SEC Filing - Lyra Therapeutics, Inc.

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lyra-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number: 001-39273

Lyra Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	84-1700838
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
480 Arsenal Way Watertown, MA	02472
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 393-4600

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

LYRA

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232. 405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2021, the registrant had 13,004,578 shares of common stock, $0.001 par value per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward looking statements, including but not limited to statements regarding:

•

our plans to develop and commercialize our product candidates;

•

the timing of our ongoing or planned clinical trials for LYR-210, LYR-220, and any future product candidates;

•

the timing of and our ability to obtain and maintain regulatory approvals for LYR-210, LYR-220, and any future product candidates;

•

the clinical utility of our product candidates;

•

our commercialization, marketing, and manufacturing capabilities and strategy;

•

our expectations about the willingness of healthcare professionals to use LYR-210, LYR-220, and any future product candidates;

•

our expectations regarding the development and commercialization of LYR-210 pursuant to the terms of the LianBio License Agreement;

•

our intellectual property position;

•

our competitive position and developments and projections relating to our competitors or our industry;

•

our ability to identify, recruit, and retain key personnel;

•

the impact of laws and regulations;

•

risks associated with the COVID-19 pandemic, which may adversely impact our business and clinical trials;

•

our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or the JOBS Act;

•

our plans to identify additional product candidates with significant commercial potential that are consistent with our commercial objectives;

•

our estimates and statements regarding our future revenue, future results of operations, and financial position;

•

our business strategy;

•

our research and development costs; and

•

the plans and objectives of management for future operations.

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, “would,’or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties, and assumptions, including those described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

•

we have a limited operating history and a history of escalating operating losses, which may make it difficult to evaluate the prospects for our future viability;

•

we have incurred significant losses since inception and expect to incur significant additional losses for the foreseeable future, and we may never achieve profitability;

•

we will need significant additional funding in order to complete development of and obtain regulatory approval for our product candidates and commercialize our products, if approved;

•

our business is highly dependent on the success of our most advanced product candidate, LYR-210, which will require significant additional clinical testing before we can seek regulatory approval and potentially launch commercial sales, and if LYR-210 does not receive regulatory approval or is not successfully commercialized, or is significantly delayed in doing so, our business will be harmed;

•

managing our obligations under our license and other strategic agreements may divert management time and attention, causing delays or disruptions to our business;

•

our operating activities may be restricted by certain covenants in our license and strategic agreements, which could limit our development and commercial opportunities;

•

failure to obtain marketing approval in international jurisdictions would prevent our products from being marketed in such jurisdictions;

•

we have entered into a collaboration agreement, and may enter into other collaboration agreements, that place the development and commercialization of our product candidates outside our control, require us to relinquish important rights or may otherwise be on terms unfavorable to us, and if our collaborations are not successful, our product candidates may not reach their full market potential;

•

clinical trials required for our product candidates are expensive and time-consuming, their outcome is uncertain, and if our clinical trials do not meet safety or efficacy endpoints in these evaluations, or if we experience significant delays in these trials, our ability to commercialize our product candidates and our financial position will be impaired;

•

developments by competitors may render our products or technologies obsolete or non-competitive or may reduce the size of our markets;

•

the successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and pricing policies, and the failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue;

•

even if either LYR-210 or LYR-220 receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success;

•

we will rely on third parties for the manufacture of materials for our research programs, pre-clinical studies and clinical trials and we do not have long-term contracts with any of these parties, which increases the risk that we will not have sufficient quantities of such materials, product candidates, or any therapies that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts;

•

we rely on third parties to conduct our pre-clinical studies and clinical trials, and any failure by a third party to conduct the clinical trials according to GCPs and in a timely manner may delay or prevent our ability to seek or obtain regulatory approval for or commercialize our product candidates;

•

if we are unable to obtain, maintain or adequately protect our intellectual property rights, we may not be able to compete effectively in our markets;

•

if we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers or other significant personnel or experience increases in our compensation costs, our business may materially suffer; and

•

the pandemic caused by COVID-19 could adversely impact our business and operations, including our clinical trials.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Condensed Consolidated Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss	3
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION	33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	87
Item 4.	Mine Safety Disclosures	87
Item 5.	Other Information	87
Item 6.	Exhibits	88
Signatures		89

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

LYRA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)

	September 30,			December 31,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	58,131		$	74,593
Prepaid expenses and other current assets		2,755			1,324
Total current assets		60,886			75,917
Property and equipment, net		4,706			2,165
Operating lease right-of-use assets		1,596			2,301
Restricted cash		329			329
Other assets		245			118
Total assets	$	67,762		$	80,830
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,912		$	922
Accrued expenses and other current liabilities		3,968			2,977
Operating lease liabilities		1,052			985
Deferred revenue		9,841			—
Total current liabilities		17,773			4,884
Operating lease liabilities, net of current portion		656			1,454
Deferred revenue, net of current portion		2,145			—
Total liabilities		20,574			6,338
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2021 and December 31, 2020; 13,004,578 and 12,932,377 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		13			13
Additional paid-in capital		226,955			224,363
Accumulated deficit		(179,780	)		(149,884	)
Total stockholders’ equity		47,188			74,492
Total liabilities and stockholders’ equity	$	67,762		$	80,830

See accompanying notes to unaudited condensed consolidated financial statements.

