Lyra Therapeutics, Inc. Q2 FY2020 Earnings Call

Welcome to the Lyra Therapeutics Second Quarter 2020 Financial Results and Corporate Update Conference Call. At this time, all participants are in listen-only mode. Following management's prepared remarks, we will hold a Q&A session. As a reminder, this call is being recorded today, August 5, 2020. I would now like to turn the call over to Laurence Watts, Managing Director at Gilmartin Group. Please go ahead.

Thank you, Daphne. Joining us today from Lyra Therapeutics is President and Chief Executive Officer, Maria Palasis; Chief Financial Officer, Don Elsey; and Senior Vice President of Commercial Strategy and Market Development, Corinne Noyes. Early today, Lyra released financial results for the second quarter ended June 30, 2020. If you've not received the news release or you would like to be added to the company's distribution list, please go to the investor relations section of Lyra's website, which can be found at www.lyratherapeutics.com. During the conference call, management will make forward-looking statements, including statements related to Lyra's 2020 financial results and guidance, 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 significant 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 differ from these statements include factors described in the section titled risk factors in the company's current report on Form 10-Q filed today, August 5, 2020. 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. With that, I will now turn the call over to Maria Palasis, CEO of Lyra Therapeutics. Maria?

Thank you, Laurence. Let me start by saying how delighted I am to welcome you to Lyra's second quarter 2020 financial results conference call, which is our very first as a public company. Although Lyra does not intend to host regular quarterly financial calls, we wanted to talk with you today in view of the near-term readout from our LANTERN Phase 2 study. This is arguably the most important milestone in our company's history. Moving forward, we will likely host calls for our fourth quarter financial results in order to provide you with some guidance for the year ahead. We will host additional calls when we have data or other important information to share with you, for example, when our Phase 2 LANTERN trial reads out later this year. With that said, I will go over some recent highlights before reviewing Lyra’s pipeline. The highlight of our second quarter was undoubtedly our successful initial public offering on NASDAQ, which raised 64 million in gross proceeds and came just over three months after we completed our 30 million Series C financing. Lyra's common stock began trading on the NASDAQ global market on May 1, 2020, under the ticker symbol LYRA. Two other pieces of news that I would like to highlight are our appointment of Dr. Robert Richards as Senior Vice President of Research and Development and Pamela Nelson as Senior Vice President of Regulatory Affairs. Bob is an industry veteran; he possesses extensive leadership, product development, and commercialization experience in drug delivery, and complex combination products. He will oversee the development of Lyra's two product candidates for the treatment of chronic rhinosinusitis, including the transfer of manufacturing to the contract manufacturers and efforts on the expansion of our platform. We are also excited to welcome Pam, who brings 25 years of experience in the biotechnology industry, with regulatory expertise in drugs and drug device combination products across a range of therapeutic areas from early development through to commercialization. To spearhead our regulatory strategy for US clearance of our two product candidates, which will be critical in the upcoming months and years as we announce Phase 2 results for LYR-210 and work with the FDA to establish the protocol for our pivotal trial. Now, I would like to provide an update on our clinical and development program starting with the progress we are making with our LANTERN Phase 2 trial. Our Phase 2 study of LYR-210 is intended to confirm the results we observed in our Phase 1 trial, select the dose for us to take forward into a Phase 3 study, and inform the design of that registration trial. As we announced earlier this year, we completed enrollment of the LANTERN trial at 67 patients, compared to an initial target of 99 invaluable patients. This decision was made due to the adverse impact of COVID-19 on clinical trial site operations. During the past month, the 67 patients have continued to receive therapy in this trial and record their results. More than 60 of these patients have already completed the 24 weeks of treatment, and we project that the last patients will complete their stage by the end of August. Following the treatment phase, LANTERN participants will continue to be followed for an additional four weeks following the removal of their implants to collect safety data. At the conclusion of this four-week period, we expect that our Phase 2 data will be verified and the database will be locked through this time point before reporting our top line data. All told, we believe this puts us on track to announce top line efficacy and safety at the end of this year. With respect to what we have been able to observe thus far, although we remain blinded to the trial's randomization, I believe there are a number of signs that bode well for the outcome of our Phase 2 LANTERN studies. Firstly, an independent data monitoring committee has been reviewing the ongoing safety data generated from the trial, and the study has been allowed to proceed without modification. I believe this is important given the nature of the three randomized groups within the trial. Those of you who are familiar with our trial design will recall that the LANTERN trial has three arms. The first is a formulation of LYR-210 using a 2.5 milligram dose of mometasone furoate. This is a dosage that we used in our Phase 1 study which showed a very good level of safety and clinically meaningful results. The second arm is the formulation of LYR-210 using