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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 March 31, 2023

OR

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, a 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.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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 May 1, 2023, the registrant had 31,836,815 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 within the meaning of the Private Securities Litigation Reform Act of 1995. 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 fact 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 (as defined below);
our ability to continue as a going concern;
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 evolving COVID-19 pandemic and related macroeconomic factors, 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;
the sufficiency of our cash and cash equivalents to fund our operations;
our remediation of a material weakness;
our business strategy;
our research and development costs; and
the plans and objectives of management for future operations.

 


 

These statements are neither promises nor guarantees, but 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 or expressions. 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. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.

Unless the context requires otherwise, we use the terms “Lyra,” “the Company,” “we,” “us,” “our” and similar designations in this Quarterly Report on Form 10-Q to refer to Lyra Therapeutics, Inc. and its wholly owned subsidiary, Lyra Therapeutics Securities Corporation.

 


 

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 currently intend to manufacture clinical materials in-house, but we may 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. Any inability to scale up our internal capabilities, or our reliance on third parties 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 have incurred significant losses since inception and expect to incur significant additional losses for the foreseeable future. We may never achieve profitability;
our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern;
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. If we are unable to raise capital when needed, we could be forced to delay, reduce, or eliminate our product development programs or commercialization efforts;
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 our product. 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;
we identified a material weakness in our internal control over financial reporting that resulted in a restatement of our unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2022 and as of and for the three and six months ended June 30, 2022. This material weakness, if not remediated, could adversely affect our business, our stock price and our ability to report our results of operations and financial condition accurately and in a timely manner;
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, and may enter into collaborations, 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. 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 rely on third parties to conduct our pre-clinical studies and clinical trials. Any failure by a third party to conduct the clinical trials according to good clinical practices "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 global pandemic caused by COVID-19 has disrupted and may continue to 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 Stockholders’ Equity

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

80

Item 3.

Defaults Upon Senior Securities

80

Item 4.

Mine Safety Disclosures

80

Item 5.

Other Information

80

Item 6.

Exhibits

81

Signatures

82

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

LYRA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,019

 

 

$

32,550

 

Short-term investments

 

 

60,688

 

 

 

65,344

 

Prepaid expenses and other current assets

 

 

2,092

 

 

 

2,935

 

Total current assets

 

 

84,799

 

 

 

100,829

 

Property and equipment, net

 

 

2,004

 

 

 

2,243

 

Operating lease right-of-use assets

 

 

1,825

 

 

 

2,223

 

Restricted cash

 

 

1,392

 

 

 

1,392

 

Other assets

 

 

3,848

 

 

 

3,281

 

Total assets

 

$

93,868

 

 

$

109,968

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,951

 

 

$

2,616

 

Accrued expenses and other current liabilities

 

 

6,793

 

 

 

9,030

 

Operating lease liabilities

 

 

1,900

 

 

 

1,549

 

Deferred revenue

 

 

1,510

 

 

 

1,275

 

Total current liabilities

 

 

14,154

 

 

 

14,470

 

Operating lease liabilities, net of current portion

 

 

191

 

 

 

667

 

Deferred revenue, net of current portion

 

 

13,432

 

 

 

14,077

 

Total liabilities

 

 

27,777

 

 

 

29,214

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized at March 31, 2023
   and December 31, 2022;
no shares issued and outstanding at March 31, 2023 and
   December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized at
   March 31, 2023 and December 31, 2022;
31,836,815 and 31,827,659 shares issued
   and outstanding at March 31, 2023 and December 31, 2022, respectively

 

 

32

 

 

 

32

 

Additional paid-in capital

 

 

331,001

 

 

 

329,387

 

Accumulated other comprehensive income (loss), net of tax

 

 

(12

)

 

 

10

 

Accumulated deficit

 

 

(264,930

)

 

 

(248,675

)

Total stockholders’ equity

 

 

66,091

 

 

 

80,754

 

Total liabilities and stockholders’ equity

 

