SEC Filing - Lyra Therapeutics, Inc.

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10-Q

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 June 30, 2023


☐	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.

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 August 1, 2023, the registrant had 49,545,559 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, manufacture, 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 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;

•

potential pandemics and the evolving COVID-19 pandemic;

•

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 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 manufacturing capabilities, successfully transfer our manufacturing process to our in-house facility, or our continued reliance on third parties for certain aspects of the manufacturing process, 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;

•

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	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity	83
Item 3.	Defaults Upon Senior Securities	83
Item 4.	Mine Safety Disclosures	83
Item 5.	Other Information	83
Item 6.	Exhibits	84
Signatures		86

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

LYRA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)


	June 30,			December 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	54,361		$	32,550
Short-term investments		61,789			65,344
Restricted cash		303			—
Prepaid expenses and other current assets		1,800			2,935
Total current assets		118,253			100,829
Property and equipment, net		560			2,243
Operating lease right-of-use assets		1,420			2,223
Restricted cash		1,089			1,392
Other assets		4,353			3,281
Total assets	$	125,675		$	109,968
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,188		$	2,616
Accrued expenses and other current liabilities		6,738			9,030
Operating lease liabilities		1,688			1,549
Deferred revenue		1,497			1,275
Total current liabilities		14,111			14,470
Operating lease liabilities, net of current portion		—			667
Deferred revenue, net of current portion		12,987			14,077
Total liabilities		27,098			29,214
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized at June 30, 2023 and December 31, 2022; no shares issued and outstanding at June 30, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized at June 30, 2023 and December 31, 2022; 49,545,039 and 31,827,659 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		50			32
Additional paid-in capital		379,102			329,387
Accumulated other comprehensive income (loss), net of tax		(27	)		10
Accumulated deficit		(280,548	)		(248,675	)
Total stockholders’ equity		98,577			80,754
Total liabilities and stockholders’ equity	$	125,675		$	109,968

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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Collaboration revenue	$	458		$	525		$	868		$	993

Operating expenses:
Research and development		10,799			10,793			23,395			19,298
General and administrative		4,570			4,132			9,697			8,020
Loss on impairment of long-lived assets		1,592			—			1,592			—
Total operating expenses		16,961			14,925			34,684			27,318
Loss from operations		(16,503	)		(14,400	)		(33,816	)		(26,325	)
Other income:
Interest income		897			34			1,969			48
Total other income		897			34			1,969			48
Loss before income tax expense		(15,606	)		(14,366	)		(31,847	)		(26,277	)
Income tax expense		(12	)		—			(26	)		—
Net loss		(15,618	)		(14,366	)		(31,873	)		(26,277	)
Other comprehensive income:
Unrealized holding loss on short-term investments, net of tax		(15	)		—			(37	)		—
Comprehensive loss	$	(15,633	)	$	(14,366	)	$	(31,910	)	$	(26,277	)
Net loss per share attributable to common stockholders— basic and diluted	$	(0.36	)	$	(0.42	)	$	(0.79	)	$	(1.12	)
Weighted-average common shares outstanding— basic and diluted		43,676,387			33,946,428			40,273,472			23,535,442

See accompanying notes to unaudited condensed consolidated financial statements.

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
Issuance of common stock and pre-funded warrants, net of issuance costs of $4,244		18,815,159		19		96,232		—			—			96,251
Issuance of common stock upon RSU vesting		1,302		—		—		—			—			—
Stock-based compensation		—		—		1,107		—			—			1,107
Net loss		—		—		—		—			(14,366	)		(14,366	)
Balance at June 30, 2022		31,826,357	$	32	$	325,891	$	—		$	(219,674	)	$	106,249

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Loss, net of tax			Deficit			Equity
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
Issuance of common stock and pre-funded warrants, net of issuance costs of $3,332		17,652,962	$	18	$	46,650		—			—		$	46,668
Exercise of common stock options		55,262		—		97		—			—			97
Unrealized loss on available-for-sale securities								(15	)		—			(15	)
Stock-based compensation		—		—		1,354		—			—			1,354
Net loss		—		—		—		—			(15,618	)		(15,618	)
Balance at June 30, 2023		49,545,039	$	50	$	379,102	$	(27	)	$	(280,548	)	$	98,577

See accompanying notes to unaudited condensed consolidated financial statements.

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(31,873	)	$	(26,277	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		2,964			1,951
Depreciation expense		261			566
Impairment of long-lived assets		1,592			—
Net amortization of premium on short-term investments		(1,352	)		—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1,135			788
Operating lease right-of-use assets		803			495
Other assets		(2,527	)		(949	)
Accounts payable		3,189			(1,639	)
Accrued expenses and other current liabilities		(2,928	)		1,207
Operating lease liabilities		(528	)		(524	)
Deferred revenue		(868	)		4,007
Net cash used in operating activities		(30,132	)		(20,375	)
Cash flows from investing activities:
Purchases of property and equipment		(116	)		(107	)
Purchases of short-term investments		(29,930	)		—
Maturity of short-term investments		34,800			—
Net cash provided by (used in) investing activities		4,754			(107	)
Cash flows from financing activities:
Proceeds from sale of common stock and pre-funded warrants, net of issuance costs		50,000			100,495
Payment of deferred offering costs		(2,912	)		(4,010	)
Proceeds from exercise of stock options		101			8
Net cash provided by financing activities		47,189			96,493
Net increase in cash, cash equivalents and restricted cash		21,811			76,011
Cash, cash equivalents and restricted cash, beginning of period		33,942			46,076
Cash, cash equivalents and restricted cash, end of period	$	55,753		$	122,087

Supplemental disclosure of non-cash financing and investing activities:
Property and equipment purchases included in accounts payable	$	54		$	6
Other assets included in accounts payable and other current liabilities	$	505		$	—
Deferred offering costs included in accounts payable and accrued expenses	$	420		$	236

See accompanying notes to unaudited condensed consolidated financial statements.

LYRA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization 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 implants designed to be administered in a brief, non-invasive, in-office procedure and intended to deliver 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 formally 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