an exploratory 7.5 milligram dose of mometasone furoate, three times the dosage we used in our Phase 1 study. The third arm is a sham procedure control. The 7.5 milligram dose was included to see whether even greater efficacy could be obtained without worsening the safety profile of LYR-210. The non-intervention to date by the independent data monitoring committee likely points to a safety profile of LYR-210 at both formulation concentrations that is acceptable, including at the previously untested higher dose. As such, we believe that no news in this case represents good news. We can also see that we remain blinded that the standard deviation from the LANTERN trial is coming in tighter than what we have used to design the Phase 2 study. This bodes well for the statistical powering of the trials, even though we capped enrollment at 67 patients, because we planned for a standard deviation similar to our Phase 1 trial when we designed the larger Phase 2 study. Next, I'd like to return to the number of patients in our study. Although we capped enrollment at 67 patients compared to the initial plan for 99 invaluable ones, I would note that some two-thirds of participants will be receiving some form of drug treatment based on the one to one to one randomization into low dose, high dose, and sham. This means that when the data reads out, we will have efficacy data from around 40 to 44 patients split between the low and high doses. We believe that this number is similar to Phase 2 trial sizes that have been conducted previously in the CRS space. Lastly, I would like to talk about our data collection. The primary and key efficacy assessments in LANTERN are based on patient-reported symptom scores, which are collected via electronic diaries. This method was always part of our trial design and not a reaction to the COVID-19 pandemic. As such, we do not believe that the pandemic is likely to have impacted the ability of our patients to continue reporting their daily symptom scores. So what did it plan to provide, when we say top-line data will be available by year-end? It is our current intention that our top-line data announcement for LANTERN will include firstly, the trial's primary outcome measures to define their change from baseline and cardinal symptom scores at week four. Secondly, the change from baseline and cardinal symptom scores at later weeks up to possibly including week 24 to demonstrate the potential longevity of LYR-210 as a long-term treatment. And thirdly, summary safety and serious adverse events. It will be our aim to preserve as much of the secondary endpoint data as possible for presentation at future scientific meetings, which is why I'm laying down in advance what investors and analysts should expect to see once we have the data in hand. In summary, then, we are confident not only in LYR-210 as a potential long-term treatment for chronic rhinosinusitis patients, both with and without polyps, but in the ability of our ongoing LANTERN trial to demonstrate LYR-210's near-term and long-term efficacy and safety profiles. Once we have announced the Phase 2 results from LANTERN at the end of the year, we will use the data to inform the design of a pivotal study for LYR-210 after all appropriate consultation and communication with the FDA. Now let me turn to the rest of our development pipeline. LYR-220 is our second lead product candidate. The drug utilizes the same active pharmaceutical ingredient as LYR-210 embedded in a larger matrix designed for CRS patients, whose nasal anatomy is enlarged due to sinus surgery. The development of LYR-220 is designed to provide ENTs with a classified solution for the vast majority of patients they encounter, regardless of surgical or palate status. The next step in the development of LYR-220 is the initiation of a proof of concept clinical trial, the early planning for which is currently underway. Both LYR-210 and LYR-220 make use of Lyra's innovative and proprietary drug delivery platform, XTreo, which is designed to deliver drugs directly, continuously, and consistently to affected tissue over a sustained period of time via a single administration. XTreo will form the backbone of our development pipeline expansion. XTreo is comprised of three interrelated technology components: a biocompatible mesh scaffold, which is designed to maximize surface area for drug release while maintaining underlying tissue function; an engineered last matrix which has advanced shape memory physical properties, resulting in an implant that dynamically adapts to the anatomy; and lastly, a versatile polymer-drug complex which can be customized for the treatment of various chronic diseases treatable by ENTs. As such, Lyra's XTreo platform has potential applications in many additional indications beyond CRS for long-term delivery with improved local bioavailability and enhanced efficacy and/or safety. We have identified a number of ENT indications for which we believe XTreo would act as a better delivery mechanism for currently approved therapeutics. With that update on our LANTERN Phase 2 study and our development pipeline, I will now hand the call over to Don to summarize Lyra's financial results for the second quarter. Don?

Thank you, Maria. Starting with our cash and cash equivalents balance, we ended the second quarter with $86.6 million. This balance includes funds raised during our May IPO, the gross proceeds of which were $64.4 million. In the six months year to date, our operating expenses were $8.8 million. The earnings release we issued today outlines our financial results in full, so I will not go through the details on this call. In terms of financial guidance, we have stated that we believe our current cash position is sufficient to fund the company through a planned Phase 3 study of LYR-210 in chronic rhinosinusitis. Additionally, we are projecting our year-end 2020 cash balance to be in the range of $67 million to $70 million. Finally, Lyra's shares outstanding as of July 31, 2020, were approximately 12.9 million shares. With that, I will turn the call back to Maria.