$

93,868

 

 

$

109,968

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

2


 

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

 

 

Three Months Ended
March 31,

 

 

 

 

2023

 

 

2022

 

 

Collaboration revenue

 

$

410

 

 

$

468

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

 

12,596

 

 

 

8,505

 

 

General and administrative

 

 

5,127

 

 

 

3,888

 

 

Total operating expenses

 

 

17,723

 

 

 

12,393

 

 

Loss from operations

 

 

(17,313

)

 

 

(11,925

)

 

Other income:

 

 

 

 

 

 

 

Interest income

 

 

1,072

 

 

 

14

 

 

Total other income

 

 

1,072

 

 

 

14

 

 

Loss before income tax expense

 

 

(16,241

)

 

 

(11,911

)

 

Income tax expense

 

 

(14

)

 

 

 

 

Net loss

 

 

(16,255

)

 

 

(11,911

)

 

Other comprehensive income:

 

 

 

 

 

 

 

Unrealized holding loss on short-term investments, net of tax

 

 

(22

)

 

 

 

 

Comprehensive loss

 

$

(16,277

)

 

$

(11,911

)

 

Net loss per share attributable to common stockholders—
  basic and diluted

 

$

(0.44

)

 

$

(0.92

)

 

Weighted-average common shares outstanding—
  basic and diluted

 

 

36,832,747

 

 

 

13,008,779

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income, net of tax

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

13,007,178

 

 

$

13

 

 

$

227,700

 

 

$

 

 

$

(193,397

)

 

$

34,316

 

Exercise of common stock options

 

 

2,718

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Stock-based compensation

 

 

 

 

 

 

 

 

844

 

 

 

 

 

 

 

 

 

844

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,911

)

 

 

(11,911

)

Balance at March 31, 2022

 

 

13,009,896

 

 

$

13

 

 

$

228,552

 

 

$

 

 

$

(205,308

)

 

$

23,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss, net of tax

 

 

Deficit

 

 

Equity

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2022

 

 

31,827,659

 

 

$

32

 

 

$

329,387

 

 

$

10

 

 

$

(248,675

)

 

$

80,754

 

Exercise of common stock options

 

 

2,115

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Issuance of common stock upon RSU
  vesting

 

 

7,041

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(22

)

 

 

 

 

 

(22

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,610

 

 

 

 

 

 

 

 

 

1,610

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,255

)

 

 

(16,255

)

Balance at March 31, 2023

 

 

31,836,815

 

 

$

32

 

 

$

331,001

 

 

$

(12

)

 

$

(264,930

)

 

$

66,091

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(16,255

)

 

$

(11,911

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

1,610

 

 

 

844

 

Depreciation expense

 

 

284

 

 

 

280

 

Net amortization of premium on short-term investments

 

 

(726

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Collaboration revenue receivable

 

 

 

 

 

(5,000

)

Prepaid expenses and other current assets

 

 

843

 

 

 

371

 

Operating lease right-of-use assets

 

 

398

 

 

 

246

 

Other assets

 

 

(2,446

)

 

 

(260

)

Accounts payable

 

 

3,295

 

 

 

(663

)

Accrued expenses and other current liabilities

 

 

(2,318

)

 

 

(87

)

Operating lease liabilities

 

 

(125

)

 

 

(257

)

Deferred revenue

 

 

(410

)

 

 

4,532

 

Net cash used in operating activities

 

 

(15,850

)

 

 

(11,905

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(45

)

 

 

(93

)

Purchases of short-term investments

 

 

(4,440

)

 

 

 

Maturity of short-term investments

 

 

9,800

 

 

 

 

Net cash provided by (used in) investing activities

 

 

5,315

 

 

 

(93

)

Cash flows from financing activities:

 

 

 

 

 

 

Payment of deferred offering expenses

 

 

 

 

 

(2

)

Proceeds from exercise of stock options

 

 

4

 

 

 

8

 

Net cash provided by financing activities

 

