Lyra Therapeutics, Inc. (LYRA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Lyra Therapeutics Third Quarter Financial Review and Operational Highlights Conference Call. [Operator Instructions] Now I'll turn the call over to Stephanie Marks with Argot Partners.

Thank you, operator, and welcome, everyone, to today's call. With me today are Dr. Maria Palasis, Lyra's President and Chief Executive Officer; Jason Cavalier, Chief Financial Officer; Dr. Robert Kern, Chief Medical Officer; and Corinne Noyes, SVP of Commercial Strategy and Market Development. This afternoon, Lyra issued a press release announcing its third quarter 2021 financial results and business update. A copy of the announcement can be found in the Investor Relations tab of the company's website, lyratherapeutics.com. During the conference call, management will make forward-looking statements, including statements related to the clinical development of the company's product candidates, business strategy and planned operations. These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainties. Lyra's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. Factors that could cause results to be different from these statements includes factors that the company describes in the section titled Risk Factors in the company's current report on Form 10-Q filed today on November 9, 2021. Lyra cautions you not to place undue reliance on forward-looking statements and undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in its expectations. And with that, I'll turn the call over to Maria.

Thank you, Stephanie, and thank you all for joining us this afternoon. This third quarter of 2021 was another quarter of significant progress at Lyra. On the clinical front, we continue to generate data that strengthens the profile of our lead candidate, LYR-210, for the treatment of chronic rhinosinusitis. We announced new positive data from the Phase II LANTERN post-treatment evaluation, which showed continued safety in all patients and a durable response 6 months post removal of LYR-210 in roughly half the patients that we've treated. This durable response in some of the patients, even 6 months after removal, was impressive and an important differentiator relative to other treatments in the field. We also reported the full results from the 56-day pharmacokinetic clinical study, which demonstrated that mometasone furoate blood levels were low and constant over time, providing further evidence that LYR-210 delivers a steady daily dose of mometasone. We believe that it is these drug release kinetics of LYR-210 that underpin the rapid and prolonged symptom relief that we've observed in our clinical studies. This third study further strengthens our data, safety and efficacy database. Dr. Kern will review these data in more detail shortly. Both clinical studies were presented at the 67th Annual Meeting of the American Rhinologic Society last month. At ARS, we presented the data in 2 oral presentations and also received additional recognition by the Society for our clinical research. The PK study was selected as a top clinical abstract at the meeting, and the LANTERN Phase II manuscript won the ARS 2021 Clinical Science Maurice Cottle Awards. This recognition speaks to the quality of the science at Lyra. Our clinical programs are advancing into late-stage development with the start of the Phase III clinical program for LYR-210 and the Phase II clinical trial for LYR-220 in the coming months. On the corporate front, Jason Cavalier was appointed as our new Chief Financial Officer in September. He brings over 2 decades of experience as an investment banker and has an extensive track record in advising companies on financing and strategic alternatives. Most recently, he was Managing Director, Head of Life Sciences, Mergers & Acquisitions at Cantor Fitzgerald, where he led numerous transactions across medical technology, diagnostics and biopharma sectors. He also held other investment banking positions at RBC Capital Markets, Barclays Capital, Bear Stearns and Lehman Brothers. Jason leads our financial and capital market strategy and will support our investor, public relations and business development activities. He takes the rein from Don Elsey, who guided the company through our IPO. As you know, Don's retiring. He'll remain an adviser through the year-end. On behalf of the entire Lyra team, I'd like to thank Don for his tremendous dedication, commitment and contributions to the company. Now I'd like to take a few minutes to remind you why we have initially focused our development on a treatment for patients with chronic rhinosinusitis. CRS is a debilitating disease that has been largely ignored. The disease is highly prevalent in the world with about 14 million people just in the United States. Patients are currently treated with off-label medications that have not been approved to treat CRS. Consequently, about half of these patients fail medical treatment and continue to suffer with their disease. In the United States alone, there are 4 million patients that fail medical management each year. Their next option is invasive surgery. Currently marketed products have only been developed to treat polyps, which only represents 10% of the CRS patients. Lyra's mission is to provide the very first treatment for these millions of CRS patients who have been underserved by current treatment options by developing an effective drug that directly targets inflammation at the epicenter of the disease. Our proprietary XTreo platform technology enables delivery of a targeted and consistent therapeutic dosing directly to the disease submucosa for 6 months with 1 application. No one else has been able to achieve this to date. Lyra is developing 2 product candidates to fully address patients with CRS, LYR-210 and 220, both are small shape memory implants that are placed deep in the nasal passage, using a small diameter applicator in an ENT's office during a routine endoscopy. LYR-210 is designed to be used early in the treatment paradigm in surgically naive patients after topical steroid sprays have failed. We estimate this population to represent about 2.4 million patients in the United States each year. The post-market -- the post-surgical market opportunity is also significant at about 1.6 million patients each year. To address this market, we're developing LYR-220, which is designed for the post-surgical anatomy in patients who continue to require therapy despite having had prior endoscopic sinus surgery. Our growing body of scientific evidence continues to support the safety and efficacy of LYR-210 and highlights the benefits of our proprietary XTreo platform technology. We have strong validation of our technology in CRS, our first targeted indication, and we intend to leverage the platform in new indications over the next year. In addition to our own research, we have also been hearing from key opinion leaders about their enthusiasm for the potential of LYR-210 to be a new treatment alternative for their CRS patients. Over the past few months, we hosted 2 events with leading ENTs who all share their experiences in treating CRS patients, the shortcomings of current therapies and the need for new effective treatment. We urge you to listen to the webcast, which are found in the IR section of our corporate website. I'm sure that you will find their perspectives informative. With the upcoming initiations of our 2 clinical programs, our Phase III ENLIGHTEN program for LYR-210 and the Phase II BEACON program for LYR-220, we're one step closer to potentially changing the treatment paradigm for the millions of underserved CRS patients. I'll now turn the call over to Dr. Robert Kern, who will review the new data as well as the clinical trial designs for LYR-210 and 220, which are both anticipated to initiate around year-end. Rob?

