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

I'm Jason Gerberry, I'm the biotech analyst at BofA and I'm pleased to be presenting Lyra Therapeutics and Maria Palasis, President and CEO. So Maria, thanks for joining us.

Thank you. It's great to be here in person.

Yes. So a lot going on, moving into pivotal testing with your implant mesh steroid for chronic rhinosinusitis, maybe coming off the quarter? I don't know if you want to talk a little bit about maybe just orienting listeners on who Lyra is and what are some of the key kind of milestones in the company story before we jump into more specific questions?

Sure. So Lyra Therapeutics has a platform technology, it's called the XTreo platform. And what it does, it release drugs very gradually over time in a linear fashion. So our company is focused on 2 products to treat chronic rhinosinusitis as a first indication. The -- a couple of things about chronic rhinosinusitis. First, it's just an enormous problem in the United States and throughout the world. There's -- we estimate 14 million people in the US have the disease. We know that 8 million get treated annually and half of the patients fail current medical management. So there's 4 million patients each year that fail medical management. And after that, really their only other option is surgery. So it's a large problem. Lyra has now done 3 clinical studies showing a profound effect in these patients. So it's important also from the standpoint of -- there is actually not a drug that is approved for the treatment of the broad population of patients with chronic rhinosinusitis. So we are focusing on those patients and we are really excited about the impact that we can have for these patients.

Okay. Maybe you know there's different patient segments, there's pre-surgical, there's post-surgical, there are others who approach sort of delivering a longer-acting mesh implant for the post-surgical. How did you guys decide on kind of focusing first on pre-surgical and the population that you've -- you're moving into your pivotal with?

Yes and we are really sort of the first company to do that, to focus on patients that have never had a surgery, sales medical management and really don't have any other option apart from surgery. The reason we focus there is because before developing our product, we did an extensive amount of research with physicians. And we looked at what others were doing and many other companies focused on treatment of polyps, but polyps represent such a minority of the patients. It really is about 10% to 20% of all CRS patients have polyps. So we weren't looking to develop a polyp treatment like the others. We wanted to develop a product for all of those millions of patients, the majority of whom do not have polyps that don't have a treatment. This is what the physicians wanted. This was their problem. They have ways of treating polyps, but they did not have a product to offer their patients who had failed medical management and did not have polyps. So that's really why we went there. We also recognize that there's not an established regulatory pathway. So what that meant for us as a company is that, we needed to work very closely with the FDA to be able to get alignment. And we've been able to do that and we're very confident about our pathway.

Given that you're basically treating a patient with a known API that works, why do you think others hadn't pursued the broader market opportunity? Was it the lack of regulatory guidance? Was it the risk associated with the development program? And obviously, you can reach different parts of the meatus that perhaps could offer therapeutic benefit that perhaps a spray cat. So can you talk a little bit more about that?

Yes, it's -- so I can't really speak for why they didn't go that route. But I do think that a lot of it has to do with the regulatory pathway. And I think that the first company that decided to treat polyps was not necessarily trying to provide a product for EMTs, but perhaps broaden the indication for allergists. Some of those patients also have chronic rhinosinusitis and will have polyps. And once that pathway is established, then there's a pathway and companies may choose to take that pathway. Again, in our situation, we recognized really what the unmet need was in the space and we listened to what the physician said. They were really clear around the requirements. So for instance, we asked them, well, how long should we release the drug, how long of a treatment do you want it to be a 3 month, a 6 months, a one year? Our technology is very versatile. We can really do all of the above. And the feedback that we got back from the physicians was that we see our patients 2 to 3x a year. And one physician in particular said, think about it like a dental cleaning, you go in there twice a year and you get your matrix, but they wanted to see the patient again. So what they said is, optimally, we would like 6 months of treatment. So we designed the implant to be able to deliver 6 months continuously with really linear kinetics and we're really the only company that has been able to do this is, our high dose has 7,500 micrograms and it releases it very literally over that 6-month period of time. That's what the physicians wanted and that's what we offered them.

Okay.

There's another important aspect related to that in order to deliver drug for 6 months, it needs to stay in place. And the tissue over time remodels as swelling goes down as polyp shrink. So there needs to be an active mechanism to keep it in place. Our matrix, they have shape memory properties. They're very elastic. It's placed using a small applicator. The matrix sort of blooms out the end. It's oversized. So that as the swelling goes down, it will keep wanting to push outwards and that will help it stay in place. That's really critical to our success. So when you think about other companies, there is a lot of technology and a lot of work that went into creating those 2 key features, the drug release that is linear and then the shape memory properties.

