Lyra Therapeutics, Inc.

At this time, all participants are in a listen-only mode. After the speaker's prepared remarks, there will be a question-and-answer session, and if you have a question at that time, please press the star, then the number one key on your touch-tone telephone. Now, I'll turn the call over to Ms. Stephanie Marks with Argo Partners.

Thank you, Operator, and welcome, everyone, to today's call. With me today are Dr. Maria Palacios, Lira's President and Chief Executive Officer, Don Elsie, Chief Financial Officer, Dr. Robert Kern, Chief Medical Officer, and Corinne Noyes, SVP of Commercial Strategy and Market Development. This afternoon, Lira issued a press release announcing its second quarter 2021 financial results and business updates. A copy of the announcement can be found in the investor relations tab of the company's website, liratherapeutics.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 significant risks and uncertainties. LIRA'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 in the company's current report on Form 10-Q filed today, August 9, 2021. LIRA 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. I hope everyone is doing well. Second quarter has been an exciting one for LERA. We released the full data set from our positive lantern phase two study. We had a very successful end of phase two meeting with the FDA for our lead program. We entered into a licensing agreement in Greater China and other Asian markets with LamBio. And we reported positive top line results from the PK study, which support a 505b2 new drug application for LYR210. Our fundamentals are strong and we are in a position to successfully execute against our upcoming milestones. The foundation of our company is our proprietary XTRIO technology platform which is grounded in drug formulation chemistry and polymer science. Our product candidates are pharmacologic interventions which target highly potent therapeutics directly to the site of disease for months to manage chronic illnesses. Our ability to deliver the right drug to the right place for the right amount of time translates into a number of potential benefits for patients, including increased efficacy, improved compliance, and avoidance of systemic side effects. Deep drug formulation expertise has been a core capability of LERA's, developed over many years. This expertise provides us with a distinct advantage over others in the field. Lyra is now at a major inflection point. We have strong validation of our technology in our first two indication, in our first indication, chronic rhinosinusitis, or CRS. The randomized controlled lantern phase two study clearly demonstrated with high statistical significance that LYR210 works as designed, providing six months of symptom relief for patients suffering with CRS from just a single treatment. We are deep in preparations to advance clinical programs for both of our de-risked pipeline candidates, LYR210 into Phase III and LYR220 into Phase II, both around the end of this year. Lyra is now in a strong position to bring these new therapies to the CRS patients who need them. Chronic rhinosinusitis has been described as an unrecognized epidemic, In the U.S., about 14 million people have CRS. Eight million of those patients are treated each year, but at least half of them fail current medical treatment. Of those four million patients who fail medical management each year, only about 400,000 go on to have invasive surgery, and the rest remain undertreated. This is an enormously underserved market and we know patients do not want to sign up for surgery. Similar dynamics apply globally with millions of CRS patients underserved in Asia and Europe. We believe our current candidates for the treatment of CRS will completely transform the current treatment landscape by uniquely addressing the unmet need in the broad CRS market. LYR 210 and 220 are designed to provide a therapeutic option for the full spectrum of CRS patients treated by ENTs, including both those seeking to avoid surgery and those returning after surgery. The ENT physician community is particularly eager to have a safe and effective treatment for the millions of CRS patients who are undertreated. Liris product candidates are the only ones designed to address this vastly under-penetrated patient population. As you can see, we are positioning ourselves to be a dominant player for this tremendous opportunity. There have been no products in this space that have had this type of broad potential. We remain confident that the purposeful design of our pharmacologic interventions, the strong data that we've generated to date in the clinic, and the relationships we are building with the ENT community give us a chance to truly create best-in-class products that will benefit millions of CRS patients. Dr. Robert Kern, our Chief Medical Officer and Chair of Northwestern's ENT Department, will share his insight into the current treatment landscape and unmet need in CRS and review our recent regulatory developments. Rob?

Thank you, Maria. I treat CRS patients every day, and I can attest to the fact that we have very few medical options and no FDA-approved therapies for the vast majority of patients suffering with chronic rhinosinusitis. Consequently, LYR210 truly has the potential to change the CRS treatment paradigm. LYR210 is designed to fit into the sinanasal anatomy of an unoperated patient. In a matter of minutes, with a single, administration in a simple, non-invasive office procedure, ENT surgeons can provide patients with relief for up to six months. LOR210 delivers highly potent anti-inflammatory drug, mometasone furate, continuously and directly to the affected tissue for a prolonged period of time, thus exerting the maximum therapeutic effect and maximum symptom relief for patients. Our products are designed to deliver the drug to the epicenter of sinusitis directly to the affected area, eliminating drug washout and also eliminating the need for patient compliance, thus addressing the three major limitations of current topical treatments. Furthermore, our products are designed to avoid systemic side effects, which are a potential issue with the costly biologics and certainly a major issue with oral corticosteroids. I believe LYR210 will become the standard of care for the 60% of CRS patients, 2.4 million patients, who have failed medical management and have not yet had sinus surgery. For the remaining 1.6 million who have had a prior surgery and seek to avoid a second surgery, LYR210, I'm sorry, LYR, Elvira has designed LYR220. Keep in mind that surgery is not curative in the majority of cases. and usually requires ongoing medical management to manage residual and recurrent CRS symptoms. LYR220 is an enlarged mellitus infuriate diluting matrix, sized to fit into the operated sinus cavity, and again, designed to provide up to six months of symptom relief for patients with recurrent disease. LYR210 and 220 have been created to help patients avoid surgery, whether it's their first, second, or third, And I know firsthand that this seems obvious, but most patients would prefer a simple office treatment rather than surgery. It is important to note that no other products in this space target the breadth of CRS patients that we do. The products that are available, currently available, only address about 10% of CRS patients. And these are ones that have polyps, whereas LYR2, 10, and 20 have been developed to treat 90% of the CRS patient population, providing an option for the vast majority of patients, including those without polyps. As a result, we believe these products have the potential to represent the most important advance in the medical care for CRS patients since the introduction of intranasal corticosteroids over 30 years ago. I truly believe that 210 and 220 have the potential to fill the void in the CRS treatment landscape with a novel and differentiated approach to this burdensome disease. As we reported in June, following our positive end of Phase II meeting with the FDA, the company now has a clear path forward on our pivotal program for LYR210. Our Phase II study was highly successful, and we view the upcoming Phase III as the, I'm sorry, we view that our upcoming Phase III has been significantly de-risked as a result, so that the Phase III program will largely mirror that trial. Phase 3 program will consist of two multicenter randomized patient-blinded controlled trials evaluating 210 at 750 microgram dose with approximately 180 CRS patients per trial. These patients will have failed medical treatments and continue to be symptomatic. The single primary endpoint of the pivotal program will be a composite score of the three cardinal symptoms of CRS at 24 weeks, and these are nasal blockage, nasal discharge, and facial pain. As a reminder, in the Phase II lantern study, LYR210 at 750 microgram dose showed highly statistically significant improvement over control at this endpoint with a p-value of 0.003 in week 24. We also recently reported positive top-line results in the pharmacokinetics study of LYR210. There are two important takeaways from this PK trial. The first is safety data provide a bridge to support a 505B2 approval pathway. The second point is that this was our first U.S. study of LYR210 and was fully enrolled across four sites in just 11 weeks during the fall of 2020 in the midst of high rates of COVID infection. We believe that Lyra is well positioned to address this large underserved market with unique and disruptive CRS products that have the potential to alter the current treatment landscape. Don will next discuss the financials.

Don? Thank you, Rob. The earnings release we issued today outlines our financial results in full, so I'll only provide a summary here. Starting with our cash and cash equivalents, we ended the second quarter with $69 million, compared with $74.6 million as of December 31, 2020. We believe that Lira has sufficient cash to fund the company through planned operations into 2023. Total operating expenses for second quarter were $11.1 million compared to $4.5 million for the same period in 2020. This increase was driven by our tech transfer program and by clinical operations as we wrapped up the Lira 210 Phase II trial and prepared for our FDA meeting. Net loss for the second quarter was 11.1 million. Lyra's shares outstanding as of June 30th, 2021, were approximately 13 million shares. And with that, I'll turn the call back to Maria.

Thank you, Don. As you heard from Don, we are sufficiently funded to drive all our clinical programs forward through next year. We are at an exciting inflection point in Lyra's evolution. We have strong validation of our technology and our first indication and have several important catalysts on the horizon. Preparations are already underway for advancing our two clinical programs. We're manufacturing the clinical product. We have already selected our CROs. I'm also pleased to announce that we recently received approval in Australia to begin our phase two clinical trial for LYR220, which will then expand into the US. We remain on track to initiate two clinical studies around the end of this year, the first phase three trial for LYR210 and the phase two trial for LYR220. With both of these programs significantly de-risked, our stellar team and our deep clinical and regulatory expertise, I'm highly confident in our ability to execute. We expect we'll begin seeing data from from the 220 trial towards the end of 2022 and readout from the 210 trials in 2023. In addition, we are making meaningful progress with the LiamBio team and are confident in our ability to bring LYR210 to Asia through our partnership. We have additional significant events in the near term. On Tuesday, August 31st, We will be hosting an event with KOLs for a deep dive into the current CRS treatment landscape and how LYR 210 and 220 could impact management of their patients. The event will be moderated by Rob and include two leading ENT physicians, Dr. Amber Luong, Professor and Vice Chair of Research in Otolaryngology Head and Neck Surgery at University of Texas McGovern Medical School, and Dr. Brent Senior, Professor and Vice Chair of Otolaryngology at University of North Carolina School of Medicine. Additional details will follow soon and we look forward to your participation. We are very proud of the commitment we have to conducting high quality science at Lira and are excited to have our work acknowledged by the American Rhinologic Society and in leading journals. We've had two abstracts accepted for podium presentation at the annual meeting of the American Rhinologic Society in October. There we will present long-term follow-up from the Lantern study and the full data set from the PK study of LYR210, which was selected by the Academy as a top clinical abstract. We recently received further validation of our work with the acceptance of two publications in leading scientific journals. The full Lantern data has been accepted for publication in the International Forum of Allergy and Rhinology, and our preclinical research in LYR 210 has been accepted for publication in the American Journal of Rhinology and Allergy. We expect they will both be available online shortly. We've come a long way, and I'm very proud of what we've accomplished. We have demonstrated the safety and efficacy of Lyra's lead product in three clinical studies. It's important to understand that this data not only provide validation for our products for CRS, but also for our Xtrio technology platform, which has broad potential across a wide range of chronic diseases. We can now begin to take concrete steps to leverage our technology to expand our pipeline for the future. And now we'd be happy to take your questions.

Thank you, ma'am. Ladies and gentlemen, if you have a question at this time, please press the star, then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question is from Bert Haslett from BTIG. Your line is now open.

Yes, thank you for taking the questions, a couple of them for me. First of all, just with regard to LEER 220, could you provide a little bit more color on the kind of study size, endpoints, things like that? Then secondly, I'd like to ask about the pace of R&D spend. And then I'll follow up with another one after that.

Great. Hi, Bert. I hope you're doing well. So 220 is the larger matrix that we've developed for patients who have had surgery. So it's been designed to be able to stay opposed to that larger anatomy. It'll have the same dose of drugs, 7,500 micrograms. And the release kinetics are aligned with LYR210. We estimate approximately 60 patients in that study. We're gonna be evaluating the safety. We're gonna be doing pharmacokinetics and characterizing the pharmacokinetics. We'll also be assessing the CRS symptoms via not 22 score, and also the three cardinal symptoms. And as I had mentioned in the past, there's three arms to that study. We'll have a control group, and then we have two designs that we'll be evaluating, again, both with the same dose of drug.

Terrific. Kind of the pace of R&D spend. And then my other question is, there's been some M&A in the sector recently. I'd love your thoughts on what that means for LIRA in the near term and maybe the longer term with regard to commercial infrastructure and or other strategic implications.

All right. Don? Do you want to address the question on the pace of R&D spend?

Sure. Hi, Burt. So basically, as we sit here today, we look out through the balance of the year. The R&D spend, given that it includes both tech transfer and clinical operations, Tech transfer is going to continue basically at levels that are somewhat similar today, maybe a little bit less as we've done a lot of work in the first half. And then the clinical operations will start to pick up toward the latter part of the year. Once they pick up, I anticipate that will probably continue in first quarter and then start to level off. during the course of the trial. Once we've got the sites up and running, we've got all of that, then it's, of course, as you know, it's patient recruitment and then following through the six months of treatment. So a little bit of a spike at year end into the first part of the year for clinical operations, then a leveling off. Tech ops should generally, as we approach the end of the year, start to level off. But it will continue somewhat apace with the supply of the clinical material. And then, of course, all sites are on getting ready for commercial material. Terrific. I appreciate the color.

And then I'd love your thoughts on what it might mean for Lira with regard to some of the M&A that has gone on in the sector.

I'll take that, Bert, and Corinne, if you want, you can add some color with respect to the commercial opportunity. So there was an announcement that Medtronic is acquiring Intersect ENT, which we think is really great news for us. We've been saying that the market is huge and vastly underpenetrated, and so apparently Medtronic also agrees and has taken steps to more sort of fully participate in the market. You know, we suspect that Medtronic will be aggressively developing the ENT market, benefit us when we get to that point. At the same time, I think it's important to note that we don't overlap. LYR 210 doesn't overlap with Intersex products, that when we get to that point, we'll be able to really address the lion's share of the market. Corinne, do you have anything you'd like to add?

No, I think that's exactly right. It validates what we're trying to do. We'll benefit from what they're doing in the marketplace, and our products are uniquely differentiated and targeting a different patient population that we think we can leverage all of their work and be positioned to really benefit. So it's great news.

Terrific. Thank you very much. I'll get back in the queue.

And our next question is from Kim Lugo from William Blair. Your line is open.

Thanks for taking the question, and congratulations on all the progress during the quarter. And also thank you for setting up the upcoming R&D day. Those are always very helpful. But maybe a question for Dr. Kern. Can you comment, given your experience in treating CRS patients, on how 210 will be differentiated from the biologics? I think there's still a big disconnect between how the street is looking at the respective opportunities between 210 and the biologics, which isn't unusual, but I'd love to hear from a treating physician.

Well, sure. I mean, the biologics are really, practically speaking, only going to be applied to patients who have failed surgery and have failed surgery and have extensive nasal polyps. So you're talking about a pretty small chunk of the market. I mean, we're looking at 4 million patients. They're looking at probably, by their own admission, about 100,000. So that's the first step. The second thing is that, you know, biologics, they are very powerful, but they're a systemic drug with, you know, systemic side effects. There's going to be huge approval hurdles for those products from insurance companies, and they're $38,000, $35,000 a year basically for the rest of the patient's life. So that's a massive commitment. And we're talking about what we're looking at, the completely opposite end of the market. Patients 210 is really for patients that have had no surgeries, that are patients that have symptomatic disease but yet continue to live with it. They don't like using nasal steroids or nasal steroids aren't effective. And it's the vast majority of patients. And it's more of an entry level as opposed to an end stage product. And it's also a simple office procedure, patients in and out. There's minimal commitment from the patient and really from the insurance company. So, you know, they're really kind of apples and oranges, but, you know, I live this, so it's obvious to me. Did I fully answer your question?

No, that's very helpful. Thank you. And maybe kind of pivoting to the Leigh Ann Bio agreements, and the clinical program in Asia. Could you, I guess, Maria or whoever wants to address this, can you maybe talk about the regulatory environment there, what the study is going to look like, is there a kind of similar 505 pathway versus the states, and also maybe just the prevalence there?

Tim, hi. So I'll take that and then, Corinne, I'll turn it over to you. Okay. So the agreement and the collaboration with LandBio has been going very well, so we're very pleased with how things are progressing. And in terms of the regulatory environment, They don't, you know, per se have a 505 B2 process, but we are going to be able to leverage our U.S. data in China. We're very confident about that. Corinne, would you like to follow up on the commercial question?

Sure. So in China, what we know is that there is a – the treatment paradigm looks very similar to what exists in the United States with patients – starting with medical management and after medical management fails, roughly around the same percentage, 50% of patients. The only other option is surgery. So we know there are over 80 million patients in China that have CRS. They are captured in very concentrated hospital settings where patients go in for treatment, for even outpatient treatment. And what we can say right now about the market is that we know it's at least as large if not larger than what exists in the United States. And with the development plan that we're putting in place, we're very excited that there's the potential to access China and those other territories, you know, in short order following a U.S. approval.

Great. Thank you for that.

Again, if you would like to ask a question at this time, please press the star, then the number one key on your touchtone telephone. Our next question is from Ashwani Verma from Bank of America. Your line is open.

Hi. Thanks for taking our questions. This is Ash from Bank of America. So a couple of follow-ups to what has been discussed earlier. So regarding LYR 210, is there any inclusion-exclusion criteria difference between the Phase 3 that you plan to conduct versus what you had in Phase 2? That's my first question. Separately, just on the Lian Bio milestone payment, so any color on the timing of these 135 million milestone, is that based on your activity, or does Lian Bio have to conduct some operations for that? And I have another follow-up after that.

Hi, Ash. Regarding the 210 trial, the Phase 3 program, inclusion-exclusion, the Phase 2 trial was very successful. We were very pleased with the results of that trial, and as you know, because of COVID, we had to stop it short. But despite that, we were able to see statistical significance in many of the endpoints, not 22, four cardinal symptoms, also the rescue medication. So we are mirroring the phase three as inclusion-exclusion to that phase two trial. One of the things that will be different is, as you recall in the phase two study, we measured the four cardinal symptoms In the phase three study, we will be looking at the individual symptoms as we did in the phase two, but the primary endpoint is going to be the three cardinal symptoms. So that'll be the composite that we'll be using. Another note that is different, we did imaging in the phase two. We did MRI imaging, and the reason we did that was due to concerns about radiation burden outside of the US. However, in the US, CT is really the standard, so we'll be doing CT rather than MRI. But really, other than that, we're talking about a very similar trial. And then the next question was on the milestone payments. said publicly is that the milestone payments are regulatory, clinical, and commercial payments, both in the U.S. and in Asia. So beyond that, we haven't really given any more specifics.

Yeah, okay. And just so on APEX, I wanted to go back to that. I think Don, you mentioned that the R&D line driven by tech transfer and clinical operations spend, have you given the breakdown of those two lines by any chance? And just curious on, I think GNA also came a little bit above expectations. So is that, could that be like the new run rate that we can understand?

First part of that question, have we given that breakdown between those couple of lines? We haven't. It's not really our intention to get that granular on that spending category. With respect to general and administrative... I'm going to say that it's not necessarily indicative of a new run rate. There are some things that come along episodically, drove Q2 probably a little bit higher than what I would consider a run rate. That being said, as we look forward, and clearly expand activities with China and the like, there will be some additional spending in that category. Not particularly material, but there will be some increase there.

Yeah. Okay. Great. Thank you so much.

You bet.

I am showing no further questions at this time. I would now like to turn the conference back to Ms. Maria Palazzo, CEO. Thank you.

Thank you so much for joining us today. Please keep an eye out for details about our upcoming KOL event. We look forward to updating you as we make progress. Thanks again. Have a good evening.

Thank you, presenters, ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.