Thank you, Maria. As Maria mentioned, new positive data on LYR-210 was a subject of 2 presentations at the 67th Annual ARS meeting, that's the American Rhinologic Society. Before I review these data, I wanted to remark on the award that the LANTERN manuscript received at that meeting. In my 30 years as a rhinologist and a member of that society, I have not seen that award given to industry-sponsored research. So it was quite an accomplishment for Lyra and a validation of our rigorous clinical program. The LANTERN post-treatment evaluation assessed the safety and efficacy over 6 months following matrix removal. During the post-treatment period, there was no increased incidence of treatment-related adverse events. Also, approximately half of these CRS patients experienced a durable response 6 months after the removal of LYR-210. While roughly 90% of the patients in the control arm showed worsened CRS symptoms from weeks 24 to 48. The durable symptom relief observed in some patients after removal of LYR-210 offers potential long-term benefit and is a meaningful differentiator relative to other treatments. We also reported results from the 56-day pharmacokinetic study, which showed that LYR-210 delivered a constant daily dose of mometasone furoate over the study period without a drug burst. The PK study enrolled 24 patients across 4 U.S. sites to receive LYR-210 2,500 and 7,500 picogram doses or 7,500 picogram doses. The study showed LYR-210 to be safe and effective in patients with less severe disease as patients in the PK study had baseline SNOT-22 scores of around 38 compared to 68 in the LANTERN Phase II trial. Impressively, 63% of patients achieved a score below 20, the common standard threshold for surgery, and 38% of patients achieved a normal score, meaning below 9 by day 56. These results further demonstrate our belief that LYR-210 has the potential to provide an effective treatment for mild all the way to severe CRS disease. We've now shown in 3 separate trials, both safety and efficacy for our lead product, LYR-210. We believe these impressive results validate a 6-month treatment duration provided with a single administration and the potential for a more durable effect post removal. As a practicing physician and otolaryngologist, I believe that LYR-210 offers a significant advantage over existing therapies and has the potential to establish a new standard of care for chronic rhinosinusitis. Looking ahead, the global Phase III ENLIGHTEN program for LYR-210 is expected to initiate around year-end. We anticipate enrollment in each trial to about 180 adult patients with CRS who have failed medical management and are surgically naive. The 2 studies will be randomized 2:1 to LYR-210 versus control. The primary endpoint will be the 3 cardinal symptom scores at 24 weeks with secondary endpoints to include SNOT-22, rescue treatments, sinus CT scans, quality of life and pharmacoeconomic evaluations. The design is largely similar to the Phase II LANTERN study, which was highly statistically significant in the 3 cardinal symptoms at 24 weeks. ENLIGHTEN-1 will include a 6-month extension study where placebo patients will cross over to LYR-210 treatment, and 50% of the treated patients will receive a repeat dose. It is important to note that the extension study will not delay top line readout of the primary endpoint at 24 weeks. We believe that ENLIGHTEN is a robust clinical development program, the first of its kind in this field. Later this month, we will also start the Phase II BEACON study for LYR-220. We plan to enroll approximately 65 post-surgical patients across sites in the United States and Australia, randomized 1:1:1 to receive 1 of 2 different matrix designs, each at a dose of -- each at the dose of 7,500 picograms or control. The primary endpoint will be safety and feasibility over 24 weeks with secondary endpoints, including PK, SNOT-22, 3 cardinal symptoms, rescue treatment, sinus CT, nasal biomarkers and quality of life. Let me now turn the call over to Jason, who will review the quarter's financials. Jason?