Okay. And on the regulatory point, can you maybe just talk about the regulatory interactions that you had before you move into Phase III and sort of the clarity that you got on pathway?

Certainly, so we've spoken with the FDA all along for several years as we embarked on this program. At the end of our Phase II, we went to the FDA with the data and we know from the FDA that their preference on a primary endpoint needed to include at least 2, up to 4 of the cardinal symptoms of chronic rhinosinusitis. Those cardinal symptoms are nasal discharge, nasal obstruction, facial pain and pressure and loss of sense of smell. So for the FDA, it was important that we focus on kind of what defines the disease and the disease is defined by those 4 cardinal symptoms. They leave it up to the sponsor as far as whether you want to pick 2, 3 or 4. In our Phase II study, we examined each of those cardinal symptoms individually, but then also the composite of 4 -- all 4 cardinal symptoms. At 24-weeks, we were statistically better than the control in our highest dose. But what we noticed is that many of the patients in our trial did not have a loss of sense of smell. And so when you don't have a defect, it's hard to improve upon it. So when we went to the FDA, we proposed a composite of the 3 cardinal symptoms omitting the sense of smell and that composite and the FDA was in agreement with us that the 3 cardinal symptoms for our patient population makes sense. And so our primary endpoint will be at 24-weeks in our ENLIGHTEN program, 3 cardinal symptoms.

Okay. So as you mentioned an important facet of the product, the mesh and how it stays when you do the implant and that's sort of critical to delivering the payload over a sustained longer period of time. So others in the space have tried to develop meshes, I think in their regulatory SBA, there's some data out there suggest maybe there's a fallout rate with those that could be in the 10% to 20% range, if I have my data points, right? Can you talk about maybe some of your data on that aspect of the that you've generated to give you confidence that your mesh stays where it is to stay and that is going to be a good patient experience?

Yes, that's really important. Actually, the results are much greater than that for these -- their drug-eluting stent like devices. And the other product I think that you're referring to which is the drug-eluting stent for recurrent polyps, that product was removed in the clinical study at 2 months and then that endpoint was at 3 months. And prior to that, there were many, many implants that have fallen out. So if you think about that, that's really a low bar. I mean, we need ours to stay in place for approximately 6 months. We had a 22-weeks, we had an [ 80% ] retention, which is spectacular. And if an implant did fall out, we can -- that patient was still in the study. When you look at our results, you could see that we maintain a very strong benefit in our patients despite the fact that we had 80%. But our retention rate is like nothing we've seen.

Got it. Okay. Maybe talk a little bit about the market, both in terms of with polyps, without polyps. And how you see is-- I presume this is a concentrated prescriber base that's ultimately maybe an ENT that's going to do these procedures. And so as we think about what the future looks like in terms of actually how a product like this will be marketed, who would it be marketed to, who will be administering it? And has that created any sort of bottleneck, right? Because there's so many patients arguably, but there's probably not as many providers so to speak.

Sure. So let's start with the sub the 4 million patients. These patients that failed medical management. We estimate 60% are surgically naive, 40% had a prior surgery. They're a mix of polyp and non-polyp, but the vast majority are non-polyp patients. They're about 10% to 20% of all of those patients have polyps. In the pre-surgical, it's about 10% in the patients who have had surgery, it's 20% to 30%. So of those 4 million, however, they go in and out of care and maybe some of you have experiences if there's not a treatment that is your -- that's amenable to you that you're not going to go back to that physician. And there's so many patients who just have decided they're not going to get surgery. That's what an ENT has to offer them apart from additional medical management like the nasal steroids razor or oral steroids that they've already tried and we can talk about why they don't work. It's surgery and patients oftentimes just do not want to have surgery. So if you look at how many patients see in ENT per year, currently, it's 1.5 million patients a year that see ENT and have failed medical management. So already, that's a large population of highly accessible patients. Again, think about 60% pre-surgical and 40% postsurgical, the majority of which are non-polyp patients. And there's really nothing for those patients.

Do you have any data on how many surgeries are occurring annually?

Yes, surgery broadly, including sort of balloons and polypectomies, which is about 400,000 surgeries a year. So very underpenetrated. When we talk to physicians, what they have always said is if we just had something else to offer our patient, particularly those who don't want to have surgery, they believe they'd be able to drive more patients in.

Yes, I think from what I'm hearing in a lot of your responses that you don't see this as being something that conflicts with an income-generating source for the ENT, which might be surgeries that it could be complementary to what they offer?