Thank you, Don. In summary, I believe Lyra has a very exciting future. In the short term, I believe that Lyra is on track to report Phase 2 results from LYR-210 before the end of the year that demonstrate the drug's efficacy, safety, and suitability as a long-term treatment for CRS patients. In the meantime, we will be working to further the development of LYR-220 and leverage our R&D investment and XTreo to expand our development pipeline into new indications. With that, I will now open up the call for questions. Operator?

First question comes from the line of Ashwani Verma with Bank of America.

Thanks for taking our question, congrats on the progress here. I have a few questions. So just wanted to understand, the data monitoring committee you mentioned reviewing the safety data; they haven't asked for any modification. What constitutes an adverse event profile that would require a modification? Is there like a threshold for that? Do you have to get certain serious adverse events? I'm just trying to understand where the kind of line is drawn here? And then I have a couple of other follow-ups.

Hi, Ash, thank you for your question. The monitoring committee is made up of ENTs with many years of experience, and we depend on their expertise to look at the study. According to their practice, if they see, for instance, adverse events that are at a very high rate or adverse events that are not expected, then they will pass a judgment at that point and ask for a modification, but we do not have a threshold established. We really depend on experts to assess the safety and propose changes as they see fit.

And the other questions that I had were just around the number of patients. It looks like you’ll have 44ish patients that will have the efficacy data, and the rest with placebo. As we look at some of these secondary data points, and I know that will come at a later point in time, I'm sure a lot of folks have been interested in just comparing the efficacy in polyp versus non-polyp. So my question is, what's the split of polyp versus non-polyp in the high and low doses? And then will we be able to compare it to some of the other treatment options available, like optimales and much compound?

Ash, thanks for your question. With respect to polyp to non-polyp, we're at about 50-50 in our trial, and we ensure that those patients fall into each group in a consistent way. And that consistent with our Phase 1, we're also at about 50-50 in terms of polyp and non-polyp patients. With respect to comparing data, we are the first product that we are aware of that provides a six-month therapy for surgically naive patients that have polyps and don't have polyps. So comparing to other trials will not be straightforward because other trials have really focused on non-polyp patients. Now, having said that, we do look at effect sizes. As a reminder, what we saw in our Phase 1 was that we saw an effect that was statistically significant starting at one week, and certainly with polyp patients, we saw a significant effect at four weeks in our symptom scores. At 20 weeks, we saw a 50% effect, which was a very substantial effect. While it's difficult to compare across trials because the endpoints are different in terms of how we collect our symptom scores, we are very encouraged by the large effects that we see. Just a reminder, we are doing in Phase 2 the four cardinal symptoms, and polyp studies generally will use nasal obstruction for which is one of the four cardinal symptoms.

That’s great. And it seems that there is additional data coming from Gossamer's GB001; they are using a different endpoint as well. They're using SNOT-22 as the primary endpoint, even though they are looking at patients with and without polyps. So what's your view of that program and how that might be comparatively similar to Lyra's product offerings?

I can start that question, and maybe Corinne can chime in. I can say that we are familiar with that trial; we understand that they are using the SNOT-22 score. The SNOT-22 score is also being used as a secondary endpoint in our trial. Through our conversations with the FDA, it is very clear that the FDA prefers cardinal symptoms, and that's why that is our primary endpoint and also our key secondary endpoints over time. But we are collecting the SNOT-22 score, and via that SNOT-22 score, we can certainly look at other trials. It is really important, though, to know that our population is likely to be different from these other studies, as for the most part, we are treating surgically naive patients, while often we see studies treating post-surgical patients. Corinne, do you have anything you'd like to add?

I do. In terms of how we view that product from a competitive perspective, we see Gossamer’s product as systemic agents, which will definitely have a role in the treatment of CRS. When we speak with physicians, their preference is to treat CRS, which is a disease of local inflammation, with first and foremost local treatments. We really believe that our product, LYR-210, will be the preferred local treatment of choice and will thus be used before a product like the antibodies or Gossamer, which are systemic treatments for what is ultimately local inflammation. So we view ourselves as earlier in the treatment paradigm, and when we speak with physicians, they confirm that preference.

Thank you very much. Don, I have a quick question for you. Regarding the cash trends you mentioned, can you provide any additional insights on the operating expense spend for the next couple of quarters?

Not really. I think that as we go through the balance of the year, Ash, you're going to see sort of steady as it goes. Probably the couple of the biggest influences will be in manufacturing tech transfer, as well as other preparations to put in place for an ultimate Phase 3 trial. And some of those are capital expenditures, and so the timing could be somewhat fluid on those. But you're not going to see anything dramatic on a quarter-to-quarter basis.

Alright, great. Thank you, everyone.

Your next question comes from the line of Chris Howerton with Jeffries.