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Collaboration revenue	$	14		$	—		$	14		$	—

Operating expenses:
Research and development		7,077			3,712			19,352			8,779
General and administrative		4,018			2,651			10,639			6,377
Total operating expenses		11,095			6,363			29,991			15,156
Loss from operations		(11,081	)		(6,363	)		(29,977	)		(15,156	)
Other income:
Interest income		26			29			81			50
Total other income		26			29			81			50
Net loss	$	(11,055	)	$	(6,334	)	$	(29,896	)	$	(15,106	)
Comprehensive loss	$	(11,055	)	$	(6,334	)	$	(29,896	)	$	(15,106	)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.85	)	$	(0.49	)	$	(2.30	)	$	(2.13	)
Weighted-average common shares outstanding—basic and diluted		13,001,514			12,924,682			12,979,837			7,133,967

See accompanying notes to unaudited condensed consolidated financial statements.

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(unaudited)

(in thousands, except share amounts)

Three Months Ended September 30,
	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-In			Accumulated			Total Stockholders’
	Shares		Value		Shares		Amount		Capital			Deficit			Equity (Deficit)
Balance at June 30, 2020		—	$	—		12,924,563	$	13	$	223,339		$	(136,529	)	$	86,823
Issuance costs related to issuance of common stock from initial public offering		—		—		—		—		(44	)		—			(44	)
Exercise of common stock options		—		—		254		—		1			—			1
Stock-based compensation		—		—		—		—		468			—			468
Net loss		—		—		—		—		—			(6,334	)		(6,334	)
Balance at September 30, 2020		—	$	—		12,924,817	$	13	$	223,764		$	(142,863	)	$	80,914

Balance at June 30, 2021		—	$	—		13,001,105	$	13	$	226,211		$	(168,725	)	$	57,499
Exercise of common stock options		—		—		3,473		—		11			—			11
Stock-based compensation		—		—		—		—		733			—			733
Net loss		—		—		—		—		—			(11,055	)		(11,055	)
Balance at September 30, 2021		—	$	—		13,004,578	$	13	$	226,955		$	(179,780	)	$	47,188

Nine Months Ended September 30,
	Redeemable Convertible Preferred Stock						Common Stock				Additional Paid-In			Accumulated			Total Stockholders’
	Shares			Value			Shares		Amount		Capital			Deficit			Equity (Deficit)
Balance at December 31, 2019		209,119,674		$	130,666			230,860	$	—	$	4,419		$	(127,757	)	$	(123,338	)
Issuance of Series C redeemable convertible preferred stock, net of issuance costs of $201		78,306,611			29,446			—		—		—			—			—
Accretion of convertible preferred stock to redemption value		—			115			—		—		(115	)		—			(115	)
Issuance of common stock warrants in conjunction with sale of Series C redeemable convertible preferred stock		—			—			—		—		740			—			740
Conversion of redeemable convertible preferred stock to common stock upon closing of initial public offering		(287,426,285	)		(160,227	)		8,335,248		8		160,219			—			160,227
Issuance of common stock from initial public offering, net of issuance costs of $7,072		—			—			4,025,000		4		57,280			—			57,284
Vesting of restricted common stock		—			—			19,661		—		—			—			—
Issuance of common stock upon exercise of warrants		—			—			313,794		1		(1	)		—			—
Exercise of common stock options		—			—			254		—		1			—			1
Stock-based compensation		—			—			—		—		1,221			—			1,221
Net loss		—			—			—		—		—			(15,106	)		(15,106	)
Balance at September 30, 2020		—		$	—			12,924,817	$	13	$	223,764		$	(142,863	)	$	80,914

Balance at December 31, 2020		—		$	—			12,932,377	$	13	$	224,363		$	(149,884	)	$	74,492
Exercise of common stock options		—			—			72,201		—		604			—			604
Stock-based compensation		—			—			—		—		1,988			—			1,988
Net loss		—			—			—		—		—			(29,896	)		(29,896	)
Balance at September 30, 2021		—		$	—			13,004,578	$	13	$	226,955		$	(179,780	)	$	47,188

See accompanying notes to unaudited condensed consolidated financial statements.

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(29,896	)	$	(15,106	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		1,988			1,221
Depreciation expense		723			54
Gain on disposal of assets		—			(45	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(1,431	)		(1,689	)
Operating lease right-of-use assets		705			666
Accounts payable		1,167			141
Accrued expenses and other current liabilities		966			150
Operating lease liabilities		(731	)		(667	)
Deferred revenue		11,986			—
Net cash used in operating activities		(14,523	)		(15,275	)
Cash flows from investing activities:
Purchases of property and equipment		(2,302	)		(674	)
Net cash used in investing activities		(2,302	)		(674	)
Cash flows from financing activities:
Proceeds from the sale of Series C redeemable convertible preferred stock		—			30,392
Payment of offering costs related to sale of Series C redeemable convertible preferred stock		—			(206	)
Proceeds from initial public offering, net of underwriting discounts		—			59,892
Payment of initial public offering costs		—			(2,383	)
Payment of deferred offering expenses		(241	)		—
Proceeds from exercise of stock options		604			1
Net cash provided by financing activities		363			87,696
Net (decrease) increase in cash and cash equivalents		(16,462	)		71,747
Cash and cash equivalents and restricted cash, beginning of period		74,922			10,137
Cash and cash equivalents and restricted cash, end of period	$	58,460		$	81,884
Supplemental disclosure of non-cash financing and investing activities:
Property and equipment purchases included in accounts payable	$	1,049		$	17
Conversion of redeemable convertible preferred stock	$	—		$	160,227
Allocation of Series C redeemable convertible preferred stock to common stock warrant	$	—		$	740
Series C redeemable convertible preferred stock stock issuance costs included in accounts payable and accrued expense	$	—		$	1