Absolutely, this is very complementary to that. The way to think about it is, there's just going to be those patients who don't want to get surgery and the physician will have something to offer them, they're proceduralist. They like to do procedures. They don't really -- they can prescribe drugs but inherently they want to do procedures. So we're offering a procedure for those patients who don't want to get surgery for those patients who want to maybe try something else prior to surgery. And for those patients who have a surgery, it's not -- surgery doesn't cure the disease. It's inflammation that creates the symptoms. So they're going to continue needing anti-inflammatory treatment and that's where our second product comes in, where we can then provide that anti-inflammatory treatment for patients who have had the surgery.

Can you talk a little bit about the sort of clinical meaningfulness, the data that you've seen so far, it's measured out to 24 weeks. Just put that in some context in terms of what you can offer patients? And obviously, companies see some effect size compression going Phase II to Phase III, but you're also enriching the endpoint relative to what was evaluated in Phase II?

Yes, so I mean, the effect that we saw in Phase II was really sort of profound when you think about a clinically meaningful effect. So the way that we can assess it is using something called the SNOT-22 score, which is very appropriately named, as you can tell, it is specific to CRS to the disease. And so it's a validated symptom score. It's comprised of 5 domains, 3 of which are disease related. One is sleep-related because as you can imagine, patients that are chronically congested aren't going to sleep well. Another one is a psychological domain, they can also get depressed. And so for the -- for using that score, there is a minimally clinically important difference that's been validated, that's 8.9 points. So if you look at our LANTERN results at 24-weeks, we saw a 40-point improvement in the SNOT-22 from a baseline of 69. That's an enormous change and it's also 4x that minimally clinically important difference. That's improvement over baseline. It's enormous. And then relative to control in our control patients, we're getting treatment. They were getting a [ sally ] lavage, which is standard medical therapy. Relative to control it at 24-weeks, we saw a 20-point improvement, which is twice the MCID. We also saw a dose range, we had a low dose 2 and the low dose was right in between the control and the high dose. So not only did we show very strong statistical significance, but we also showed clinical meaningfulness, which is what physicians need to see for adoption and they will look at the SNOT-22 score.

Okay. Would you -- when you go out as far as 24-weeks, I know people who do deal with this and they're miserable. So what kind of placebo effect would you anticipate when you're going to such a far-out measure, but on an end point that is a patient reported outcome?

Well, with a trial like this and these types of scores, there is a placebo effect, but it's also important that not only our control also involved treatment to, they were -- the way that our control group goes is that patients were blindfolded and then an applicator is placed in the middle meatus where the matrix is placed, the patients are decongested, so they're cleared out. And then the physician acts like they're placing the matrix. And then after that, they do the sally lavage. So there is an effect that we saw in our LANTERN study that was a placebo, in addition to the fact that they're getting some treatment. But what's important to note is both in the control group and in our treatment group there was a significant improvement very quickly at 4 weeks. Our improvement was around 20 points. So it was twice the MCID. So it was a meaningful improvement. The curves between the treatment and the control, we're just starting to separate. The numbers were not high enough for that to achieve statistical significance. At 8 weeks, we did in the SNOT-22. So we do show a rapid onset and that is important for patients.

In terms of either regulatory or commercial importance, right, the regulatory endpoint is going to be 24-week in your pivotal, but how important is it to hit that on, say a 4- or an 8-week measure just to communicate to providers, right, that this not only will provide patients with pretty rapid relief and durable long-term relief as well?

Yes, I believe that it's going to be important to show that the patients have a really a significant improvement relative to their baseline value. So that will certainly be very important that we can demonstrate that relative to baseline that those patients are feeling meaningfully better and it's a statistically significant improvement. And we're very confident on that. I mean our Phase II trial was -- showed very significant results. We only had about 21 to 23 patients per group. And clearly, our ENLIGHTEN program between both trials is going to be about 360 patients. So we're feeling good about that.

Yes, so remind me you said the implant will be removed at 24-week, right? So you'll be assessing, I imagine sort of how durable the benefit is beyond that 24-week, we can talk a little bit about because an important assumption how you model this is the retreatment rate and what proportion of patients do you think would want a retreatment, I imagine that if they're feeling relief and they went from a state of being miserable that they'd be, hey, let's redo this, but they may ultimately say post removal of the ENT maybe says you're going to get an extra month or 2 a benefit?