Hey everyone. Thanks so much for taking the questions. I think I have a few here. The first would be, you were kind of describing, Maria, that you were observing a tighter standard deviation than you initially planned for. So hoping to get a little more color in terms of what the magnitude you're expecting there. Secondly, I'm just curious to know if you expect to see any disruption or potential risks due to the COVID-19 pandemic in terms of the end of study removal procedure and what kind of mitigation may or may not be required for that. And then the third question is, what's the gating factors or activities that are either ongoing or planned to get 220 into the clinic? Thanks.

Thank you, Chris. Regarding the standard deviation, we have not done a formal statistical analysis, so we're not able to share that. What I can say is that in our Phase 1 study, we didn't control the cardinal symptoms. That Phase 1 study was a safety and tolerability study, and in the Phase 2 trial, we are ensuring that the patients come in with certain characteristics as far as their cardinal symptoms. Again, the trial is blinded, but we can see that the data appears tighter than we would expect in the Phase 2 trial. Regarding disruptions or risks, as I mentioned, we have about 60 of our patients that have already completed the 24-week follow-up. We have been fortunate that the trial is using these electronic databases. We do have follow-up visits at four weeks, at 12 weeks, and at 24 weeks. We have not seen a significant impact there. I will have to see once we have the trials completed, but at this point, our sites have remained operational, and we don't expect to really have much of an impact on the data as a result of COVID. The majority of our sites are in Europe, so we do expect that the remaining patients have their visits scheduled in August and will be able to complete those visits. With respect to LYR-220, for that product, we really need to complete the product development and then plan for the design of the clinical study, and that, as I mentioned, is in process. We are on track to start that clinical program at the end of next year.

Your next question comes from the line of Tim Lugo with William Blair.

Hey, this is Lochlin on for Tim. Thanks for taking my questions. I was just wondering related to the data monitoring committee and sort of data collection in general, as you mentioned, the efficacy endpoints are done electronically. Has there been any disruption to your lab testing, specifically in cortisol levels for the higher dose cohort? And do you know if the data monitoring committee had that data for all patients, or has anything got delayed due to COVID? And then the second question, as you outlined in the prepared remarks, obviously, there have been some changes in management over the past few months. Just where does the team stand at the moment, and are there any other positions that you're looking to fill or functionality that you’re looking to build out over the coming six to 12 months?

Great, thank you for your questions. With respect to the data monitoring committee, they do get to see all of the safety data that we have available. Certainly, if there were any tests that were out of range or that they were concerned about, I suspect they would have made some recommendations. So as far as they do have the cortisol data; they do look at that. Regarding lab testing, we have been fortunate that the follow-up visits and the testing have been taking place. I do think that there may be some instances where appointments may have been rescheduled, but it's our understanding that they have happened, and that really is more of the minority. We have been able to collect that data. With respect to changes in management, as you would expect, when we look at what Lyra needs to do in the upcoming months and years, we constantly look at our management team and the experience within the company, and ensure that we have the right skill sets in place. We're very fortunate that we have Bob Richard, who has joined. He has a polymer science background and experience with polymer drug combination products and transferring processes. We also have Pamela Nelson, who brings extensive regulatory experience. The next phase for our company is focused on the FDA and working with them on our pivotal trial design. Pam is going to be instrumental in those conversations. As we move forward, we will continue to look at our management structure and see what we need to add. For the time being, we have the right team in place, and I’m really proud of the people we've been able to add.

Your next question comes from the line of Robert Hazlett with BTIG.

Congratulations on the progress. If you could comment in general terms on the CRS patient visits to ENTs, that were affected by COVID to some degree. Has that recovered? We expected to recover over time as things wax and wane and certainly by the time you finish your Phase 3. But has that recovered to any meaningful extent? If so, how much? Do you have any metrics along those lines?

We do monitor that, and I can start, and perhaps Corinne has something to add. It's our understanding that office visits have recovered for the most part. It's not clear if surgeries are happening at the same rate that they were happening. There may be a shift from surgical procedures to treat CRS to office-based procedures, where the risks to the patient and physician are lower. This is how we understand it. Corinne, do you have something you'd like to add?

When we speak with physicians, that's correct. We hear that depending on the physician, 50% to 75% of patient volume has come back, but that surgeries and procedures are still lagging. It depends on where we are in the country. Some centers are starting elective procedures again, while others haven't. I think the bulk of the recovery in terms of procedures and surgeries is still ahead of us.

Thank you. That's all I had. Congratulations on the progress. Look forward to more.

And I am showing no further questions at this time. I would now like to turn the conference back to Ms. Maria Palasis.

Thank you, Daphne. We continue to use technology to keep in touch with our shareholder base. In the coming days, we plan to attend virtually the William Blair and BTIG Healthcare Conferences. We welcome your requests for virtual meetings and calls at those events. Thank you all for participating in today's call. Have a great rest of your day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.