 

4

 

 

 

6

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(10,531

)

 

 

(11,992

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

33,942

 

 

 

46,076

 

Cash, cash equivalents and restricted cash, end of period

 

$

23,411

 

 

$

34,084

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


LYRA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization, Going Concern and Basis of Presentation

Lyra Therapeutics, Inc. (the “Company”) is a clinical-stage biotechnology company focused on the development and commercialization of therapies for the localized treatment of patients with chronic rhinosinusitis, or CRS. The Company’s proprietary technology is designed to consistently deliver medicines directly to the affected tissue for sustained periods with a single administration. The Company’s product candidates, LYR-210 and LYR-220, are bioresorbable polymeric matrices designed to be administered in a brief, non-invasive, in-office procedure and intended to deliver up to six months of continuous anti-inflammatory drug therapy to the sinonasal passages for the treatment of CRS. The Company was incorporated as a Delaware corporation on November 21, 2005 and is located in Watertown, Massachusetts. On July 16, 2018, the Company formerly changed its name from 480 Biomedical, Inc. to Lyra Therapeutics, Inc.

The Company is subject to risks common to companies in the therapeutics and pharmaceutical industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, reliance on third party manufacturers, ability to transition from pilot-scale manufacturing to large-scale production of products and the need to obtain adequate additional financing to fund the development of its product candidates.

Going Concern

From inception through March 31, 2023, the Company has raised an aggregate of $350.4 million to fund its operations primarily from the equity financings, government grants and its License and Collaboration Agreement with LianBio discussed in Note 6.

The Company has incurred recurring net losses since inception and has an accumulated deficit of approximately $264.9 million at March 31, 2023. The Company expects to continue to generate operating losses for the foreseeable future. At March 31, 2023, the Company had approximately $22.0 million of cash and cash equivalents and $60.7 million of short-term investments, and, due to an expected increase in certain expenditures, these conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these condensed consolidated financial statements are issued.

Management has concluded that there is substantial doubt regarding its ability to continue as a going concern based on its analysis under applicable accounting standards. Based on its current business plan, the Company anticipates that its cash, cash equivalents and short-term investment balance is sufficient to fund its operating expenses and capital expenditures into mid-second quarter of 2024.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) assuming the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company expects to incur increased costs as it progresses its product candidates through clinical development. The Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity or debt financings, collaboration agreements, strategic alliances and licensing arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to obtain funding as and when needed would have a negative impact on the Company’s financial condition and ability to pursue its business strategies. If the Company is unable to obtain funding when needed, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant

6


LYRA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standard Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2023 and the results of its operations and its cash flows for the three months ended March 31, 2023 and 2022. The results for the three months ended March 31, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. These condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2023.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2023. Since the date of those financial statements, there have been no changes to its significant accounting policies except as noted below.

 

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. For the three months ended March 31, 2023, other comprehensive income consisted of unrealized gains and losses, net of taxes from its short-term investments.

As the Company did not have any element of other comprehensive income or loss during the three months ended March 31, 2022, its comprehensive loss is equal to its net loss for the three months ended March 31, 2022.

Restricted Cash

The Company had restricted cash of approximately $1.4 million as of March 31, 2023 and December 31, 2022. These balances were held unsecured as of March 31, 2023 at one of the Company’s financial institution to secure the Company’s letters of credit for its facility leases.

The Company’s statements of cash flows include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on such statements. A reconciliation of the cash, cash equivalents, and restricted cash reported within the balance sheet that sum to the total of the same amounts shown in the statement of cash flows is as follows:

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Cash and cash equivalents

 

$

22,019

 

 

$

32,550

 

Restricted Cash

 

 

1,392

 

 

 

1,392

 

Total

 

$

23,411

 

 

$

33,942

 

 

 

 

 

 

 

 

Net Loss per Share

The Company has reported losses since inception and has computed basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. The Company has included pre-funded warrants to purchase 5,000,000 shares of common stock at an exercise price of $0.001 in its computation of basic net loss per share based on the nominal exercise price. Diluted net loss per share is computed using the more dilutive of (a) the two-class method, or (b) treasury stock method, as applicable, to the potentially dilutive instruments. The weighted-average number of common shares outstanding gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and restricted stock units, warrants, if any, and nonvested shares. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive, basic, and diluted loss per share have been the same.