Definitely and it really is going to -- so I'll tell you about our LANTERN results. But first of all, you're spot on in that we know from some of our studies that when we remove the implant, patients felt so much better that they were very upset that they couldn't get another implant. So that tells us that there are just going to be some patients that are not going to want to wait around for their symptoms to come back, they're probably going to want to have another one right away. And there may be other patients that will wait for their symptoms to come back. And interesting outcome from our LANTERN study is we had that extension evaluation where the patients had 6 months of treatment or 24-weeks of treatment, it was removed and then we followed the patients for another 24-weeks. And it was interesting to see that in half of those patients that were treated with a high dose, they -- their symptoms did not worsen. So that's implying that we're seeing in some patients a more durable effect. And scientifically that does make some sense that if you're providing the steroid locally at these concentrations that there's a remodeling that maybe takes longer to reverse itself. It's a chronic disease that we anticipate symptoms will come back, the inflammation will. But we're going to examine that in ENLIGHTEN. So we have the 2 studies that we're doing ENLIGHTEN-1 and ENLIGHTEN-2, 180 patients in each trial. The primary endpoint of both trials is at 24 weeks, but ENLIGHTEN-1 has an additional extension study, which will be an additional 28 weeks. That's going to do a few things for us. Number one, we're going to look at some of those patients who receive treatment are going to get a repeat dose. So we'll be able to assess the safety of repeat dosing and we may even see even more efficacy out of that group. And then we're also going to patients who got treated, we're going to follow them and we will look again at the duration of benefit like we did in LANTERN, but not with many more patients. So we'll be able to get this information which we want to include in our label. In addition to that, we think that for payers having 52-week data is going to be really important when we talk about other companies that have maybe had pilot products, they don't all have that 52-week data. And we know in our work in talking to payers that that's sort of a box check having that 52-week data. So we will also be getting that for that reason too.

Yes, can you speak a little bit to what you think regulators want to see from a safety perspective? I imagine that you're getting steroid to different parts of the tissue that for longer periods of time. So to get comfort that there's that exposure doesn't have any sort of safety implication and/or you mentioned your dose is lower. So maybe it's the spray and the data that's been generated on the spray, you can kind of leverage that in terms of your regulatory filing.

Our -- so we've -- now that we've done 3 trials and treated so many patient, I mean the safety profile is very strong. We absolutely have to collect more data in ENLIGHTEN. What was I sort of worried about is, are you going to see a lot of nose bleeds when you put this high concentration, but we didn't. There was no difference between our control group and our treated group. So we will continue to collect information on the local observations. But so far, it's a very safe drug. There's a lot of data on physicians, I'm very comfortable with Mometasone Furoate, it's a well-known steroid, but we'll continue to collect that information. Then in terms of other compartments and when we look at the pharmacokinetics and we can detect systemic levels, but it's very, very low and it's below the level of other drugs that are already approved out there and are taking chronically. So we're really thrilled with the safety profile. I think the other thing that pharmacokinetics taught is not only are the systemic levels very low, but they're incredibly flat, right? That's -- it just verified the fact that we have linear release because these blood levels were just as flat as can be without averse other products burst the drug, so they may claim that they release drug for a month or 2 months, but the majority of that drug is coming out in their first few days.

Okay. And maybe just quickly, how is enrollment progressing with ENLIGHTEN and are there any impacts at all with COVID to enrollment and be it the ability to kind of get to a timely top line in to the back end of 2023?

Yes, not in the US, the US has been able to deal with COVID now. What we've done to mitigate that is we have a lot of sites. I mean for ENLIGHTEN-1, we've identified and contracting with over 50 sites. We have more than a third that are already up and running, screening and enrolling. So we feel comfortable with our progress to date and we are on track. But clearly, we're still in the startup phase, right? We're getting more sites up and running. And then we have said that ENLIGHTEN-2 will be up in the first half. So by the end of this quarter, we're on track for that. Things are moving along really well with ENLIGHTEN-2.

Okay. And then maybe and I have about 2 minutes left, but the recent financing, if you could talk about that, what that helps you accomplish and capital runway to the first Phase III results?

Yes, so we are really excited. We completed a $100 million at market, private equity financing. I think good is right in the nick of time, so we did the deal. We were able to bring in some very strong health care-focused investors where they did diligence on the company, which was wonderful to see that they did the diligence and then came in -- in a really big way. So with this cash that we have in addition to what we reported out at the end of Q1, it's about north of $130 million. It's going to take us to the middle of 2024. It will take us past our readout on BEACON, which is our Phase II study for our second product. It will take us past the readout of ENLIGHTEN. So we reported out on that. We also -- as you know, we added Dr. Harlan Waksal to our Board. He is our Executive Chairman and that's just been transformational. He's got over 30 years of experience in building biotech companies and building commercial organizations and that's what we need to be thinking about, executing on the trial and thinking about preparing for commercialization. So he's going to be really important in us preparing for that moving forward.

Okay. Great. Well, thanks for joining us at the conference and looking forward to the progress updates.

Great. Thank you.

All right.