Lyell Immunopharma, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Lyell is a clinical-stage cell therapy company with no products approved for sale and no product-sales revenue.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $0.065 million | $0.553 million; down $0.488 million, primarily because the GSK agreement had ended |
| Research and development expense | $44.6 million | $35.8 million; up $8.8 million |
| General and administrative expense | $19.3 million | $34.4 million; down $15.1 million |
| Operating loss | $62.6 million | $68.6 million |
| Net loss | $67.0 million | $68.1 million |
| Net loss per share, basic and diluted | $0.27 | $0.28 |
| Operating cash used | $46.2 million | $47.9 million |
At March 31, 2023, cash and cash equivalents were $109.4 million and marketable securities totaled $558.6 million, for $668.0 million in combined cash, cash equivalents and marketable securities. The company reported an accumulated deficit of $834.4 million. Cash, cash equivalents and restricted cash decreased $14.1 million in the quarter. Investing activities provided $32.2 million, mainly from net sales and maturities of marketable securities; capital expenditures were $1.5 million.
Lyell had no debt outstanding. Total liabilities were $96.6 million, including $66.6 million of operating lease liabilities. Management stated that available liquidity should fund operations at least 12 months from issuance of the financial statements; its operating-plan estimate was that existing resources would meet working-capital and capital needs into 2026. The company expects to need additional capital to complete development of its programs.
Material changes and unusual items
- R&D expense rose 25% year over year, largely due to higher personnel costs and research, clinical-trial and laboratory activity. The company attributed $3.2 million of the increase to changes in success-payment accounting and valuation.
- G&A expense fell 44%, mainly reflecting lower stock-based compensation and legal and other outside-service costs.
- Interest income increased to $4.5 million from $0.4 million, primarily due to higher interest rates.
- A $10.0 million impairment charge fully reduced the carrying value of one strategic investment to negligible value. This was a non-cash expense.
- Success-payment fair-value changes reduced the related liability by $1.7 million in the quarter. The balance was $2.6 million at March 31; no payments had been triggered. Agreements with Fred Hutch and Stanford could require aggregate payments of up to $400 million, in cash or publicly traded shares, if contractual stock-price thresholds are met.
- Unrealized gains on marketable securities were $3.7 million, reported in comprehensive income rather than net income.
Outlook, programs and risks
Enrollment continued in Phase 1 trials of LYL797, a ROR1-targeted CAR T-cell candidate, and LYL845, an epigenetically reprogrammed TIL candidate. Initial LYL797 data were expected in the first half of 2024; initial LYL845 data were expected in 2024. LYL119 and another TIL candidate were in preclinical development; an IND submission for LYL119 was expected in the first half of 2024. These are management expectations, not assurances.
The company expects operating expenses and losses to increase as it advances clinical and preclinical programs, develops manufacturing capabilities and supports operations. It was producing clinical supply at its Bothell facility, which it said could support approximately 500 infusions annually at full staffing and capacity, depending on product mix. The GSK collaboration was terminated effective December 2022, Lyell discontinued work on the related programs, and no further revenue from that collaboration was expected.
Key disclosed risks include clinical-trial enrollment and outcome uncertainty, safety and regulatory hurdles for novel cell therapies, manufacturing and specialty-material supply risks, dependence on third parties, competition, and the possibility that future financing may be unavailable or dilutive. Management also cited macroeconomic, inflation, geopolitical, COVID-19 and financial-services-industry uncertainty. No material legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable-assurance level; the filing also notes a prior material weakness in internal control over financial reporting.
Important facts for investors to verify
- Whether clinical-trial enrollment, manufacturing and data timelines remain on track, especially for LYL797 and LYL845.
- Whether the stated runway into 2026 remains supportable as spending, trial costs and capital needs evolve.
- The status and valuation of strategic investments, including the impaired investment, and the potential effect of future impairments.
- How success-payment valuations and any future trigger events could affect earnings, cash resources or share dilution.
- Whether Lyell uses its $200 million at-the-market offering program; the filing reported no sales under it to date.
- Any developments in manufacturing qualification, patient enrollment, safety, regulatory review or internal controls that could alter the company’s plans or risk profile.