Lyra Therapeutics, Inc. Q4 FY2020 Earnings Call

Welcome to the Lyra Therapeutics Fourth Quarter and End Year 2020 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. As a reminder, this call is being recorded today March 9, 2021. I would now like to turn the conference call over to Laurence Watts, Managing Director at Gilmartin Group. Please, go ahead.

Thank you, Terry. Joining us on the call today from Lyra Therapeutics are President and Chief Executive Officer, Maria Palasis; Chief Financial Officer, Don Elsey; Chief Medical Officer, Rob Kern; and Senior Vice President of Commercial Strategy and Market Development, Corinne Noyes. Early today, Lyra released financial results for the fourth quarter ended December 31, 2020. If you have not received this news release, or you wish to be added to the company's distribution list to receive future releases, 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 financial results and guidance for 2021, and 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 be different from these statements include factors the company describes in the section titled risk factors and the company's annual report on form 10-K filed today, March 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. With that, I will now turn the call over to Maria Palasis, CEO of Lyra Therapeutics. Maria?

Thank you, Laurence. And welcome, everyone to Lyra's Therapeutics fourth quarter and full year 2020 financial results conference call. 2020 was an exciting and successful year at Lyra, culminating in the release of our LANTERN Phase 2 trial results in December, and the completion of enrollment in our 24-patient pharmacokinetic clinical study, both despite the ongoing global COVID-19 pandemic. We believe this bodes well for future enrollment in our pivotal Phase 3 programs. Before I turn to the LANTERN results, let me remind you of some recent key appointments that Lyra has made. Recently, we were joined by Dr. Robert Kern, who has been appointed as our Chief Medical Officer. Rob is a renowned otolaryngologist and a world-leading expert in chronic rhinosinusitis. He is a Chair of Otolaryngology at Northwestern University and the immediate past president of the American Rhinologic Society. As a practicing otolaryngologist, he knows firsthand the enormous need for new treatment options for patients with chronic rhinosinusitis, or CRS. And we are delighted he will be overseeing the next phase of clinical development for LYR-210 and LYR-220. In the fourth quarter, we also expanded our Board of Directors through the appointment of Dr. Nancy Snyderman. We are pleased to have Nancy join our team and look forward to leaning on her extensive ENT experience as a board-certified otolaryngologist and head and neck surgeon. As you know, Lyra’s first area of focus as a company is in the treatment of chronic rhinosinusitis, for which there are an estimated 8 million patients treated each year in the United States, with roughly half of them failing current medical therapy. The market for these failed patients is estimated to be 6 billion annually, just in the United States. The problem and opportunity are even greater when the ex-U.S. markets are considered. Lyra has designed LYR-210 and LYR-220 to be disease-modifying and best-in-class for CRS patients who are currently underserved by medical management. Having now demonstrated effectiveness in our Phase 2, for underlying XTreo platforms, Lyra intends to use LYR-210 and LYR-220 as the foundation on which we build a leading ear, nose, and throat company. Turning now to our LANTERN study results. Let me just say that we were very pleased with the data and the patient experience that resulted from this trial. Our LANTERN Phase 2 trial showed that CRS patients treated with 7,500 micrograms achieved a statistically significant improvement in their symptoms at several time points compared to the control, including 24 weeks, the intended treatment duration for our product candidate. As such, Lyra believes that the results of this randomized controlled blinded clinical trial support a clear path to regulatory submission for LYR-210 and also provide sufficient insight and data to enable us to move the program forward to a pivotal trial, subject to an end of Phase 2 meeting with the FDA. This meeting is planned to take place before the end of the first half of this year. Following agreement on the design of the single Phase 3 pivotal trial that we believe will be sufficient to complete our registration package under a 505(b)(2) new drug application, we anticipate initiating the pivotal study for LYR-210 at the end of 2021. As a reminder, the LANTERN trial was completed with 67 patients. This was reduced from the planned enrollment due to the COVID-19 pandemic. The 67 patients were split into three treatment arms or 7,500 micrograms, 2,500 micrograms of mometasone furoate, and control, and were evaluated for improvement in the four cardinal symptoms of chronic rhinosinusitis at four weeks, and up to 24 weeks in addition to other secondary endpoints. We were excited to see a statistically significant treatment effect at 24 weeks for the 7,500 microgram dose in both the four cardinal symptoms and SNOT-22 scores. This gives us confidence that LYR-210 could be an effective therapy for up to six months. Additionally, we saw improvement relative to control at earlier time points in both the four cardinal symptoms and the SNOT-22 symptom scores. Another key takeaway from the LANTERN trial was demonstrating the safety of the 7,500 microgram dose of mometasone furoate, three times the dose we used in our Phase 1 trial. At this dose, 70% of patients achieved the minimal clinically important difference at four weeks, as measured by the SNOT-22 score, and 100% by week 24. On the back of this data, we plan to move forward with a 7,500 microgram dose for our Phase 3 program. Based on the observed rapid and durable symptom relief over 24 weeks, we believe LYR-210, if approved, would deliver a major step forward in care for CRS patients who are facing surgery as their next treatment option. We intend to present a full data set from the LANTERN study at COSM, the Combined Otolaryngology Spring Meetings, which is being held from April 7th to April 11th. We believe the results of the trial support a clear pathway to pursue a larger pivotal Phase 3 trial for LYR-210 with a proposed 24-week primary endpoint based on the cardinal symptoms of CRS, the FDA preferred measure of efficacy. Importantly, the LANTERN results also support Lyra's proprietary XTreo platform, which is designed to deliver drugs directly, continuously, and consistently to diseased tissue over a sustained period of time via single administration. Because of this, the LANTERN study gives us confidence to advance LYR-220, our second program that will utilize the XTreo platform for chronic rhinosinusitis patients who have previously undergone surgery and require ongoing medical management. Approximately 40% of patients who see an ENT have had a prior nasal surgery or even multiple surgeries. LYR-220 utilizes a larger matrix than LYR-210 and is designed to adapt to the anatomy of these patients. Given the positive results from the LANTERN study, we now plan to initiate a Phase 2 study for LYR-220 using the 7,500 microgram dose in the second half of 2021. Furthermore, Lyra continues to see versatility in the XTreo platform, which we believe has potential applications in many additional indications beyond CRS, where long-term delivery to treat chronic diseases would improve local drug bioavailability and enhance efficacy and safety. The LANTERN study showed that XTreo can successfully deliver continuous therapy for up to six months, and we believe XTreo to be tunable with regard to the drug being delivered and the period of delivery, which provides us with multiple expansion opportunities either as additional internal development programs or as partnerships. Before I turn the call over to Dan to discuss the financials, let me allow Dr. Kern, our newly appointed Chief Medical Officer, to share his own perspective on the LANTERN study.

Thank you, Maria. I'm very pleased to join Lyra Therapeutics as CMO. An appointment I accepted after the company released data from its Phase 2 study of LYR-210. As you can see, I have quite clearly voted with my feet. As a practicing otolaryngologist with many years of experience working with companies to develop new products to treat CRS, I believe the LANTERN study has demonstrated that LYR-210 is the first nasal implant to achieve the benefit up to six months in CRS patients after only a single administration and in a simple, clinical, outpatient office setting. A prolonged treatment effect of LYR-210 is impressive. Currently, no therapy can deliver 750 micrograms of mometasone for extended symptom relief. Patients often forget to use daily medications, and we believe this product candidate provides the potential to eliminate the need for patient compliance for a full six months with a single office visit. There is no doubt that mometasone is an effective anti-inflammatory treatment for CRS; the limitations relate to compliance and drug delivery. What LYR-210 has the potential to do, unlike any currently available therapy, is to eliminate both these limitations by delivering mometasone continuously and directly to the affected tissue for a prolonged period, thus exerting maximum therapeutic effect and maximum symptom relief for patients. Together, LYR-210 and LYR-220 have the potential to offer ENT physicians a full range of CRS treatments, regardless of whether or not patients have had prior sinus surgery or whether or not they have had polyps. I believe such a comprehensive offering will be very appealing to ENT physicians worldwide. My experience is that CRS patients would much prefer to avoid surgery if at all possible. It can be painful and often not curative, as most patients continue to require medical management even after surgery. I believe the data and the experience generated from the LANTERN study position us quite well to design successful Phase 3 pivotal trials. Subject to eventual FDA approval, I believe LYR-210 has the opportunity to change the current treatment paradigm for CRS patients. With that, I will now hand the call over to Don, to summarize Lyra's financial results for the fourth quarter. Don?

Thank you, Rob. Starting with our cash and cash equivalents balance, we ended the fourth quarter and the year with $74.6 million, compared with $81.6 million as of September 30, 2020. Total operating expenses for the fourth quarter were $7.1 million, compared to $4.4 million for the same period in 2019. The net loss for the fourth quarter and the year were $7 million and $22.1 million, respectively. 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 believe that Lyra has sufficient cash to fund the company through planned operations into 2023. Finally, Lyra's shares outstanding as of December 31, 2020 were approximately 12.9 million shares. And with that, I'll turn the call back to Maria.

Thank you, Don. In the coming months, we have several milestones that will prove pivotal for the company. These include an end of Phase 2 meeting with the FDA for LYR-210 and the initiation of our Phase 2 study for LYR-220. Before that, however, we will have two additional data announcements to share with you, which will be the results from our 56-day U.S.-based pharmacokinetic study of LYR-220 in the second quarter, and the presentation of our full LANTERN dataset at COSM in April. In January, we announced the PK study, the first involving U.S. patients, had completed enrollment at 24 subjects and achievement in and of itself considering the ongoing COVID pandemic. The lead enroller in the PK study recently commented on LYR-210's ease of application and deployment during an analyst call. Some of his comments regarding his experience include that LYR-210 was satisfying, quick, and painless to administer, and the learning curve for administration was fast and would likely be so for other ENT. In summary, Lyra remains dedicated to providing solutions across the continuum of care for millions of sinus sufferers. Our product pipeline is well-aligned with the needs in CRS, and we're pleased with the clinical results to date. I think physicians share our enthusiasm for the impact our technology will have for their patients. I'm also incredibly proud of the extraordinary team we've built at Lyra. We have accomplished so much since we went public just under a year ago, and we continue to believe we have all the ingredients for success. That concludes our prepared remarks for today, and we'd like to now take some questions. As always, thanks for your continued interest and support. Terry, you can go ahead and open up the line for questions.

Your first question comes from Chris Howerton from Jefferies. Your line is now open.

Excellent. Thank you so much for taking the questions and congratulations on the progress.

Thank you, Chris.

Great. Yes, of course. I have a couple of questions. First, regarding the presentation at COSM, could you highlight what new information we can expect to receive at that time in relation to the topline results from December? That's one question. Another question is about the reimbursement strategy you've mentioned in the past, which has mainly focused on buy and build. However, I believe you've indicated that you're open to seeing how things evolve in the market. Do you have any updated thoughts on whether you still prefer a buy and build approach or if you're considering the specialty pharmacy route? Lastly, in our recent discussions with KOLs, one physician found the concept of halting disease progression compelling, particularly in terms of starting earlier within the treatment paradigm. I would be interested in hearing Dr. Kern's thoughts on that and how 210 could potentially impact future treatments. Thanks.

Thank you, Chris. I can start with the question related to COSM and then I’ll turn it over to Corinne to provide her thoughts on reimbursement and then Dr. Kern on the comments by the doctor. We look forward to presenting our results at COSM, which will take place on April 11. We will be presenting data on each of the cardinal symptoms of Chronic Rhinosinusitis, including nasal obstruction, nasal discharge, facial pain, and smell. We will have results pertaining to each of these symptoms individually as well as composite scores. We have already shown the composite of the four cardinal symptoms and the SNOT-22 score, and we will also present the composite of three cardinal symptoms. Additionally, we will share our objective results on MRI, which assessed inflammation. Lastly, we will present results for patients with polyps and those without, and this will all be new information. The second part of your question was on the reimbursement.

I’ll take the second question. Yes. Hi, Chris. This is Corinne Noyes. To answer your question about our reimbursement and distribution model, we are going to continue to evaluate the most appropriate strategy as we progress through development. But our plan right now is to have a hybrid approach that incorporates both a buy and bill model, as well as specialty pharmacy. There are some physicians who will enjoy the benefits of a buy and bill model, but there are others who will prefer the ease of a specialty pharmacy and some payers that will require going through a specialty pharmacy network. So we envision having a hybrid distribution and reimbursement model that incorporates both buy and bill and specialty pharmacy.

Okay. Very clear. Thank you.

Hi, this is Rob. I’ll interject now. You asked about whether, if I understood your question correctly, whether this device might more or less arrest disease progression? Is that what you're asking?

Yes. I mean, the nature of the question is essentially, yes, that you could arrest disease progression and alter what the sequelae are from a treatment perspective? Like, do they even have to have surgery, for example?

Yes, I believe that will likely be the case. Assuming we obtain FDA approval and everything else falls into place, there is a role for the product. Limited epidemiological studies indicate that patients typically experience significant symptoms for about six months before being diagnosed with chronic sinusitis. This means there could be a period of six months to a year where patients are suffering without a full diagnosis. If awareness of our product increases, and we successfully enter the market with FDA approval, early intervention may help prevent the disease from progressing, as both physicians and patients will recognize that such products are available. So, in short, yes. I hope this detailed response adds some clarity.

Yes. If you don't mind, I have a quick follow-up. Do you think it would be valuable to gather data for long-term follow-up, specifically regarding whether patients who received 210 are moving towards surgical procedures? Is this something you believe could be collected in a clinical trial?

You're speaking as if it's okay to continue.

Yes, maybe, Chris, I can mention that in our Phase 2 study, we followed our patients that had a LANTERN test for six months, and then after the six months, the implants were removed. We continue to follow those patients, and this is ongoing for an additional six months. So it's an excellent question, and we are tracking those patients' symptoms. So we will have a sense for when their symptoms returned, when the Phase 2 study is fully completed. And maybe one thing that I think Dr. Kern can probably speak to is that, with oral steroids, I believe when patients do come off those oral steroids, their symptoms do tend to recur pretty quickly.

Yes. That's correct. I mean, again, I think we're speculating here, but I would imagine that if we bring a product to the market that patients do well on it, we'll get it every six months. That's certainly the way the newer product is used. And this would just offer a longer duration and hopefully prevent the progression to surgical level of morbidity.

And from a measurement standpoint, Chris, we're going to be in the Phase 3 assessing the percent of patients that no longer require surgery. So we'll have an outcome measure, which maybe is partly what you're asking for as well. And so, we will have an assessment of whether this patient still requires surgery if they require surgery at the time of entry. So we know that will be important for payers.

Understood? Okay. All right. Great. Thank you very much.

Thank you, Chris.

Your next question comes to the line of Robert Hazlett from BTIG. Your line is now open.

Hi, thanks. My name is – its Bert from BTIG. Hope you're well? Just a quick question or two on the upcoming pivotal study; first of all, with the arrival of Dr. Kern, are there any elements of the study that might be either tweaked or considered or added in terms of either the primary endpoints in terms of timing or the three cardinal symptom score or any secondary that you might want to include with the study? I've got one or two more after that?

Thank you for the question, Bert. We had a very successful Phase 2 study, and we plan to keep our inclusion and exclusion criteria similar to what we used in Phase 2. Regarding the endpoint, we will be using the cardinal symptoms, but we have not yet decided whether to use the four or three cardinal symptoms. We understand that the FDA would prefer two or more cardinal symptoms, so we will let the data guide our decision. After our end of Phase 2 meeting, we will announce which composite we will use. The primary endpoint will be the cardinal symptoms, and we plan to assess this at 24 weeks, as our product has a six-month duration, making that the most appropriate timeframe. With the recent approval of antibodies, there is now a precedent that we did not have when we started the trial. Additionally, we expect the trial size to be about 300 to 350 patients.

Terrific. Thank you for that color. And just with regard to potential enrollments on it, you just mentioned the US Phase 3 case study enrolled well rapidly, and great to hear that. Any sense of what that might portend with regard to enrollment timing for the pivotal study?

It really is too early for us to provide a perspective on how long it will take to enroll the study. We certainly will do that after we have our end of Phase 2 meetings. But at this point, it really is too early to say.

Okay. Thanks. And then just a question on LYR-220; could you give a little bit more detail on the Phase 2 that's upcoming? Will this mimic LANTERN in terms of size, scope and opportunities or will it have a slightly larger or smaller different focus, just any additional color with regard to the design, size, and maybe timing of that study?

Sure. So the study for LYR-220, we anticipate it being approximately 40 patients. This is a study that will also include the 7,500 microgram dose. Prior to the end of the LANTERN study, we were uncertain which dose, but we've now clearly made the decision to move forward with that dose. Another interesting aspect is that we have actually two designs for that 220 matrix that we are considering. So that will be different from 210. So 210 has the two doses, one design in this situation. We actually have two candidates designed, and both of which deliver 7,500 micrograms and both of them from our XTreo platform. We see it as very derisk. So we're going right into the Phase 2, and we're on target to start this study in the second half of 2021.

Thank you for the additional information. I have one more question. Considering the XTreo platform as a whole, I know you're currently focused on the 210 and 220 developments, but should we anticipate any new opportunities with XTreo in the near to mid-term?

We do agree that the XTreo platform definitely lends itself to the treatment of many other areas. We can make the platform very small to fit into tight spaces within the ear or other places in the sinus. We are, as you said, very focused right now on LYR-210 and LYR-220 and getting those trials started. However, the work that we do in other areas at this point is really around the market research and meeting with physicians. So, we're still a ways away from clinical work in those programs.

Okay, terrific. Thank you so much. I appreciate it. Congratulations on all the progress.

Thank you, Bert.

Your next question comes from the line of Ash Verma from Bank of America. Your line is now open.

Hi there. This is Ash. Thanks for taking our questions. Congratulations on the progress. I have a couple of questions. The first is about the pharmacokinetics study. Can you remind us of the trial design and what you consider a successful outcome? My second question relates to your financial guidance. Last year, you mentioned specific guidance for the financial year 2020 around $60 million to $70 million, but you didn't spend that much. I'm curious why you opted not to provide a similar cash flow forecast for this year. Lastly, is the FDA meeting scheduled, or do you still need to arrange it? What topics do you plan to discuss in that meeting?

Thank you, Ash. I will start with the PK study design. We began the PK study in the fall during the pandemic, aiming to enroll 24 patients. We enrolled 12 patients at the 2,500 microgram dose and 12 at the 7,500 microgram dose. We successfully enrolled all patients within the fall, which was exciting for us. The study design involved taking blood samples to measure the level of mometasone furoate in the blood, which is necessary for our 505(b)(2) product and required for the NDA. This study has provided us valuable experience in U.S. sites that will be beneficial for the Phase 3 trial. We plan to announce the results from this study in the second quarter of 2021, and the study is still ongoing.

Yes.

Let me address your third question, and then Don can respond to your second question. Regarding the FDA meeting, I can inform you that we have been in communication with them. We are scheduled to have that meeting before the end of the second quarter, and those plans are confirmed with the FDA. Our objective for that meeting is to discuss the results of the LANTERN study and to outline our plans for Phase 3 while seeking the FDA’s feedback. We have had extensive discussions with the FDA previously, and we will continue those conversations at the end of Phase 2. Don?

Great. So, Ash this is Don. Glad you could join us today. If I understood your question correctly, you were asking why we weren't giving guidance for 2021 specifically, is that correct?

Yeah. That's right.

Okay. Yeah. When we took a look at giving guidance, Ash, it really was we're starting Phase 2 for 220, a Phase 3 for 210. We're doing tech transfer. We really felt it was probably a little less meaningful externally as to whether it fell on this side of December 31, or it fell on the other side of December 31. So we thought it was more meaningful to give a total cash guidance and saying that our resources would take us into 2023 on all of those programs that span a year-end yardstick if you will. It was that simple.

Okay, got it. Great. Thank you so much.

Thank you, Ash.

Our last question comes from Tim Lugo from William Blair. Your line is now open.

Thanks for taking the question. And it sounds like this will be covered in the upcoming data release. But maybe broadly, can you just discuss around the efficacy of the cardinal symptoms as individual symptoms? Were there any of the deviations from the others, or were the results consistent across the cardinal symptoms in LANTERN? And then also Dr. Kern, I appreciate that you know much more about the ENT than any of the financial analysts on the call. But I just want to hear your thoughts around really how a six-month treatment will change this area of the field and what really brought you to join Lyra's team?

You want me to go ahead? Yes. Why don't I go first with the cardinal symptoms, and then Rob, you can take the next one. So, we have shared the four cardinal symptoms and that composite. Because we see such a dramatic effect in the four cardinal symptoms, we see over the high dose of a change of about what is it 2.8 points at four weeks, and nearly five points at 20 weeks, and it's comprised of those four symptoms. So, what you would expect is that each of those symptoms is having a significant effect here. So we will be showing each of those when we do our full data release. I can't share that with you now. But certainly since the disease is defined by the cardinal symptoms, as you would expect, we are seeing an improvement in those. And as we had also mentioned earlier, our patients are both polyp and non-polyp patients. Non-polyp patients sometimes have less of an effect on smell. And so we will be sharing those results also with you, the effect on smell in addition to their nasal congestion, nasal discharge and facial pain and pressure.

Well, I mean, I think that this really is a product that has the potential to change the way I practice on an everyday basis. I – maybe boring that to take care of people with runny noses and sinus problems, but that's my lot in life. And it's been that way for 30 years. I've been involved with many companies as we talked about. But with the biologics, usually expensive things too, I was the National PI of the RESOLVE trial that got brought SINUVA to market. But this is a product that has much longer duration of action. Six months really is a game changer. It's not every two months; it's six months. So getting involved here plus I knew the team here for a while now, and they were very pleasant to work with. I thought this was an opportunity to move out of their clinical space and the laboratory space. I work with 30 basic scientists. We have been Northwestern, more NIH research money than the entire country combined for sinusitis. This was an opportunity to take that practical laboratory experience and bring it to patient care in a product that I thought really could make a difference. So, that's kind of why I'm here.

Well, Dr. Kern, as a CRS sufferer, I appreciate your dedication to those of us with runny noses and facial pain, and all of that that comes along with care. Thank you.

Thank you.

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

Thank you, Terry. In May, we plan to attend virtually the Bank of America Healthcare conference, and we welcome requests for meetings in the interim. With that, I would like to thank you all for participating in today's call. Have a great rest of your day.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation, and have a wonderful day. You may all disconnect.