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

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

[Operator Instructions] Your first question comes from the line of Tim Lugo from William Blair.

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

Tim, thank you for the question. As we have mentioned in the past, we have transferred the technology to an outside contractor. In the past, we have also manufactured in-house, and we've used our SMEs here that transfer the process. The scale up right now is geared towards our clinical studies, and we're sufficient for those studies. As you know, we have 3 trials. We have the ENLIGHTEN-1, the ENLIGHTEN-2 and also BEACON, and so we're in very good shape with our manufacturing. We're going to be spending time during the enrollment period and follow-up periods to be scaling up at our contract manufacturer. And as I think I've mentioned in the past, we're very selective with who we have chosen. We've chosen a contract manufacturer that we believe is very well suited to be able to scale up the matrix for commercial.

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

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

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

Well, I should probably answer that. I think the magnitude of the response is with a single administration is very striking. That's -- I mean, the only thing that comes close to this in this change in the SNOT-22 or either the biologics, which you have to give regularly and require, are extraordinarily expensive, and the other option is surgery. So to have that kind of outcome at 6 months is striking. The statistics were robust, and the presentation was appropriately scaled. It wasn't -- it was measured, but it was exciting. I think it was probably the main reason, and it was well done.

Yes. Maybe I can also -- thanks, Rob. I totally agree with everything. One thing, I've been in this space for a long time, doing drug delivery from implants, and the fact that we had 2 doses, and we did a dose response, I think really stood out. It's really a rare thing to see because you do have to create a whole new product in formulation, and it just speaks to the strength of our development and scientific team that we did that. We went into the study really not knowing whether we would see a dose response. And the fact that we did see it was validating certainly to Lyra and to the scientific community.

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

Sure. This is Corinne Noyes. We're very pleased with how the LianBio collaboration is progressing, and we are on track to have them participate in our second of the 2 Phase III studies. And the goal with that participation is for them to submit and commercialize shortly after we do in the U.S.

Great. Congratulations on the progress.

Thank you, Tim.

Your next question comes from the line of Bert Hazlett from BTIG.

Just 2 for me. My congratulations on all the progress as well. Just with regard to the financial statements and looking forward, given that you're starting the 2 major efforts, the 3 studies, but 2 major efforts with 210 and 220, how should we think about the trajectory of R&D going forward? It's been $7 million plus over the past couple of quarters. Should that materially increase on a quarter-to-quarter basis? And if so, roughly what levels should we be thinking about in terms of modeling?

Yes, this is Jason. So I think given that we've completed the tech transfer to our contract manufacturer, we expect that spending to, obviously, tail off offset by increase in the manufacturing expense to supply the units for the clinical trial. So we would expect a slight uptick overall in our R&D, which is the manufacturing as well as the -- obviously, the clinical expenses. So given that we're starting 3 trials, so I would expect a slight uptick. But again, we feel like with the cash on hand and expected milestones, we will have enough cash to fund the business through the end of next year.

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

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

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

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

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

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

And your next question comes from the line of Chris Howerton from Jefferies.

Two for me. One would be, what would be the expected enrollment cadence or time line for the Phase III programs for 210? And if you're unwilling or unable to kind of provide clear estimates there, maybe you could remind us what the time lines were for the LANTERN study? And then the second question would be just as -- I think we actually discussed this recently, but I'd be curious to see if Dr. Kern or anyone else on the team had additional thoughts here about why is it that you're seeing durable effect 6 months after the removal of the device? Is there something about tissue remodeling or something else that could be going on to explain some of those durable effects?

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

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

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

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

Congratulations on your progress.

Thank you, Chris.

[Operator Instructions] And we have a question coming from Ashwani Verma from Bank of America.

Congrats on the progress. Two for me. So this LianBio collaboration, I just wanted to make sure I heard it right. I think you're assuming that they will launch in their geographies 1 year after you can in the U.S.? And how much of the milestone payments can be assumed in the next 1 year and out of that $135 million? And how much would be around the approval and launch? That's my first question. And just on the Phase II design that you just discussed. So like when you conduct the open-label part of the study, just like optimizing the procedure, is that something that you're going to share with us, just around -- I'm assuming that you want to identify like whether the retention is good enough or not of a bigger metrics. So just curious if you will share that with us.

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

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

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

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

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

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