10-Q
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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 June 30, 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 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.

2


 

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.

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

 

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.

4


 

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.

5


LYRA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS