about that, we will make that available.

Outstanding. Thanks so much.

Thank you. And your next question comes from the line of Chris Howerton from Jefferies. Your line is now open.

Great. Thank you so much for taking the questions. Two for me, one would be what would be the expected enrollment cadence or timeline for the Phase 3 programs for 210. And if you're unwilling or unable to kind of provide clear estimates there, maybe you could remind us what the timelines were for the LANTERN study? And then the second question would be, just as, I think we actually discussed this recently, but be curious to see if Dr. Kern or anyone else on the team had additional thoughts here about, why is it that you're seeing durable effects six months after the removal of the device? Is there something about tissue remodeling or something else that, that could be going on to explain some of those durable effects? Thank you.

Thank you, Chris. I'll go ahead and take the first question and then Rob can address the second one. We expect that enrollment for both ENLIGHTEN-1 and ENLIGHTEN-2 will take approximately 12 months. We think we'll be enrolling patients through 2022. Clearly, we'll be trying to enroll patients as quickly as we can. We're thinking a lot about the sites that we pick to ensure that happens. We intend to not only have sites in the U.S., but also in Europe. So we feel good about those estimates and we're hoping that we'll be able to accelerate as possible. Rob?

Sure. Yes, I mean, obviously, it's a very intriguing and encouraging finding that half of the patients really sustain the improvement, but it's a small study and we need to keep in mind that this is improvement. It's not cure. Cure is a dangerous word to use with a chronic disease. You can think of a couple of colds and it can spin the whole thing out of control. So while it's encouraging, we don't get it carried away. I think, if you want me to put my basic science immunologist hat on. I could say that the -- what we don't see. Before I get to that, what we don't see is a rebound effect, the biologics, despite their power, as soon as you take the drug away they start to revert back. Now the difference and again, I've got my speculative hat on -- my immunology speculation hat on. The steroids are much broader. They basically squelch almost the entire inflammatory cascade. The biologics punched little holes in it. They're like little targets. So my sense is that what we are doing, and we are so broadly suppressing it, that there is some element of remodeling that we are kind of turning back, takes years to get this disease. We are suppressing all aspects of the inflammatory response. So we are perhaps walking back the clock, If that answers the question.

No, I appreciate it, Dr. Kern, I really do. Thank you. And actually Maria, if I might sneak in just another follow-up, could you give us maybe similar expectations for the Phase 2 220 study as well?

So the Phase 2 study is going to initiate this month and there are two -- the two parts to that study. There is the sort of the open label part where we're going to be assessing the feasibility. We're going to be optimizing the procedure of delivery and then after that, we're going to be going into the randomized portion of the study. And so we'll be starting in Australia and then we're going to be clearly with the U.S. is focused on 210, but we expect then we'll get started in the U.S. too. So in terms of enrollment, again, it would be through 2022 that will be enrolling that study.

Okay. All right. Well, thank you very much and congratulations on the progress.

Thank you, Chris.

Thank you. [Operator Instructions] And we have a question coming from Ashwani Verma from Bank of America. Your line is now open.

Hi, thanks for taking our question. Congrats on the progress. Two for me. So this LianBio collaboration just wanted to make sure I heard it, right. I think you're assuming that they will launch in their geographies one year after you can in the U.S. And how much of the milestone payments can be assumed in the next one year and out of that $135 million and how much would be around the approval and launch? That's my first question. And just on the Phase 2 design that you just discussed. So like when you conduct the openly about part of the study, just like optimizing the procedure, is that something that you're going to share with us just around. I'm assuming that you want to identify like with whether the retention is good enough or not of a bigger metrics. So just curious if you will share that with us?

Hi, Ash. Thank you for your questions. We'll start with Corinne and Jason can address the first one.

So to answer your question about the timing of launch in China, our current development plans have China launching shortly after the U.S., so sooner than a year.

And on the milestones, we haven't disclosed the specifics around the milestones and timing of the LianBio collaboration. I would say that the structure -- the overall structure of it is not dissimilar from similar agreements. But we haven't released specifics around the milestone payments.

So Ash, on your second question about the Phase 2 design and whether we'll be able to share data from the open label. Certainly, we would report out when we have that data on hand and I would expect it in the second half of 2022 and really what we're going to be assessing there is the feasibility of placement. And so whatever data we have from that and the safety will be certainly reporting out.

Yes. Okay. Got it. Thanks.

Thank you,

Ladies and gentlemen, that concludes our Q&A session for today. I'll hand it back over to Maria Palasis, the CEO for any closing remarks.

Thank you, Operator, and thank you all for joining us today. We look forward to updating you on our progress. You may now disconnect. Enjoy your day.