7


LYRA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares):

 

 

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Stock options

 

 

5,495,826

 

 

 

2,962,177

 

Restricted stock units

 

 

260,616

 

 

 

42,879

 

Total

 

 

5,756,442

 

 

 

3,005,056

 

 

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Effective January 1, 2023, the Company adopted Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 requires that credit losses be reported as an allowance using an expected losses model, representing the entity’s current estimate of credit losses expected to be incurred. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. The adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.

3. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

 

 

March 31,

 

 

Quoted Prices in Active Markets for Identical Assets
(Level 1)

 

 

Significant Other Observable Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

    Money market funds

 

$

20,334

 

 

$

20,334

 

 

$

-

 

 

$

-

 

    Corporate debt securities

 

 

 

 

 

 

 

 

 

 

 

 

Total cash equivalents

 

$

20,334

 

 

$

20,334

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

    US treasury bills

 

 

2,987

 

 

 

2,987

 

 

 

 

 

 

 

    Corporate Bonds and U.S. Government Agency Securities

 

 

57,701

 

 

 

7,003

 

 

 

50,698

 

 

 

 

Total Short-term investments

 

$

60,688

 

 

$

9,990

 

 

$

50,698

 

 

$

 

8


LYRA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

 

 

December 31,

 

 

Quoted Prices in Active Markets for Identical Assets
(Level 1)

 

 

Significant Other Observable Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

    Money market funds

 

$

22,580

 

 

$

22,580

 

 

$

-

 

 

$

-

 

    Corporate debt securities

 

 

7,089

 

 

 

2,098

 

 

 

4,991

 

 

 

 

Total cash equivalents

 

$

29,669

 

 

$

24,678

 

 

$

4,991

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

    US treasury bills

 

 

2,966

 

 

 

2,966

 

 

 

 

 

 

 

    Corporate Bonds and U.S. Government Agency Securities

 

 

62,378

 

 

 

4,732

 

 

 

57,646

 

 

 

 

Total Short-term investments

 

$

65,344

 

 

$

7,698

 

 

$

57,646

 

 

$

 

As of March 31, 2023, the Company’s cash equivalents were invested in money market funds which were valued based on Level 1 inputs. As of December 31, 2022, the Company’s cash equivalents were invested in money market funds which were valued based on Level 1 inputs, and highly liquid corporate debt securities which were valued based on level 2 inputs. As of December 31, 2022, the Company's short-term investments consisted of U.S. treasury bills which were valued based on Level 1 inputs and Corporate Bonds and U.S. Government Agency Securities which were valued based on Level 2 inputs. In determining the fair value of its investments at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data for Level 2 investments. All available-for-sale securities have contractual maturities of less than one year. The Company did not have any financial assets or liabilities during any of the periods presented in the accompanying consolidated financial statements that required Level 3 inputs.

The carrying values of the Company’s accounts payable, accrued expenses and deferred revenue approximate their fair values due to the short-term nature of these liabilities and as such these are considered level 1 in the fair value hierarchy.

 

4. Preferred and Common Stock

There were no preferred stock or common stock transactions other than the exercise of stock options during the three months ended March 31, 2023.

On March 27, 2023, the Company notified Jefferies LLC (“Jefferies”) of the termination of the Open Market Sales Agreement, dated May 11, 2021, between the Company and Jefferies.

5. Stock-Based Compensation Expense

A summary of the restricted stock unit activity under the Plans for the three months ended March 31, 2023 was as follows:

 

 

Shares

 

 

Weighted-
Average
Grant Date Fair Value